Author Topic: Case Study: Buy a mobile home in HCOL area?  (Read 2742 times)

whiskeyjack

  • 5 O'Clock Shadow
  • *
  • Posts: 94
Case Study: Buy a mobile home in HCOL area?
« on: March 07, 2015, 02:02:56 PM »
I am posting this on behalf of friends so these are not my personal numbers, but the problem was such that I thought I'd seek out collective wisdom.

The friends do not read MMM but are interested in making the best financial decision.   First the financial situation:

Family of 3.  Late 30's
Income:  $1550-ish every two weeks take home
$80 per paycheck to 401k and $25/paycheck to HRA

Assets:
Truck (OLD!  But paid off at least)
2013 Hyundai - still owe $14,132 on it.  3.49% interest rate
401K -approximately $40k
Savings just got wiped out to purchase new tires for the car

Rent $1100

Utilities:
Cellphone $150
Water $90
Garbage $20
Internet $36
Electric/gas $115

Car:
Payment $245
Insurance $120
Gas $130 - $170

Other:
$60 YMCA membership
$75 Storage unit

Entertainment:
Netflix $8
Hulu $8

Estimated $250-$400 on food which does includes some eating out/fast food. (working on breaking the fast food habit)

They just finished paying off medical credit card debt and other debts to the tune of several hundred per month split between several creditors.

I mentioned that there would be pushback on the car loan, but I am assured that they intend to meticulously maintain this car for 200k miles or more and only upgrade it when there are new all-solar, self-driving, flying models available.

I also asked about medical and here are the numbers:   dental, medications & other insurance costs:  $50/month.   Their insurance typically covers other recurring costs unless there is an emergency.

Adding this all up I get about $3150/month take home (slightly more) and about $2600 expenses so there should be ballpark an extra $450 for month for savings and emergencies.    They currently have no emergency fund.

The real question: 
They currently rent a mobile home in a very nice mobile-park, surrounded by vastly more expensive homes in a generally HCOL area.   It is in a good school district.  The owner would like to sell it to them for something like $120-$140k which I suspect is nearly all the cost of the land.

The home is Pre-HUD and they are having problems finding a lender.  The current owner would be willing to finance for 10 years but the house would have to be paid off during this time.  Is this feasible with their current income?  If so, how?  They estimate taxes and insurance at approx. $200/month and HOA dues of $180/year.   They would also be liable for all home repair and maintenance.    I have no idea how that sort of rent-to-own financing would work if they went with the owner's offer  so any advice about that would be appreciated.

Is it a good idea?

Rents for 2-bedroom houses are $1400 anywhere within a reasonable distance of work (currently they are very close to work).

I know that if MMM forums had a commandment it would be "Thou shalt not pay interest on a depreciating asset" but I don't know that they can do better than this either by renting or trying to purchase a traditional house.

We look to your face-punching and advice.

iamadummy

  • 5 O'Clock Shadow
  • *
  • Posts: 93
Re: Case Study: Buy a mobile home in HCOL area?
« Reply #1 on: March 07, 2015, 02:22:20 PM »
always a 'friend'

zurich78

  • Stubble
  • **
  • Posts: 180
Re: Case Study: Buy a mobile home in HCOL area?
« Reply #2 on: March 07, 2015, 04:15:14 PM »
You know its "friends" when they even share their YMCA membership fees!

whiskeyjack

  • 5 O'Clock Shadow
  • *
  • Posts: 94
Re: Case Study: Buy a mobile home in HCOL area?
« Reply #3 on: March 07, 2015, 04:22:16 PM »
When I do my own case study it will be called "Kept my mother's house as an out of state rental:  bad idea or very bad idea?". 

But thanks for playing.

MikeBear

  • Bristles
  • ***
  • Posts: 390
  • Age: 60
  • Location: Michigan
Re: Case Study: Buy a mobile home in HCOL area?
« Reply #4 on: March 07, 2015, 05:27:08 PM »
"Pre-HUD" MOBILE home that a bank won't touch, yet the owner still wants at least $120k for? That means it's around 40 years old already, which is at least 25 years past the date it has ANY worth at all.

RUN AWAY from that "deal". In Michigan, we call those "scrapers" ( as in, you are buying the lot only, and will scrape the house off with a bulldozer) They are also priced anywhere from $3k to $20k max, depending on how much acreage and how nice the land is.

High cost of living area or not, that's a very bad deal. I'm willing to bet you could do a lot better, if you look around harder.
« Last Edit: March 07, 2015, 05:30:18 PM by MikeBear »

whiskeyjack

  • 5 O'Clock Shadow
  • *
  • Posts: 94
Re: Case Study: Buy a mobile home in HCOL area?
« Reply #5 on: March 07, 2015, 06:42:48 PM »
For whatever reason this particular home doesn't come up on zillow, but the neighboring houses (all mobiles) are listed at $224k or higher.   I would agree that this is a 'scraper'.   The tax assessment value for this lot is $105,000 land value and $27,000 'improvements' which is a huge jump from last year which said $4000 improvements so I think they may have been smoking something.  However old it is, it at least still has walls and is upright but hasn't improved any since last year.

Let's say the owner would take $105k - is this still run-away territory just because it's in a mobile park?   One of my concerns is that I don't think they can built a 'regular' house on it, or even do something cute like a container home or a 'tiny house' because of the HOA.   


MikeBear

  • Bristles
  • ***
  • Posts: 390
  • Age: 60
  • Location: Michigan
Re: Case Study: Buy a mobile home in HCOL area?
« Reply #6 on: March 07, 2015, 07:48:27 PM »
For whatever reason this particular home doesn't come up on zillow, but the neighboring houses (all mobiles) are listed at $224k or higher.   I would agree that this is a 'scraper'.   The tax assessment value for this lot is $105,000 land value and $27,000 'improvements' which is a huge jump from last year which said $4000 improvements so I think they may have been smoking something.  However old it is, it at least still has walls and is upright but hasn't improved any since last year.

Let's say the owner would take $105k - is this still run-away territory just because it's in a mobile park?   One of my concerns is that I don't think they can built a 'regular' house on it, or even do something cute like a container home or a 'tiny house' because of the HOA.

Doesn't sound like it has any real value, EXCEPT, if living there is much cheaper than renting in the same area, you can't easily move, and you pretty much consider the money spent on it a throw away in the first place.

You may be able to sell it later and get back at least some of your money, but there's no guarantee of that. Also, you'd have to be the bank to anybody buying from you in the future. Lots of "if's" there, and a mobile that age is not easy to repair OR to get insurance on. Nothing used in building it is standard. Also, a fire will burn it to the ground in 5 minutes, and I'm NOT kidding. You maybe have that long to jump out a window, and it's gone. I've seen it happen.