Should You Own The Land Under Your Mobile Home?
In the past, what were called mobile homes were often placed in mobile home parks where the lot on which the home sat would be rented from the park owner. This formula has changed over the years as more people consider manufactured homes because of the affordability and quality construction. Should you own the land under your house if you decide on a manufactured home?
Land is an investment.
Pro: Mobile homes are on par with or superior in quality to site-built homes. With site-built homes, ownership value and wealth appreciation are usually not in the home but instead in the land. In desirable areas where land prices have skyrocketed, it is common for a new landowner to tear down the existing house and build a new one because the land is what is valuable. Land will appreciate in many markets and is an investment asset. The home is not an appreciating asset, whether site-built or manufactured unless it is exceptional in some way or the costs to replace it rise rapidly.
Con: Buying land is expensive, especially in urban areas. The overall cost of a new home will increase significantly when also buying the land under it. A planned community may be for you ff your budget does not allow for the added expense of land or if you are not interested in land as an investment but rather a comfortable, affordable lifestyle. Finding manufactured home parks where the residents own the land is rare, so renting the land may be the best option. You may find that the excellent facilities and amenities offered to the residents are also an excellent reason to rent rather than own the land.
Is it possible or likely that the mobile home park will be repurposed at some point in the future?
Pro: If the mobile home park is located in an area where land prices are stable, then the likelihood of the land being sold and turned into something else is low. If there is no boom in land prices, you are probably safe from the park being sold and repurposed.
Con: If land prices are increasing rapidly, there is the possibility of the park being sold, but still, this does not happen often. Owners of mobile homes parks in desirable areas sometimes sell them, and the land is repurposed, leaving the residents with no option but to move. If the park is sold to build a shopping mall or high-end housing, all the residents will be forced to relocate. Since these homes are not highly mobile, as the name infers, this can be expensive, stressful, and difficult.
Is the lot rent going to increase?
Pro: If you are relatively sure the mobile home park you are interested in will not be sold, or you can get a written agreement regarding potential lot rent increases, then you don’t need to be concerned. It is also possible local government prevents this sort of activity, and you are thereby protected from predatory price increases.
Con: There is a problem in the mobile home park industry where big corporations buy up mobile home parks and raise the rents to unaffordable levels. Mobile homes aren’t very mobile, so the corporations know you probably won’t move. Unfortunately, this captive market is why this can happen.
Should I live in a mobile home community or settle on rural land where I can do as I like?
Pro: Community. Mobile home parks have a lot to offer in terms of community. Since many people live close to each other, community facilities are often available to all residents, which would be very expensive for an individual to build: clubhouses, pools, sports facilities, and even green parks. Also, there are usually clubs or groups made up of residents, which can significantly add to your quality of life.
Con: HOAs (Home Owner’s Associations). HOAs have many rules about what you can and cannot do on your property. Additionally, they charge a fee to common upkeep areas. Sometimes they are reasonable, and the rules make sense. However, sometimes they are political or ego-driven and can drive you nuts with petty controlling behavior. You might want to have meetings with the HOA in a prospective community to see if their rules and behavior are something you can tolerate. If you like to do things your way, a rural situation might suit you best.
A rented lot vs. paying a mortgage.
Pro: A rented lot will usually cost less than a mortgage. But you also have to factor in HOA fees or any other additional expenses when making this comparison. You might also want to look into the tax ramifications of renting. Can you deduct your lot rent or HOA fees from your taxes as you can with a mortgage?
Con: You may not be able to get a mortgage if you are renting the lot space. It is more challenging to get a loan for a manufactured home if you do not own the land. The mortgage rates might also be higher as there is less property for the bank to hold in the event of a failure to pay the mortgage.