Mobile Homes: A Decent Option
By Steve Gillman - 2011
Mobile homes are not really what they used to be. The quality
of mobiles, modular homes and all manufactured homes has improved
over the years due to customer demand. Prices have risen substantially
as a result, but they are still far below the cost of a regular
wood frame house in most parts of the country, making them a
decent option for those who cannot afford to spend $160,000 for
a place to live (that was the national average for houses as
of early 2012). Let's look at what the advantages are, and whether
it makes more sense to buy in a park or to put a mobile home
or manufactured house on real estate.
Manufactured homes are the affordable option for many people,
and so they may lead the recovery in real estate, according to
the latest statistics. A recent article from Fox Business News
The Census Bureau reported 51,600 shipments of new manufactured
homes in 2011, an increase of 3.2%. In January, shipments were
3,945 new homes, up 42.1% from January 2011, according to the
Manufactured Housing Institute.
They also note:
In his annual letter to shareholders released in late February,
Berkshire Hathaway Inc.'s Warren Buffett noted the company's
Clayton Homes division, which makes manufactured homes and arranges
mortgages for buyers, continues to operate profitably and its
mortgage portfolio has performed well. Buffett said he expects
earnings to "improve materially" in the years ahead
as more Americans seek lower-priced homes.
Loans made through Buffet's companies were not hit with high
default rates like many others were. He credits this in part
to only loaning what people can truly afford. Almost anyone who
can afford to rent an apartment can afford to buy a mobile home.
Many manufactured homes sell for $50,000 and up (the average
as of the end of 2011 was around $64,000), but you can still
buy a decent one for a lot less than that. As of this writing,
at least one vendor was advertising a new 16-by-80-foot Fleetwood
Sand Pointe mobile, with three bedrooms and two bathrooms, for
under $36,000. That included delivery, setup, and skirting.
Rates on loans for manufactured homes are as low as 4.5% interest
at the moment, and some lenders will loan (if your credit is
good) with a 5% down payment. If you were to borrow $32,000 at
5% on a five-year loan (loans are usually for shorter terms than
with traditional housing), your payment would be $604 per month.
Add a $300 payment for lot rent to that and you might be right
around where rental rates for apartments are depending on where
you live. But in five years you will have some equity, even if
the home depreciates substantially. You also will get a new home,
and a 16-by-80 single-wide has 1,280 square feet--probably more
than you'll get in an apartment with reasonable rent.
A mobile home in a park gives you some flexibility if you
are not sure what the future will bring. You can sell it on your
own far more easily than you could a traditional home (there
is less paperwork). Or, if you choose to stay in an area once
your home is paid off, you can buy property and move your mobile
Now, it is worth noting that mobile homes on land usually
appreciate in value when real estate in general is appreciating.
A mobile or manufactured home on a rented lot in a park will
usually depreciate from the day you buy it. This is not always
true. There are some popular areas where local authorities limit
the number of mobile homes or parks, and so prices have actually
gone up. But in general, you will lose value on your home if
it's not on real estate. If you are spending less between the
payment and lot rent than you would to rent a house or apartment
this is not a problem, because in the end you'll have something
as opposed to nothing in equity. Just be aware that you'll be
selling for less than you paid someday.
If you really want cheap housing, and even the opportunity
to profit when you sell, buy a used mobile home. Buy as cheap
as you can and pay off any loan you have on it quickly. Then
you are free to sell it on payments, which can sometimes enable
you to get 100% more for the home, since you are making it possible
for the buyer to afford it. I saw a livable mobile sell for under
$2,500 in recent years, and I've known people looking for housing
who would have happily paid $6,000 for the same home if the payments
were just $250 monthly.
Buying a mobile home that is already on land is another option.
In many parts of the country a mobile on land can give you as
much living space as you would in a traditional house for half
or less of the price. These are a bit trickier to finance, but
local banks are sometimes still writing loans on them.
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