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Rent Apartment Or Buy Mobile Home And Resell?

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On my post warning against overpaying on rent, James poses this question:

Is it better to rent an apartment or buy a manufactured home? I found a good location where they are selling a 2 bedroom manufactured home for $170K. The mortgage calculator says, for a no downpayment for 30 years at 6.12% interest, I pay $1,032.39 monthly.

Today, Im renting a studio at $1,000 a month. So I thought would the mobile home be better? I mean in 3 years, I would have paid out 36,000 (more if the rent goes up). That money goes away. But I buy that mobile home, I can sell it in 3 years for a super discounted deal, say, 80,000. I would not be only be able to regain the 36,000 but also would have made money.

First, I think you’re getting too exotic by thinking about saving money by purchasing a mobile home and reselling it, recouping some of the equity and thus paying out less in rent. It’s certainly a very interesting decision and analysis but ultimately I think your assumptions are going to be your undoing on this one.

If all your assumptions go through, that you can purchase the mobile home and resell it at the stated prices, it sounds like your plan will work. Your assumptions, however, are very difficult to support and I am clearly not qualified to give you an advice on that. All I know is that there is a social stigma associated with mobile homes and I have no experience selling one, either first hand or anecdotally. What I do know is that you’ll have to put that mobile home somewhere and generally mobile home parks charge some sort of land usage fee that you didn’t figure into your calculation. You also have closing costs and selling costs that you haven’t factored into your equation which may make the decision less financially attractive. Then again, your extra low price of $80k may have accounted for all of this in its fudge factor, who knows.

All that being said, I go back to the beginning where I said this is probably making it too complicated and potentially putting yourself in a bad spot, especially if you experience difficulty selling it and have on your hands a depreciating asset that you can’t sell. Would I do this? Probably not. I don’t like committing myself to debt larger than my fist unless it’s a pretty sure thing and I don’t think your trade off necessarily is. It’s definitely an interesting question though.

Anyone else care to weigh in?

{ 30 comments, please add your thoughts now! }

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30 Responses to “Rent Apartment Or Buy Mobile Home And Resell?”

  1. Joe says:

    Perhaps I’m missing something but I’m a little confused as to how you will owe 170k on something pay 36k on it (most of that being interest btw) and then selling it for 80k and coming out ahead… what happens to the note that is now paid down to like 155k? 155k-80k = 75k in the hole at the end of this adventure.

    Am I reading this incorrectly?

  2. PR says:

    Jim is right. I’m looking at buying one too. Take a look at this page, for example.

    The mobile homes at the bottom of the page are a block away from the Jersey Shore. They’re selling for a third of their purchased value and they’ve been on the market for about 8 months. Mobile Homes are often popular in the shore areas because it’s a cheap, easy way to get a ‘beach house’, at the same time, they haven’t been selling. Meanwhile, the owners are paying a land rent fee of $3500/year. I’d look at a mobile home as a primary residence only if you plan on staying around for a while, and only if you find a good property to park it on. Land mortgages are pretty affordable in certain areas of the country. Inland around here, they’re around $200/month for a wooded lot, which is cheaper than the shore-front land rental.


  3. tinyhands says:

    Like Joe, I’m missing something in the math too. If, after 3 years, he sells something for 80k on which he still owes $163,482.58, how is that coming out ahead? Good luck showing that a mobile home will either retain its value or appreciate. Like cars, don’t they depreciate as soon as they’re towed off the lot? It’s probably worth less than owed after 3 years, so he’s in quite a hole.

  4. PR says:

    I think James forgot about the paying off your mortgage part. 🙂

  5. MoneyNing says:

    Yikes, I didn’t see the mortgage part after I read the article either. Good catch guys 🙂

  6. Patrick says:

    Besides the bad math, mobile homes are notoriously difficult to resell. If you are going that route, you may as well buy a used one that will already be heavily discounted. Mobile homes tend to depreciate heavily upon purchase.

    You can probably live in a used one and resell it for roughly what you paid, but without much, if any appreciation. The only difference is not losing out too much on the rent money, and the hassle of trying to sell it when you want to move. Selling it tends to be the tough part – you never know how long it will take.

    *please note, this is based on personal observations, and will depend on your location, etc. I am not a real estate expert, so do your research beyond my comments.

  7. Brad says:

    Ignoring the fact that the loan balance is ignored, he said manufactured home, which is different than a mobile home. They’re not too unusual around here. Manufactured homes are built and hauled to the site on an undercarriage of two steel beams and axles, but then are often set on a concrete foundation. Typically, I see them as “double wides”, shipped in as two pieces and joined on the foundation.

    They appear as a conventional framed house, but in quite simple, rectangular forms. Personally, I’m not too wild about them, but they’re not like mobile homes. I think they take a bigger hit in value than a conventionally built home in a market like most areas are seeing today.

  8. thc says:

    A manufactured home and a mobile home are two entirely different things. Which is it really?

  9. vpat says:

    You have clearly miscalculated the mortgage game, here how it works
    For first few years you pay more interest than principal amount, so you cannot deduct $36,000 for first 3 years it may be less then 10,000 $ . Plus you have to add the land fee and taxes, insurance etc.

  10. tlange says:

    Mobile homes are a bad investment, they depreciate like a car and no one wants them… If faced with the same choice, I would rather rent than pour money into something I would be stuck with forever. At least while renting, I can leave when the lease is up and go somewhere else.

  11. Tim says:

    yeah, the logic in this person’s mind is all wrong. the amount paid on the mortgage isn’t all towards principle either, most is on interest, so there is no way you recoup $36. Going into something like this with the intent on being upside down on a mortgage is also troubling. aside from the other fees, you are looking at nearly $90k upside down on the mortgage which the person still owes. given the equity in the house would only be about $17k after 3 years once you take the interest out, you are still upside down $73k.

    even if you take the really fuzzy math, and say somehow we can ignore interest, fees, taxes, laws of math, etc, you somehow recoup $36k towards principle and get $80k for the house. This still would mean you would owe $54k just in principle.

    There are no silly questions, and I hope I didn’t sound too harsh, but…

    i will disagree about mobile homes depreciating and being a bad investment. It really depends on the market. In retirement communities, mobile homes can appreciate significantly. In other low income housing areas, mobile homes can also appreciate.

    also, there is a difference between manufactured homes and mobile homes. There are some quite expensive manufactured homes these days. there are also ones which appreciate. Depends on the market as always.

  12. Tim says:

    i shouldn’t say low income areas. I know the town I grew up in, there was a mobile park neighborhood that appreciated due to the proximity of other neighborhoods and eventually the mobile home area became a non mobile home area.

  13. jim says:

    On the topic of manufactured vs. mobile, I recognize he said manufactured first but then he called it a mobile home so I assumed he meant mobile home. There is a definite difference between a manufactured home and a mobile one but I think the reader confused the two and meant mobile so I ran with that.

    On the topic of his math, I didn’t actually check it and took it at face value (I was lazy). I thought his assumptions were so wrong that even if the math were correct (which it appears it wasn’t) it wouldn’t have helped.

    I’ll endeavor not to be lazy next time, it was a softball of a math question too… that’s what happens when you come back after a week off. Thanks everyone for crunching the numbers for me.

  14. plonkee says:

    I don’t understand why, if they depreciate by so much, you wouldn’t just by a second-hand one in the first place. The maths has got to be better for that, surely.

  15. Dustin says:

    It seems like everybody is saying no, so I will try something different.

    Let’s say you can get over this ‘social stigma’. Let us also say you can sell the place for what you purchased it for in three years – a flat real estate market. Assuming your mortage/taxes/maintenance/etc were the same as your current rent, then you would be even in three years. (I do understand your math was a bit off earlier though). With all that said, there are still the income tax benefits to consider. This could be your clincher. You might sit down and figure out what you expect to actually get out of the deal after a said time period.

  16. bk says:

    If buying and selling mobiles homes is so profitable, why aren’t more people besides hillbillys doing it? Oh, thats because its not and its low income housing. Besides, his math sounds completely wrong. It is difficult (impossible?) to get a 30 year fixed mortgage on a mobile home, and the rates are awful on a manufactured home.

    • a.b. says:

      Actually I know someone who parlayed a fixer manufactured home into a nice fixer bungalow into a very nice home. And they weren’t hillbillys. It is not always low income housing as many parks I know are actually more expensive then the rent on my apartment. This gentleman needs an actual answer to his question based on sound facts not bias and social stigma.

      The rates are higher if it is in a manufactured home park as it is not considered a fixed residence (personal loan rates would apply).

      The problem is there isn’t enough information to give a solid answer. Is it a manufactured or mobile home *huge difference? Will it be parked in a MH park or does that price include land? What are the income tax benefits? If there was more details it would be easier to do a breakdown.

      • jamie says:

        good call. rent money is dead money,now if you can buy, pay cash for a used mobile home it will not take long to get the money back; then you could even walk away at that point. Sorry, Iam a hillbilly and we live in nice houses too, I even wear shoes, and one of my cars are on blocks.. Have a good day

  17. sbd says:

    [ removed because it was offensive and unnecessary ]

  18. Tim says:

    mobile homes are profitable, because tornadoes and such are attracted to them so they are in constant need…but i digress.

    seriously, retirement communities have some expensive mobile homes and they do appreciate. so let’s not group all mobile homes in the category of tornado shacks.

  19. Gary In TN says:

    Heck, with all the stereotypes being thrown out here, I can’t help but respond. (removes his wad of tobacco and spits).

    I purchased a new “double wide” mobile home (still has the frames, but no wheels) for $86,000. Financed it for 30 years, but making bi-weekly payments, so it will be paid for in 16 years and 5 months. Payments run $751 per month on the bi-weekly plan.

    I had this 32’x70′ (2240 sq.ft.) home set on land I bought (1.88 acres) in the country here in East Tennessee (hillbilly heaven).

    Make all the jokes you like, but since we don’t have an income tax, 9.725% sales tax, low, low property tax, I will be way ahead of the game than from those of you that are acting so high and mighty.

    My home will be paid for long before retirement, with alot less interest having been paid, less taxes and much less stress than those of you that think living in or near a big city with outrageous land, home and tax rates is the way to go.

    I have traveled in my work to every state except North and South Dakota and would not wish to live anywhere but here. (puts back in his chaw of tobacco, grabs his barefoot pregnant wife and tells the coon dogs to get in the truck).

    I expected so much more out of this group.
    Gary In TN

    • jamie says:

      very good call Gary, besides low taxes and friendly people, crime rate here in Maryville Tn very low ( and I love coon dogs)

  20. Melanie says:

    Hmmm… I’ve been considering a mobile home purchase– not sure yet, but giving it some thought; my ex husband and I owned one when we lived in California (about a 5 min walk from the beach) … in 1993, we purchased it for 61,000. We sold it for 73,000 in Jan of 2001… so it appreciated 12,000 dollars in 7 1/2 years. Anyone care to comment on how? We used a service that buys properties outright, so we didnt even go the agent route which might have scored us a bit more profit– but then again, who knows. We divorced, and I received my 36,500 part … a nice walk away out of a divorce at least.

    I am now reconsidering– buying a mobile home cheaply and investing in repairs and upgrades. If nothing else, if I invest money into its upkeep it will at least maintain its value — long enough for me to get some money back from my rent and go from there…. EVERYTHING is a risk… as for the stignma of mobile homes– yes I hear ya on that– it CAN be embarrasing but the fact remains there are some that look more like homes and if you are making a profit YOU will be the one laughing– ALL THE WAY TO THE BANK! lmao

    Good luck out there!

  21. Anonymous says:

    If your going to buy and then try to sell latter. Then I could say don’t buy. But if you do all your homework on the home, and the place where your going to live, because some places ARE much bstter then others.

  22. CJ says:

    I live in a manufactured home and square footage-wise it is bigger than most of the “real houses” of people whom I know. It honeslty has more space than I need and I have no idea why anyone would rather have an apartment, which are generally all smaller than a double wide manufactured home. And for those of you who don’t know, they stopped making “mobile homes” in 1976. After that all that have been made are manufactured homes, which is basically the same concept but just made under much higher standards. And they’re not “mobile” or “trailers”, they don’t have wheels or hitches like the mobile homes and it would be extremely difficult to move them without damaging them, like any other “real” house.

  23. katherine says:

    I don’t understand the original question. Those figures don’t add up. Also the question seems a little naive. When you own something you must be prepared to pay to have it fixed. When you own something it is better if you can be patient when needing to sell it. The real estate market is like a wave sometimes it is high and sometimes it is low. Place your bet right here.
    As far as country folk. . . I have lived in a thriving city only to be miserable defrauded and falsely arrested. I will take all hillbillies over cold consumerism.

  24. Mona says:

    It depends on the situation. If you are trying to make money on selling a mobile home think again. They are like a car they depreciate. I did buy a used mobile home in a community. Mine was a double wide with an extremely nice contract built double garage automatic door openers. screened in sunporch. top of the line mobile home. It was second hand and I sold it 3.5 years later for $5,000 more then I bought it for in just 1 month’s time. I was lucky. you have to figure on a lot cost per month in most communities also. I ended up renting my own home and don’t consider I made a dime on the sale.

  25. Jeff says:

    I do not see the logic in buying a mobile home and renting the land it sits on. It is worse then buying a box in the sky. You still don’t own any land and you are still paying someone else to use it. It’s legalized theft.

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