They say I am Crazy

So, I opted out of contributing to the company’s 401K so I could save more for a MHP. My co-workers tell me that is a big no-no and I need to max out the contributions instead. They say I need the tax advantages; while that may be true to a degree:

I think I would rather have an income producing property than a 401K.


I would actually argue that there is no real tax advantage to an IRA and they are also a crappy investment:

  • You wind up paying taxes now or later
  • Your capital is tied up and bound by ridiculous rules
  • You have very little control (Investment 101 no-no)
  • You are penalized on-top of being taxed should you decide to use the money before the government tells you you can
  • IRA’s have a tendency to get creamed during recessions. Ask a co-worker who had an IRA in 2007-2008 what happened to them.

The depreciation allowance on a mobile home park is about a million times better than any tax advantage anyone ever got from an IRA. The ability to 1031 later on is also rather nice. Real estate has a multidimensional return where you make money through cash-flow, tax shelter, appreciation, and principal reduction. Income producing real estate is simply better than an IRA when done correctly.


Carterw65, as per your title:
“They say I am Crazy”

Personally, I would be more concerned if “They” (your co-workers) start saying that you are a genius and then start saving their dimes for a MHP.

Before the Stock Market Crash Joe Kennedy stopped to have his shoes shined. The boy who was shining his shoes offered Kennedy the following stock tip: “Buy Hindenburg”.

Joe Kennedy was credited with saying and doing: “You know it’s time to sell when the shoeshine boys give you stock tips…”

Yes, you are correct that you might forfeit some of the advantages of your 401K.

However, the pros of an income producing MHP outweigh anything that you might forfeit on the other side.

Just be thankful that your co-workers ‘say’ that you are crazy…at least they will not be out there trying to get that MHP that you are interested in :-).

We wish you the very best!


I am also a contrarian who does not believe in the concept of the 401K as being a valuable investment tool. Returns on bonds and CDs have not been impressive since the days of Ronald Reagan, and that nonsense about the stock market making a safe 10% per year is simply a matter of timing – just look at the performance of the market in recent times. Mobile home parks, in my opinion, are the only investment that is properly positioned for the new America – a story of declining prosperity and poverty. I choose to bet 100% on serving the needs of a poorer America through affordable housing.

It’s interesting to note that Joseph Kennedy, who Kristin referred to above, was not a big believer in the stock market after the depression, and invested in movies (because poor people needed something to take their minds off their problems), alcohol (same reason) and residential and commercial real estate.


Owning a community is a good business investment but keep in mind there are many poor business people (or unlucky) that have run a MHC into bankruptcy. Owning a good investment without good business skills does not equate to success.
I chose to max out my Canadian equivalent of your 401K and own a MHC. Admittedly I have many other investments as well due to my belief that all your eggs in one basket rarely works out well.


Thanks for all the replies! I really feel owning a MHP is a much better investment in my family’s future. I am no tax guru and don’t know how to run the numbers to get maximum use of $$ earned vs. minimizing taxes to keep as much of my income as liquid as possible.

I had an appt with a tax CPA, but cancelled because, first, he wanted $250 for a consultation, and second, I figured he was going to tell me the same thing as my wonderful co-workers. They are a good bunch of people, I just don’t think I can turn to them for business advice.

You may read some of the books out there from CPAs on taxes. Tom Wheelwright and Garrett Sutton do a pretty good job on this subject. Additionally, my partner produces a podcast and has had both of these two on his show to talk about these subjects:

Thanks Charles! I will look at these.

It doesn’t take long for a 30%+ compounded rate of return (not unreasonable in a carefully structured deal and well-operated park) to overtake the <10% historic returns (including dividends) that you see in the market - even if you are getting a generous employer match and have to pay taxes.

For me personally, I do the 401k, get the employer match, take it out (and pay the associated 10% withdrawal fee and am taxed at ordinary income). In my situation I end up coming out ahead following that process. I then pool that capital for my next park.

Keep in mind that you’ll want to re-invest your MHP proceeds (or at least a fair part of them) into investments with similar returns (i.e. more MHPs) if you want to do an apples to apples comparison with the market and keep the magic of compounding going. Ignoring this point is where I’ve seen a lot of folks get off track in their real-estate investing.

Also - I have found that when it comes to investments and the masses say that you are crazy, you are likely on the track to get superior returns :smile:

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I thought about contributing and getting the match also. However, when I studied the plan, I realized it wasn’t the best deal. I can’t become fully vested for 5 years. Since I just started this job, that isn’t an option for me. I certainly do not plan on being here for 5 years.

The reason I took this job in the first place was to get $$ for a MHP and only that reason. Even after 2 years I would only be 20% vested. After the first year you get a whopping goose egg. I just can’t see how it can fit in the plan.

So I have to do something with the savings. Maybe a money market account.

Agree overall that MHP is the way to go , however, regarding depreciation just remember that is just a deferral of taxes and when you sell you have to recapture, (and it could be at a higher rate - depending on your bracket). For this reason (in some cases), you may want to keep your depreciation as low as possible during your ownership of the asset. You can do that by adjusting the allocation of land and infrastructure when you buy. If you have a good tax adviser, they should be helping you look at such scenarios. It boils down to a balance between what tax brackets you think you might be in when you sell/retire and your need for stronger cash flow in the present.

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