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Depreciation on Manufactured Housing

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Depreciation on Manufactured Housing

Postby » Mon Nov 01, 2004 9:59 am

I've noticed in some parts of the country (especially in the South), that it is difficult to get your investment back on a manufactured home unless you add extensive improvements such as decks, dormers, driveways, blocked foundation, etc. As I have recently posted, I am closing on my Clayton Norris (customized) home (28x80)in a couple weeks. I got a deal on it since a couple backed out. Here is my home/land package:
2005 Clayton Norris Home .........$69,000
150x150 Lot (Residental Area)
Appraise's for $34,000, my price $25,000
Set up with decks ................$ 4,500
Block Permanent Foundation .......$ 2,500
Tax on home (6%)..................$ 4,140

TOTAL INVESTMENT .........$105,140
My downpayment is $15,000

Because of the size of this lot, I plan on putting in a circle drive next year.
I was wondering if anyone could tell me if I could get my investment back in ten years? I know manufactured home depreciate but I was wondering at what rate??

Thanks,
C, Yeary - Kentucky
Clarence Yeary offline

Re: Depreciation on Manufactured Housing

Postby » Mon Nov 01, 2004 4:21 pm


You said..." I know manufactured home depreciate but I was wondering at what rate??"

If that were fact why would anyone ever finance one for 30 years with no down payment as many buyers do..these folks will be financing up to 15% more than the purchase price..10 years from now they will still owe more than the purchase price...

Actually manufactured homes react to the resale market locally as any home in the same location would...if stick homes increase at about 4%/year..so will the manufactured homes in the same neighborhood...if stick homes lose value as they do in some areas..so will manufactured homes...Consumers Union has an extensive study on this subject that you should read...It is about 42 pages long and too long to post here..but is good reading for those like you..For the most part..the basic conclusion is that manufactured homes on land react to the local market just like any other home..


http://www.consumersunion.org/pdf/mh/Appreciation.pdf

In your case...1/4 acre lot for $25K is a little high for the SE in general..this means this area is VERY desirable..which is good for you and your resale price..

The trick to good resale in manufactured homes is the same as it is with any home...A good desirable location is all of it...Go for it..
rmurray offline

Re: Depreciation on Manufactured Housing

Postby » Mon Nov 01, 2004 4:37 pm

Murray said it correctly, location, location and location plus how you maintain your property and how your neighbors do. I am buying some investment property to put mobile homes on, I the 3 or 4 people in neighbor took care of their homes the value would be 50 percent higher, Again it is location, location and location.
Steve offline

Re: Depreciation on Manufactured Housing

Postby » Sun Nov 07, 2004 11:11 pm

Having been a mobile home dealer since 1980 as well as having built 3 mobilehome parks in California, murrays post is quite accurate. Another consideration that has a tremendous impact on appreciation is whether the area has numerous spaces available. I have found over the years that the homes will appreciate approximately $10,000 once a mobile home community has no spaces left. In Southern California it is not unheard of a dealer buying a used home in the $20,000 price range, pulling it out (giving it away) and ordering a new home for the space. The dealer then adds the amount paid for the used home and adds it as a cost on the new home. As you can see, the new home or other homes within the park, will most certainly appreciate or dealers would not pay such high prices for these spaces. However, if there are numerous spaces in a given area, why would a potential buyer pay more for a used one when they can order a new home customized to their needs? On rare occasions you will find a buyer that would prefer to have everything in place as they do not want to deal with the landscaping and other amenities that would need to be done on a new home.
cindy offline

Re: Depreciation on Manufactured Housing

Postby » Mon Nov 15, 2004 4:47 am

In my experience (home buyer / seller / subdivision developer and community owner for 15 years), the reality is that manufactured homes depreciate in most parts of the country. They cost more to maintain (most people don't) and are not easy to refinance (which is why you see a lot of owner financing) and hard to resell without the land. Where land zoned for manufactured housing is hard to come by (northeast, CA), you tend to see more appreciation than in areas where land is more readily available.

Ask yourself this: why would a community owner throw away an older home to put a new one on the lot? If older homes were appreciating, this would not make sense. The only answer is that the community owner is trying to capture the increased value in the land.

In Texas, the state even puts out a schedule of depreciation for the local appraisal districts to use to assess value of the homes; even so, I have never paid anywhere close to the "depreciated value" of a home. So, when "they" say location, location, location, they are talking about the land. Choose wisely.
Bill E. offline

Re: Depreciation on Manufactured Housing

Postby » Mon Nov 15, 2004 12:28 pm

In all your years selling homes...have you EVER seen a stick built..block..brick..log..home appreciate without the land...How many homes could sell for more than new if they have to be moved???

Manufactured homes treated like homes will increase in value just like any other in the same location...There are a few in quality parks that also increase in value..but these are very desirable locations and do not have to be moved..
rmurray offline

Re: Depreciation on Manufactured Housing

Postby » Thu Nov 18, 2004 5:31 pm

Unless you purchase the land you are sunk.

If you buy a home in a non resident owned park you will always be subject to the whim of the park owner who might increase the rent fairly for years.

But the day he plays his wild card and decides to hike rents enormously, or sells the park to a new owner who jacks up rents, you will lose your equity entirely.

This recently happened to my parents as well as all of their neighbors in an MHC owned park. Every resident there has forfeited their homes, in many cases their lifesavings.

Never buy in a park where you cannot purchase the land unless you are willing to see your investment evaporate entirely.
Linda offline

Re: Depreciation on Manufactured Housing

Postby » Fri Nov 19, 2004 6:38 am

My name is Josh and I live in Washington State, Skagit County. I am only twenty years old but I just got approved to buy a house. Now I wasn't approved for all that much but I do have a few options although I was leaning for a 1998 manufactured home. I would be paying like 104k for it. It is located in the sticks, some neighbors but at least a fifteen minute drive from the nearest town.
Now my boss keeps telling me to buy stick build, and that it is a bad investment to buy manufactured, but my price range I am dealing with won't allow me to get what I would like to get, although I have only been looking for a week. I am just wondering if it is true that its a bad investment or if I will even break even in the end.
Are property values more likely to go up or down the further you are from town? And would it be a good investment to move in for say three years or so and then get another loan, rent out the manufactured, and then buy stick build when I can get approved for a larger loan?

Thanks for your imput
Josh offline

Re: Depreciation on Manufactured Housing

Postby » Fri Nov 19, 2004 5:03 pm

Josh
As long as you are purchasing the land along with the mobile home your investment should be safe. Mobile homes depreciate just like a car. The thing that appreciates would be the land the home sits on. (This is true of stick built homes as well by the way.)
I don't know about your specific area but in Santa Cruz, land values tend to go up no matter where they are located.
Linda offline

Re: Depreciation on Manufactured Housing

Postby » Sat Nov 20, 2004 12:27 pm

Good for you...most young folks are not thinking about investments for the future..You are going to go a long ways...

Real estate investments are all location...location..location...Accessable rural locations are growing in popularity...There are a few reasons..folks are starting to get tired of small lot subdivisions and crowds..the other is for folks like you..affordability..As the homes in town rise above the reach of young folks...rural homes are increasing as well to serve this market..

You are right to realize that you are not buying your retirement home yet..this starter home needs to serve your needs...and be salable in the future...To determine if you will be able to rent the home in a few years..you should check out rental rates in the area..rents in 3 years will be about 20% higher because of inflation..Now you will have to decide if this rent will pay for the home....

It seems that you realize that to profit on a home it takes a lot of years to get ahead..this has little to do with what kind of home you have...3 years and rent is a good idea...5 years to sell and profit is a good rule of thumb...some places sooner..some longer...

Your choice will be something like this...or much older..very small house close in..probably in a rough neighborhood..Not a good resale idea..

Shop a little more...Go for it..Have fun..You are young...do your best to make a good decision...but do not be too afraid of mistakes..you will make them..we all have...enjoy
rmurray offline

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