Are We Using Wisdom?

[Dana]

I got a question for you guys. I read on old message about a woman who bought her mfh home for $39,000 and after making all of her payments for 3 years its only worth $36,000. My question is are we loosing money by buying a home and putting it in a park. I mean there's no equity in it, so what's the benefit of doing this. Is it just being able to buy a new home. We still have to pay rent so in a way it's like being renters and home owners at the same time. If my house is $75,000 and I stay in it for 10 years how much could I sell it for? and would I really be able to refinance after a year in order to get my co-signers off the loan.

Thanks

[Ron]

I assume you do not own the land in this park. With that the case, when you buy a MH it is considered personal property and will require higher interest rates for a loan. If you enter with a small downpayment and 10% interest rate, you will not have much, if any, equity after the first year or so. On thirty year loans (even stick built) with a 5% downpayment, 7-8% interest rate, you will average only about $500 equity in one year.

Also, a MH on rented land generally depreciates, unless you live in the Northeast, San Franciso, or Los Angeles areas. The rate of depreciation is different for each type of MH. A general average, and probably low, is about $100 per month loss in value.

You would simply not be able to refinance after ONE year to relieve your co-signors. Since the MH is on rented land and considered personal property, lenders would not be interested in refinancing what would then be a used MH.
If you bought a new car (considered personal property) at 5% interest rate and then tried to refinance in one year, lenders would treat the car as used and the interest rates would go up, not down.

Hard to tell what your MH would be worth in 10 years. If it is not in an appreciating area of the country for MH's on rented land, then it will definitely be less. The numbers I mention are estimates only and used to provide examples. Please do your own homework in this area to find out how the MHs are holding up in value in the park you are interested in.

[Dana]

Also, a MH on rented land generally depreciates, unless you live in the Northeast, San Franciso, or Los Angeles areas. The rate of depreciation is different for each type of MH. A general average, and probably low, is about $100 per month loss in value.

Do you know why it doesn't depreciates in area like the Northeast, S. Fran. and L. Angeles. I live in L.A. and that should be good news form me...right?

[Ron]

The reason for POSSIBLE appreciation of MH's in the LA area (and others) is due to the severe housing crunch (lack of affordable stick built homes.) There is a strong market in these areas for MH's because they are more affordable than stick built equivalents. With the already dense population in these areas, plus continued growth from people moving into these areas is the major factor in the crunch I mentioned earlier. Since September 11, these growth patterns may change over time. San Francisco is alreadys seeing a drop in home values.

It can be good news, IF you really research the park you are interested in. Canvas the current MH owners in the park who recently purchased homes there and ask their opinions about MH pricing and appreciation. Talk to local realtors and get their information. Ask real estate appraisal companies their opinion of MH appreciation.

Even with appreciation possible in these areas, BE CAREFUL, since your MH will still be considered personal property, carry a somewhat higher interest rate and while you might have some increase in equity from appreciation, it is doubtful it would provide enough cushion to enable you to refinance to remove co-signers. TREAD very carefully in your purchase. Again, this is only my opinion, not a legal or real estate assesment.

[Randy Eaton]

Hello Dana,

If your goal is to buy a manufactured home and place it in a park (leased or rented ground) and in a couple of years move your manufactured home onto property; you need to consider a few things. First, there is the risk of a second move and the costs of moving it. Try to buy property with-in 75 miles of the park you live in, this will help keep your transportation costs down. Buy the best built home you can afford this will ensure the second move will have little effect on your home. Manufactured homes appreciate slowly in a park so don’t expect to sell your home in a couple of years and make a profit. You must also consider the needs of your family in the future. If you are a younger couple and plan on having children, buy a larger home now to meet your needs later on. I have younger couples calling me all the time wanting to know what their home is worth in a park. Usually they owe more than what the home is worth and they can’t afford to take a loss so they are stuck. Carefully consider these things mentioned above before placing a new manufactured home in a park.

Randy Eaton
www.buymfghome.com