Roughly 10,000 Baby Boomers per day are entering retirement currently, and many of these are considering downsizing their housing needs and costs as a part of their overall retirement plan. Unfortunately, some may miss an important option to downsize into a manufactured home. While it’s not the correct decision for everyone, there are those who can’t properly analyze the opportunity due to ignorance of the facts. And that’s the case for the Yahoo Finance writer who wrote “Think Twice Before Downsizing to a Mobile Home in Retirement”.
The writer raises concern for investing in something you don’t own the land under, which is the case in a manufactured home community. However, you also don’t own the land under an apartment, which is the #1 option for most retirees. So I guess you’d have to say that owning half of your living accommodations is better than owning none at all? What the writer is missing is that the whole point of moving to a manufactured home community is to cut your housing costs dramatically while still maintaining the privacy of a detached dwelling with its own yard and the ability to park by your front door – it has nothing to do with a financial investment. Do manufactured homes depreciate? Of course they do. So does that car your bought. But, just like that car, your purchase is not based on re-sale, but on current, in-hand cash flow concerns. Let’s look at the math. If you buy a manufactured home for $20,000, set up in a manufactured home community with a lot rent of $300 per month, then your total payments, if you pay cash for that home, is $300 per month. If you instead rent an apartment, you’ll find the U.S. average rent is currently $1,150 per month – that’s $850 per month more! Who cares about the fact that your heirs will only be able to sell the home for maybe $15,000 twenty years from now (although there’s no proof that the home will not remain stable or increase on the re-sale market)?
The writer also is concerned that “mobile homes are not mobile”. Well, exactly what out there is? Can you move your current brick home over a couple blocks, please? You would never want to move a “mobile home” – it is chock full of risk of damage in the move. These homes were built on wheels simply to allow them to be shipped to their ultimate destination, not because you might want to move them again. My in-ground swimming pool came on an 18-wheeler a decade ago, but I don’t think I want to try and move it again. But this lack of movement has nothing to do with value or investment.
The final point of the writer is that the owner of the land has superior rights to the owners of the manufactured homes. Yes and no. Both parties have rights under law. And, without the manufactured home, there is no income on that land. So really, the only risk is that the land under your home is sold for re-development. This is a very, very low risk. There are roughly 50,000 manufactured home communities in the U.S. and around 10 are torn down each year. That means your odds are .0002 of a percent. That’s about the risk of being hit by lightning in some areas. So I don’t think it’s worth losing sleep over. But what the writer is really missing out on is the financial cash flow benefits – that’s the big news story. If you save around $10,000 per year over the cost of apartments, that’s $200,000 in your pocket over a 20 year horizon. If the land your home is on is re-developed, the developer typically pays to have your home moved to a comparable property, and meanwhile you are $200,000 ahead. Doesn’t sound like much of a gamble to me.
Gather your own facts and make your own decision. But don’t rely on bad journalism!