Talk me out of this: buying a Manufactured Home in Bay Area, CA

[justkeepswimmin]

Hello fellow Mustachians! I am considering buying a manufactured home in the Bay Area (Peninsula) and I need your help :)

Life Situation: Early 30s. No kids (but soon). Work at tech companies in the Bay Area. Make $150-200k per year combined before taxes (depending on bonuses). Take off ~35% in taxes.

Current expenses: Very Mustachian if I do say so myself :) We spend about $1500 a month including everything (rent, utilities, food, transportation, fun, etc). Maxing out that 401k and HSA like a boss. Investing savings in low-cost index funds and Lending Club. Living with 4 roommates & biking everywhere!

Specific Question: It's time to trade in our grown-up roommates for a little one :) We can't afford a million-dollar home (or even a 700k condo), but we love our jobs and want to stay in this area. That puts our options as:
1) Rent (~2100-4000/month)
2) Buy a manufactured home (~220k + 625 space rent)

I'm leaning towards buying a manufactured home for the following reasons:
- Cost: mortgage + space rent + utilities + insurance + maintenance = ~2100/month. You can hardly get a studio in this area for that price.
- Rent control: 30 yr mortgage acts as rent-control where it is common to see 10-20% increases in rent every year
- Location: Walkable to work! This is huge. Right now it's almost 1hr via bike every day which is fine, but walking would be even better
- Location: Amazing, safe neighborhood. Very quiet and the nicest MHP I've ever seen. Right next to a beautiful park which is a huge bonus
- Location: A/A+ schools (can't get any better than that!)

Am I crazy?? I don't mind living in a MHP. I know manufactured homes outside California depreciate like clunkers, but the price of manufactured homes here has actually gone up steadily because of the massive housing shortage + influx of tech workers. I know if everything crashes I'll be out of luck, but with how things are going right now I don't see that happening in the near future. Would love to hear some level-headed opinions on this one - I've been racking my brain for almost a year on it!

Love,
Indecisive

[pbkmaine]

Can you rent a manufactured house in the same park? The reason I ask is that manufactured houses tend to depreciate rather than appreciate, and I would not want to pay $220k for a depreciating asset.

[justkeepswimmin]

Can you rent a manufactured house in the same park? The reason I ask is that manufactured houses tend to depreciate rather than appreciate, and I would not want to pay $220k for a depreciating asset.

Good question but nope, it's an owner-occupied only park and no renting is allowed. Other parks in the area do allow rent but its no cheaper than any other apartment (still $2-3k/month).

[DaveR]

$220k new? Or are you looking at a partially depreciated asset? Even if it depreciates, it's not going to go to zero in 10yrs. What are the numbers? It can still make sense if there is residual value.

[justkeepswimmin]

$220k new? Or are you looking at a partially depreciated asset? Even if it depreciates, it's not going to go to zero in 10yrs. What are the numbers? It can still make sense if there is residual value.

It's a pretty average 2003 model. Houses in the same neighborhood are going for 2 million which is why the cost is 220k instead of the 50k it would be if it weren't in CA.

[sparkshooter]

I'd be concerned about the $625 "space rent" - not because it's a lot of money, but because it could change substantially going forward. I'm very surprised the market hasn't pushed those prices higher. For HCOL areas, the physical land you are on is the primary value of a house/condo/manufactured home/etc. What sort of future guarantee do you have that the space rent won't jump up a ton?

[justkeepswimmin]

I'd be concerned about the $625 "space rent" - not because it's a lot of money, but because it could change substantially going forward. I'm very surprised the market hasn't pushed those prices higher. For HCOL areas, the physical land you are on is the primary value of a house/condo/manufactured home/etc. What sort of future guarantee do you have that the space rent won't jump up a ton?

625 is the lowest there is. Other places it's up to 2000/month. This particular park hasn't seen increases like that because the owners are against it. So no guarantees but if they wanted to raise it by now they could have and they haven't. This is just the least-worst option, not a great option :)

[Static Void]

Sounds awesome to me. Being able to walk to work on the Peninsula is a rare and true luxury. The way real estate moves in the Bay Area, and how prices  (so far, over and over) don't collapse the same way as other more sane & normal markets, seems like you could exit pretty efficiently if the time comes.

I have a friend lives in an MHP on Tasman (Sunnyvale) and it's quite nice, with good transportation convenience (some nearby shopping & light rail).

[ClaycordJCA]

What assurances do you have that the owner of the MHP won't sell to a developer?  A quick Google search shows that MHPs are slated for closure in Palo Alto and Mountain View. My concern is that the crazy Peninsula real estate prices could wind up making your $220,000 investment worthless in just a few years.

[Jeremy E.]

Is there open spots in the lot? You can buy a new manufactured home for less than that and they'll probably move it for free. My sister just bought a brand new triple wide for $110,000 and they moved it and seamed it together for free. I live in a manufactured home on a concrete foundation, it's a 1979 and some things have needed replaced, but I'm still way ahead of where I would be if I bought a house. I like it. How much is lot rent? Realize that the expensive homes around it come with land, whereas you are just buying a manufactured home. There was a mobile home lot near me where the owner gave everybody a 6 month notice that they had to get their homes off his property because he was building apartments. Realize that the owner can do this and you will have to move your home.

[jengod]

Friend of a friend lives in trailer in Mountain View and it was a nice spot. They are living in Silicon Valley for 10 percent of the usual price. It might be worth it to keep your lives local and bike-able as well as pulling down those amazing salaries.

[bryan]

Try to come up with your alternate life outside of SV  and ask yourself if you would give it up and pay the extra cost to move to the bay.

Couldn't you be FIRE by the time the kid is getting into school?

[Left]

Can you get an RV instead? And by that I mean just the trailer, not the actual motorhome.

With slide outs, it has a decent amount of room

[AZDude]

Strange question here, but could you buy a manufactured home and have it shipped to that park? You can buy one in AZ for $50K. I cant imagine shipping and hooking it up could cost $170K.

Might not be possible, but you could look into it. Otherwise, honestly, manufactured homes are undesirable due to the stigma(you are white trash, etc...) and because they are often found in bad neighborhoods. Seriously though, if its in a good neighborhood with great schools, I see no problem whatsoever.

[mm1970]

Are there no owner parks there?

I live in Santa Barbara, we have *one* park that is like a condo - owned by the home owners, and that one is more expensive.  Although there's another one that's half owned.

The others, there are space rent.  A few years ago one of the parks was sold and space rents doubled.

[john c]

I almost NEVER recommend buying/living in a trailer, unless you own the land, but in this case, I say go for it.

1) $2100 per month, not counting the mortgage interest deduction, is GREAT for the area.  This assumes no residual value on the cash you're paying.

2) Getting to walk to work is awesome, worth another $5-700 per month.

3) The school situation.  That's worth $200k on the price of a home.  This is probably the most compelling reason to buy.  Schools are a BIG deal in California.

Is this trailer new?  If so, you'll take a huge hit on depreciation if you want to sell.  However, after 10 years or so, the depreciation will equalize with the equity paydown on your mortgage, and you can walk away free and clear, just like rent.  I think you'd do well to lock in $2100/month rent for 10 or so years.  Should you want to get out early, you'll get killed by the depreciation of the mobile home.

Also, you'll need to seriously ask your SO if she's ready to be "the queen of my double wide trailer, with the polyester curtains and a redwood deck?"  (Apologies to Sammy Kershaw)

[Shiernian]

I would wait for the baby to come before you buy anything. No need to commit to buying anything before the birth! You can just change rental situations if you need to so you won't have roommates. Birth of a baby may change what you want to buy, and where - for instance have you considered where day care will be relative to work? Believe it or not you might want to be in a different school district than you think for a number of reasons which may not be apparent right now. Have you just looked at rankings or have you talked to parents whose kids attend school in that district? There might be a better district in the area that you haven't considered yet, or you might want a different school in the same district and that house location may not feed into the school you want.

Just keep saving your money and buy some land with a house or condo on it when you have saved enough (or else just keep saving it without buying a place.) This decision can really be put off. You said baby is coming soon - how soon? Don't let the upcoming birth pressure you into a hasty decision.

[nobody123]

Be careful not to let your nesting instincts lead you into irrational decisions.  Can you just eliminate one of your existing roommates to make room for baby?  They really don't take up much room for the first 6 months or so, so you can see how your life really changes.  Maybe you will want to quit working, maybe you will find a daycare you like that is 20 miles in another direction, etc.

You can always buy a place.  I suggest waiting to see how your life changes before making a huge commitment.

[mrs sideways]

Can you just eliminate one of your existing roommates to make room for baby?  They really don't take up much room for the first 6 months or so, so you can see how your life really changes.

You expect roommates to put up with a wailing baby for 6 months? If the roommates can't kick the parents out they'll probably move on their own.

OP, my question would be if you plan to stay in the Bay Area, or if you want to save up that money before you cut and run to someplace cheaper for FIRE. If you want to stay for the next 20-30 years, I'd say buy a regular home, otherwise look at this home as an alternate way to rent.

Let's say in 10 years you move to a cheap place and sell the home, and it loses half its value. Let's be equally grim on the lot fee and assume it will go up 8% a year (or double in 10 years) so by the end you're paying $1250 in "rent" for the space. Your cost over 10 years for housing alone (not including insurance, utilities, maintenance etc.) will be $208,650. This averages to $20,865 a year or $1739 a month. If you're in a good school district, $1739 is a damn good deal on rent. But the question is if you can save up enough over the next 10 years to make it worthwhile.

[nobody123]

Can you just eliminate one of your existing roommates to make room for baby?  They really don't take up much room for the first 6 months or so, so you can see how your life really changes.

You expect roommates to put up with a wailing baby for 6 months? If the roommates can't kick the parents out they'll probably move on their own.

No,  but I can't imagine a married couple having 4 roommates either.  Depends on how close the quarters are, I guess.

[$200k]

Any update on this?  Wondering about doing the same.  My seriously undermarket lease ($2,800) is winding down, and I'm glad to have had that place for so many years.

Getting a 1,200 double wide with a yard in the Bay Area for $2K is tempting.  Especially since I'm here for the higher wages and a 10-year window.   

[jengod]

Honestly, friends of friends live in a mobile home in Mountain View (they work at Google or similar) and it's a fine life in an otherwise unaffordable neighbor. They get all the amenities without having to pay $2.5 million for a rundown 1951 bungalow.

In short, if you really really want to live in Silicon Valley, I can't talk you out of it.

[pecunia]

I used to live in a trailer.  As noted - not a real estate investment more like a vehicle purchase.  It was a comfortable place to live.

Fire trap

Higher Insurance rates for double wides than stick built houses - don't know why.