Is Buying a Mobile Home a Good Investment?

Mobile homes are unique investments; is one right for you?

Question

I’ve lived in an apartment for many years. I'm feeling ready to own my own home, and live in a place with a yard. I also want to make a sound investment. The problem is, I can’t afford to pay more than I currently do for my apartment. Recently I was told that buying a mobile home and placing it in a mobile home park will cost about the same as my apartment per month. That sounds great, but is buying a mobile home a good investment?

Answer

Mobile homes are unique investments. The answer to your question will depend on a number of factors, including:

  • how much you currently pay for rent
  • whether you plan to buy a new or used mobile home
  • whether you will need to borrow money to purchase the mobile home, and if so, what finance options are available
  • how much a mobile home space will cost to rent in your area, and
  • your long-term financial goals.

As you analyze whether a mobile home is a good investment for you, there are a couple things to keep in mind.

Changes in value over time. Mobile homes placed in mobile home parks typically decrease in value over time. On the other hand, land normally appreciates over time. So, if you own land and build a traditional home or, in some cases, even place a mobile home on it, the value will normally appreciate. On the other hand, since mobile homes in mobile home parks usually depreciate in value, you might not be able to sell your mobile for as much as you bought it.

Depreciation can be particularly troubling if you have to borrow money to fund the purchase of the mobile home, because the home may end up worth less than the outstanding balance on the loan. Also, while financing options exist to purchase mobile homes, you should expect to pay a higher interest rate and have a shorter repayment term than you would with a traditional 30-year mortgage on a stick built home.

Resale issues. Another unique issue mobile home owners face is reselling the home. Despite what the name implies, “mobile” homes are not that mobile. Once placed in a mobile home park and hooked up to utilities, mobile homes are not easy to move. In fact, mobile homes can cost thousands of dollars to move. This can make them difficult to resell, since a buyer may have to commit to living in the same mobile home park you live in.

Maintenance responsibilities. Unlike an apartment, you will be responsible for maintaining and repairing your mobile home. That means if the dishwasher goes out, or there is a leak in the roof, you will be on the hook for any related expenses. You will also need to insure the mobile home at your expense.

Good value for the price. Of course there are some benefits to buying a mobile home too. For one, they are affordable. Even with rent in a mobile home park, a mobile home may cost less than an apartment per month.

Mobile homes built after 1976 have been subject to standards enforced by the U.S. Department of Housing and Urban Development (“HUD”), so that the quality of construction is often very good. One of HUD’s stated goals is to ensure that mobile homes are durable. As a result, you might find an affordable mobile home that will last you a long time.

And although mobile homes go down in value and can be difficult to sell, a mobile home is an asset that you can sell when you are ready to move (unlike an apartment you rent). In other words, it is possible that you end up with some equity in the mobile home, so that when you go to sell it, you will receive some cash in exchange.

If homeownership and a yard is your primary concern, a mobile home may be a smart purchase. Be aware, though, that your mobile home likely will go down in value over time. In cases like yours, it is a good idea to weigh the pluses and minuses, and take a hard look at your financial goals, before deciding to purchase a mobile home.

To make sure a mobile home is consistent with your financial goals, talk to a financial adviser. A lawyer can also help answer any questions you have, and review purchase and lease agreements so as to close the sale smoothly and protect your interests in the event of later disputes.

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