Most homeowners will consider downsizing their homes, at some point in their lives, in order to lower their cost of living. Downsizing to a mobile, or manufactured home is an option being considered by more and more homeowners. Here’re the key things you should know.
Housing costs are a significant portion of everyone’s monthly budget, regardless of whether we own or rent. Downsizing can lower day-to-day out-of-pocket living expenses. It can also provide a pool of cash for various purposes, such as financial investment, health care expenses, and home renovations.
Downsizing has become a smart way to simplify life. The less-is-more philosophy is catching on with many homeowners, especially seniors. Florida State University professor, Elizabeth Goldsmith, teaches a course on how to downsize gracefully. In her view;
“Many people fear the process of change and letting go of things, but fortunately people are now fed up with such wasteful spaces.”
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The ups and downs of the economy is another factor in encouraging, and in some cases requiring homeowners to downsize. It took years to recover from the last recession. Now, in August 2020, we’re in the throes of another recession, with an uncertain economic outlook. A recent article on Realtor.com stated:
“Many families are still digging out of the last recession, which had an impact on home values, employment, and retirement nest eggs invested in the stock market. A couple finding itself with a diminished income may simply be unable to keep up with mortgage payments and maintenance costs on their 2,800-square-foot home on a half-acre lot.”
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Downsizing can be accomplished in a variety of ways:
Smaller: Owners of single-family homes often choose to find a smaller home in the same general area or neighborhood. Oftentimes, a homeowner’s circumstances change over the course of his/her life, and the larger home that was once needed in order to raise a family is no longer desirable.
A smaller home is also easier to maintain. It will require a lower utility demand, which will result in cheaper bills. A smaller home will also have lower property taxes and will cost less to insure.
Change of area: Property values differ from locale to locale, sometimes dramatically. A homeowner can often realize a significant reduction in his/her cost of living expenses, simply by moving to a new area or new community.
Just by changing location, a homeowner can oftentimes achieve his/her downsizing objectives with a home that is as large, or nearly as large as his/her previous home. By combining a change of area, along with finding a smaller home, a downsize can result in an even greater reduction in the cost of living expenses.
Manufactured Home or Mobile Home: Making the transition from a conventional ‘site-built’ home, to a manufactured home, or mobile home, can definitely achieve a homeowner’s financial downsizing objectives. Manufactured homes are less costly to buy, and cheaper to maintain. Moving from a conventional home, into a manufactured home, has become an increasingly popular option for downsizers.
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1. The Manufactured Home Option
It used to be that there was a stigma associated with living in a mobile home or a manufactured home, especially for someone who had lived in a site-built home his/her entire life. Mobile homes were thought of as being cheap, poorly constructed, and unattractive.
But times have changed, and the manufactured home market has changed along with the times. Manufactured homes are now attractive and well built. And the stigma associated with living in a mobile home community has all but evaporated. These communities have now become popular destinations for homeowners who choose to downsize, especially seniors.
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Mobile or Manufactured?
The term ‘mobile home’ was officially abandoned in June, 1976, when the U.S. Dept. of Housing and Urban Development (HUD) created a new set of standards, referred to as the ‘HUD Code’, for homes which were built ‘off-site.’ Since 1976, all homes manufactured off-site have become known as ‘manufactured homes.’
The HUD Code addresses issues, such as;
- a) Over-all quality
- b) Construction
- c) Design
- d) Strength
- e) Durability
- f) Transportability
- g) Fire resistance
- h) Energy efficiency
- i) Codes for HVAC, plumbing, and electrical
As we all know, the term ‘mobile home’ is still very much in play in our popular lexicon. Today, the two terms, mobile home, and manufactured home, are used interchangeably. However, both terms refer to the same thing; a home built off-site after 1976, and transported to a homesite.
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There are essentially three types of manufactured homes:
- Manufactured Home: This is a conventional single-family home constructed in a controlled factory environment according to HUD Code.
- Modular Home: This is a single-family home which is built in two or more sections in a controlled factory environment. It is transported to the homesite in sections, where the sections are attached together. It is then settled onto a permanent foundation and anchored. These homes are designed and built to satisfy the HUD Code, plus all state and local building codes.
- Pre-cut Home: A pre-cut home is a ‘kit home’. All components are designed and built off-site, and then transported to the homesite where they are assembled. Sometimes the owners/buyers assemble the home themselves, or hire a licensed contracting crew to assemble it.
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One factor, which has deterred many homeowners from downsizing to a manufactured home in the past, was the perception that a manufactured home was of a lower quality, construction-wise, compared to a site-built home.
However, on close examination, this perception appears to be wrong. After all, the HUD Code established building code and quality standards. These standards are no less stringent than standards which are applied to site-constructed homes.
In fact, logic would suggest that these homes may actually be superior in quality in many cases. Manufactured homes are constructed within highly controlled, indoor environments. Site constructed homes are built outdoors. During the construction process, they are subject to rain, snow, and wind. In extreme cases, building materials can be damaged or compromised by the elements.
Manufactured homes are built by full-time crews who work for the manufacturer, year-round. These workers become highly skilled at their tasks, and this continuity of skilled workers helps to ensure consistency in quality. Site-constructed homes are built by construction crews that typically experience a high turnover, season to season, especially with unskilled workers. This inconsistency of personnel sometimes translates to inconsistencies in the quality of workmanship.
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Other factors, like landscaping, are basically a trade-off. The landscaping around a manufactured home can be just as appealing as landscaping around a site-built home. The main difference is that a manufactured home homesite is usually quite small, compared to a site-built home.
There are two factors where manufactured homes are at a disadvantage, compared to conventional houses. One of those is architectural style. Manufacturers of mobile homes have a finite number of architectural options in their repertoire, whereas the architectural options available to site-constructed houses are largely without limit. Another architectural factor is that manufactured homes are boxy. They are constructed within redundant, rectangular shapes, dictated primarily by transport limitations.
However, with a little imagination and a modest investment, a manufactured home, once in place on its foundation, can benefit in appearance from a new, attractive architectural façade.
Manufactured homes are also limited by size, again dictated by transport limitation. However, if someone is contemplating the purchase of a manufactured home as part of a downsizing strategy, the size limitation will make you simplify things in your new house.
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3. Mobile Home Communities
When homeowners begin to investigate downsizing to a manufactured home, they are often pleasantly surprised to discover that these homes are typically located in well-planned communities. Most of the time, these communities have a theme. Some are geared to over-55 homeowners. Others are geared more toward growing families with children. They also often have amenities like pools and recreational facilities, clubhouses, and structured social events and activities.
Still, other communities are located in areas of town with lower property values. The advantage here is that the costs of homeownership are usually lower by comparison.
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4. Mobile Home Land Ownership Issues
Perhaps the biggest risk associated with mobile home ownership is land. More specifically,
- a) Who owns the land under your home?
- b) What ongoing costs are associated with utilizing the land, if any?
- c) What are the chances that a homeowner will lose the right or ability to continue to use the land?
- d) What would happen if the right to use the land is lost?
- e) What happens if the monthly rental rate on the land becomes unaffordable?
If you own the land under your home, you have little to worry about. If not, you do. If you don’t control the land, somebody else does. That somebody may be an individual who is sympathetic toward the tenants. Or, it may be a faceless corporation that is driven only by bottom line considerations.
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If the land is owned by an investor who charges $300 per month for each homesite, and his community has 100 homesites, his monthly gross income is $30,000. However, if he decides to redevelop the property into a strip mall with 200,000 sq. ft. of retail space, and if he can lease that space out at $1.25 per sq. ft., he could increase his monthly income to $250,000 per month. Evicting his tenants, and increasing his monthly income by $220,000 per month is an easy call.
Another problem can come up when there is no long-term lease in place controlling rental rates. If the owner wants to begin to clear out tenants, he can raise his monthly land rental rates so high that they become unaffordable. Mobile homes can often be very difficult to move. They can even be next to impossible to move, because potential mobile home communities may not accept the structure, for some reason.
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In cases like these, sometimes tenants are so strapped for money that have to move out of the community, leaving their homes behind and eating the loss. With a high monthly land cost, their home may become so undesirable in the eyes of prospective buyers, that no one wants to buy it. In cases like these, the landlord takes possession of the home and can then rent it out or sell it.
Raising rental rates also has the effect of raising the value of the land, should the owner want to sell it. One market analysis conducted in California concluded that for every $100 per month increase in land rental rates, the average valuation in property value to a mobile homeowning tenant was $10,000.
The best solution regarding land ownership issues is the formation of a land co-op. Owners form a corporation and pool their resources together to purchase the land. Then they essentially sell shares in the co-op to fellow homeowners. From that point forward, the homeowners themselves control their land and future land costs.
Land is perhaps the biggest risk associated with mobile home ownership. Land ownership issues are important considerations in a homeowner’s downsizing choice involving mobile homes; an otherwise excellent option for seniors and others who need quality, affordable housing.
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5. Mobile Home Movers
The term ‘mobile home’ is a misnomer, with respect to their portability. They are initially transported from the factory to their final destination. However, they’re not really mobile, once they’ve been located at their homesite and secured to their foundation.
There are some rare circumstances which can require that a manufactured home be relocated. While highly undesirable, these relocations are feasible, but are difficult and likely to cause damage to the structure.
If you are currently a mobile homeowner, or you’re contemplating the purchase of a mobile home, and you find yourself in one of those situations where your home must be moved, it is absolutely essential that you find yourself an experienced, professional transporter. Mobile home transports fall into several categories;
LEGAL vs OVERSIZE – Legally, there are both size and weight considerations. The maximum outside dimensions are 42’ X 8.3’ X 13.5’. The maximum weight is < 16,000 pounds. Any load that does not conform to the above specifications requires special permitting.
SINGLE vs DOUBLE-WIDE – Single-wide mobile homes are no longer than 72’, and no wider than 15’. Double-wide mobile homes range between 56’ to 90’ and are no more than 26’ wide.
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How Much Does It Cost to Move a Mobile Home?
A simple, interstate move requiring no escorts or special permits to transport will cost between $500 – $3500, depending on distance. A simple intrastate (state-to-state) move will cost between $2000 – $15,000. However, a more complicated move, requiring permits and escorts, will average between $1500 – $4000 interstate, and $3500 – $25,000 intrastate.
In order for a transporter to quote a rate for the move, he’ll need the following:
- a. Type of structure
- b. Dimensions of structure
- c. Pick-up and delivery locations
- d. Route survey and planning
- e. Legal or oversize transport
- f. Permits and escorts, if any
- g. Disconnect and set-up service planning
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6. Mobile Home Downsizing Bottom Line
A 2020, real-time market example will help illustrate the benefits of downsizing to a manufactured home. We’ll assume that our homeowner, Joe, has just sold his 3Br, 2Ba, 1033 square foot ranch house in Maplewood, Minnesota for $200,000. He then locates and purchases a 3Br, 2Ba, 1344 square foot manufactured home in Maplewood for $60,000.
Right off the bat, we see that Joe has realized a gross profit from the transaction of $128,000 (included the common 6% commission sales paid to agents). Even if he has an outstanding mortgage of $30,000, Joe will still gross $98,000.
Joe’s new manufactured home is actually larger than his old home by 300 square feet. Even though his old lot was larger, both lots have mature trees, and there is less grass to mow at his new home. Not only that, his new home is within a planned community, which includes community events, a clubhouse, and playground.
Joe no longer has his $287 per month mortgage payment. But he now has a monthly land rental payment of $300. But with his $98,000 profit, he has sufficient funds in hand to cover 30 years of land payments. His taxes and insurance costs are about the same.
So now, the above example begs the question, “Why don’t more people downsize to a manufactured home?”
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