Decision: mhp or sfh paid off - or both?

Brain Teaser:

I want to buy a small house with cash; I want no mortgage.

I really want to buy a MHP.

I am older, have 200k to my name of which I can spend 130k.

Here’s the scene:

I just completed a loan mod on my home. I now have a 400k loan amount. My total monthly payment is $1650.

I have a renter who pays $750 so my net out of pocket housing cost is $900.

In four years my monthly payment increases by $150 per month and caps out at about $2000 in 7 years.

The worst case scenario in 7 years is $1250 per month housing cost keeping a renter paying $750, not including property tax increases which are sure to come.

Due to home prices increasing and foreclosures lessening, now may be the time to find a home in my price range. My new housing cost without a mortgage will still be about $500 per month due to property taxes.

This scene takes purchasing a MHP off the table though I will still have 70k which should be my safety net.

If after moving, I sell the house I’m presently in + a condo I own, I should walk away with 50k net which would then give me 120k to work with. This could take a up to one year.

Investing 100k in a MHP with only 20k left for safety net would be OK because my home would be paid off, I would be increasing my cash flow by $400 per month due to no mortgage payment ($900 now w/renter minus $500 prop taxes in home pd off) = $400 increase which could add to the 20k safety net.

OR -

I buy a MHP now and stay where I am, my renter keeping my costs fairly low. But then there’s the big house with the big loan that I don’t need or want. I think there is a creative way around this but I’m not seeing it. Any ideas?

I’m in a similar situation to yours. I’m not sure yet, but I may end up living in the MHP I plan on buying (still looking to find one in the general area where I live). So far the financials haven’t made sense.

Hi Glenn,

I’ve been going round and round about this. I too wanted to live in the MHP - hit 2 birds w/one stone. After speaking with Frank I agree with him that the MHP’s that are best to invest in would probably not be one I’d want to live in myself. My friends have a place in a very nice MHP but it would not be a good investment. Another way around this would be to invest in a MHP and live in a different one thereby keeping your housing costs low. In fact, I came upon a great little MHP right on a river that I could live in, but the man selling his MH wants 50k! because he is in the prime location looking over the water. The point is there are very nice MHP’s out there. I read a few of your posts. I agree with the responses that suggest going to the bootcamp. From my experience, I believe it is imperative because of the little nuggets to be learned that can make or break a deal which we would otherwise have no way of knowing. I think the cost is small in comparison to the gain to be made. In my case, my decision to move forward on purchasing a MHP right now rests upon the 400k loan on my primary residence that feels like it is a huge weight around my neck, not to mention my property taxes keep skyrocketing making it an untenable situation in the next few years. I wish I could figure a way to buy a MHP now and make a move in a few years but I think it has to be the other way around. Are you planning on going to the bootcamp? I’d love to go but not until I can make a move right away on a MHP.

What you should be doing is setting your priorities. At this point in your financial life you are trying to go in two directions. Is your priority to be a investor or a home owner. When finances do not allow both you must chose your path.

Wise investors realise that being a renter allows the freeing up of cash to actually move forward with investments. For the true investor home ownership is a liability not a asset.

Free up cash by selling your home and condo, rent a affordable place to live, invest in a income property (MHR) and when income allowed then move back into home ownership.

Greg, Thank you for your thoughts.

I believe I have enough cash to invest right now. Which way to go is my temporary conundrum.

Being 55 years old has some time limits re: growth of new investment. A MHP will be my income stream.

My housing cost now is $900.

Renting a small apartment would be about 1000 - 1200 per month in my area.

The sale of this home may yield 20 - 25k.

The costs associated with closing and moving would be about 8 - 10k.

Possibility # 1 - I could stay where I am, get another renter- increasing my monthly cash flow to $550 per month (I’ve had renters for this amount for several years) which decreases my housing cost to 350 per month. I could then purchase a MHP now for 100 - 130k down right now.

Once I have the MHP, I then I deal with stage 2 and sell this house + condo and with proceeds of 50k + 50 - 80K remaining from my 200k, I find a small home for cash.

Possibility # 2 - Purchase the new smaller house with 100 - 130k, sell the primary house + condo gaining 50k + 50 - 70K left from my 200k and purchase a MHP.

I think what feels like an obstacle now is the unknown of the housing market. I have access to the MLS and 6 months ago smaller homes in my area were mostly showing active. Now, due to heavy investors for some part, most properties are under contract and fast. Though most foreclosures are slowing, the midwest where I am is still experiencing an increase. It’s an odd market.

In sum, I think either scenario would work. It’s all about the numbers and I have to say, at my age, it is also about quality of life. I’m looking at a MHP as an income stream. Owning my own home outright is also important. Thanks again for your thoughts.


I am planning on the bootcamp, but will look into the books and courses first. I think in the end you will make the best decision for yourself. Greg does have a very valid point of view and one which I have thought about and will consider also.

take care

Hi Glenn,

With the help of my business counselor at SCORE, I’ve decided the following:

  1. Buy a smaller home with cash for me to live in, but rent out for now.

    This accomplishes 2 things, I can take advantage of lower pricing in the market right now. I can stay where I’m living for one - two years which provides Stability, peace of mind and gives me 100% freedom to take the bootcamp and look for a lower priced MHP as I will have about 50 - 70k to invest vs. 100k - 130k.

  2. Purchase a MHP

    This starts my income stream.

  3. Sell the house I"m in now + one condo.

    This will get that nagging debt burden off my shoulders and provide additional capital for either one more MHP or pay down the debt on the first MHP.

This above plan provides immediate relief, puts my cash to work, allows me to enjoy the journey of learning about and purchasing a MHP, establishes a new income stream, lets me take advantage of the present housing prices and most importantly takes those two debt burdens away. I will have met my goals of house paid off, income stream and relief from mortgage on my present house. Which leads to my ultimate goal of traveling the good ol US of A.

My timeline is House purchase completed max by next March or sooner, get a renter in, take bootcamp within one year from now, own MHP by March 2014.

Personally I think it is a well thought out plan. I do understand about the security of having your own place. We’ve rented a house only to have the owner sell it while we were there. Understandable, but very inconvenient, especially when you have a family.

take care

I’d just like to add to the discussion about renting vs. owning by pointing out the giant “buyers premium” that owners are paying right now. Let’s take a 2,500 sq. ft. house in a nice neighborhood in Dallas, Texas, as an example. Let’s say you wanted to buy that house. It would cost you about $200 per square foot, or $500,000, to buy it. In Texas, the property tax is very high – about 2.5% – so the tax alone would be $12.500 per year (let’s round that to $1,000 per month). They you have the insurance and repairs and maintenance, which would be at least another $400 per month.

This type of house rents in Dallas right now for around $3,000 per month. If you subtract the property tax and insurance and repairs and maintenance from this amount , then the net figure would be around $1,600 per month. At a 10% cap rate, that would value the home at $160,000 – $340,000 less than the price.

That $340,000 is the “buyers premium” you are paying to have the pride of ownership.

Until such time as renting even comes close to costing the same as owning, you would not want to buy a house. The myth about home appreciation is over. The new reality is that renting is superior right now.

The only downside to renting, of course, is that you don’t feel like you have as much control over your housing future. But $340,000, in this example, is a lot to pay for that control. But, of course, it depends on your personal choices.


Thank you for your good wisdom.

I would agree with your view on renting vs. owning applied to younger people or those who desire to own a house for half a million.

There is definitely something to be said for renting vs owning in our current political and economic climate in the U.S. and globally.

I would like to clarify my position and that is that I have never believed one’s primary residence is to be viewed as an investment.

There are areas in the U.S. where the numbers make sense to purchase now. BUT one MUST know their local real estate market, stay on top of it daily, have the ability to see the big picture, know what’s going on in the U.S. as well as globally, know themselves, know what they want and why.

In my case, my Home is not an investment. It’s partially a woman thing. And now definitely an age thing. I want my primary residence out of the clutches of any bank or financier or landlord. I want my money in my pocket now and have as small a housing cost as possible. I know what it feels like to have a Home paid off and speaking for me only, it’s the greatest feeling in the world.

These are the numbers on homes I’ve been looking at. And I always choose homes with the idea of the next buyer in mind.

1500 sf - approx

130k Max - complete

(purchase price 45k - 100k (add 30k for rehab including closing costs)

450 per month property taxes max (factored on max 5500 annual property taxes)

Repairs at 150 per month ( factored at 10% due to recent rehab of entire house)

Using my max max allowable to get in to the property minus taxes, ins, maint, and repairs, I’m at $600 per month cost to live mortgage free.

Re: Renting this house for one - two years while I get back on my feet,

This type of house rents in the Chicagoland area right now for around $1500 - $1800 per month. If you take the lower rental amount of 1500, and you subtract the property tax and insurance and repairs and maintenance from this amount , then the net figure would be around $900 per month. At a 10% cap rate, that would value the home at $90,000 – $40,000 less than the price. That $40,000 is the “buyers premium” I would be paying to have as you would say the pride of ownership and I would define as the comfort of depending on myself. After what I’ve been through with my very good investments until the downturn, I’m happy to pay that premium. Not that I would advise this for others. But for me it works. It then frees me to be settled and comfortable. I then have a firm foundation with which to continue on to take your bootcamp and purchase my first MHP. By the way, any of my responders or fellow investors - how many of you are renting right now? If so, how many of you over 50 and man or woman? It’d be interesting to know. Well, thanks to all for helping me on my new path, with a special Thank you to my counselor at SCORE who has been a successful real estate developer in the Chicagoland area for over 60 years. I will be with you in Spirit at the upcoming Bootcamp.

Adele I am not a renter however my situation in many ways was similar to yours. At age 56 my home was paid off and I was considering early retirement. To do so I would need to supplement a reduced pension. I was aware that owning my home outright meant that the cash tied up in the home was dead. Dead in regards to the fact that it was not earning it’s keep, no return on value.

I took out a Home Equity line of credit on it for $200,000 and put a down payment on my park.

The income from my park pays the mortgage on the park as well as paying off my Equity loan and provides $2000 per month in positive cash flow.

All the money that was sitting dead in my home is now finally earning it’s keep. My tenants pay for all my investment costs and my dept is tax deductible to boot. As my tenants continue to pay down my debt I can continue to pull more money out of my home for other investments or personal needs. My home has changed from being a liability to being an asset.

At any point in time in the future I can sell the park, pay off all my debts and quietly wait to pass my inheritance along to my kids.

Hi Greg,

Your situation is definitely one way of looking at it.

I have done your situation before, a few times, but I was never comfortable putting my own house on the line.

Recently, it took me four long years of Hellish Hell to get a loan mod on my Home. It was devastating.

It was tied up in a similar situation as yours when the economy crashed and it was not pretty.

I’m really glad you were able to do what you did.

Thanks again for your personal story, it’s much appreciated and I will think about it.

Take care, Adele.

Hi Adele,

I’m in somewhat of a similar situation in that I am looking to use money to aquire a place to live and purchase my first MHP. Here’s what I did… I bought a duplex here in Orlando, live in one side and rent out the other. The rental ($1225/mo) covers the PITI ($1138/mo) and a little bit of the expenses that comes along with renting. So I am living for the cost of the remainder of those expenses. It does help that I got a 2.85% interest rate, it does help that I bought it after Orlando’s housing market got beat up and it does help that I’m single and can live in a smaller home. But I was able to get a nice place in a nice neighborhood… and might be even allowed to call it an “asset” on investing forums, or at least close to it.

Adele, Glen and other… did you end up taking the bootcamp (this weekend I think?), or are you going to sign up for the next one? I just saw it’s in Orlando, so if I decide to go, no traveling for me!

Joe Hartman


Orlando just can’t work in my schedule at this time. Keep us posted if you go.

Hi Joe,

You did very well in your investment. Killer interest rate. Sounds like something to hang on to for a while.

It’s definitely an asset. My plan is to take the bootcamp after I purchase my little home.

I’m chomping at the bit to take the bootcamp now but I’m going to follow my business plan.

Seems like everything is coming your way - your duplex and now the bootcamp in Orlando.

I can’t stress enough how important it is to take this bootcamp from Frank and Dave.

Early in my investing days I took a few bootcamps and would go hear speakers at different real estate organizations. Sometimes it was just one gem of info that I came away with where had I not gone I would have not otherwise known. Also, it’s very well priced. I paid this type of pricing 10 years ago. Plus it’s so great to meet others doing just what you are going to do. I’ve made lifelong friends from these events. Take care and check back anytime.