Does the word “depreciation” send your mind into a chaotic spin? Do your eyes glaze over at the sight of such financial jargon? Take a deep breath. It’s going to be OK.
As a one-stop-shop for understanding mobile homes and investing, we believe in expressing big ideas with clarity in mind. This isn’t an easy topic to tackle, but we hope you’ll find it easier to understand once we’ve explored it below.
Today we’re going to talk about mobile home depreciation. Together we’ll explore whether there is a way to stop mobile homes from depreciating. And after that, we’ll take an in-depth look at the different tactics we can employ in dealing with depreciation.
Let’s face it. No one loves depreciation. And mobile home depreciation is no exception.
What is mobile home depreciation?
We’ll go ahead and assume that you’re here because (a) you’re an investor or (b) you’re a property owner who wants to be sure you’re getting it right.
But what is depreciation? And how do we stop it?
To be sure we’re all on the same page here, let’s talk about definitions. It’s important to define the what before we get to the how.
Depreciation is the loss of value. We’ll go into how this is calculated for mobile homes later on in this article.
Appreciation, on the other hand, occurs when the value of an asset increases (in our case, that asset would be a mobile home).
To be clear, depreciation and appreciation can fluctuate over time due to various factors. (More on that below so read on.)
The real truth about depreciation
In the end, depreciation is often inevitable. Material things do not last forever in prime condition. Still, when it comes to resale value, your mobile home’s value can sometimes increase. But let’s take a look at depreciation first.
Here are a few reasons why your mobile home can depreciate:
- Location can impact value. If your mobile home is in the wrong location, its value could decrease significantly. So let’s say you put a brand new mobile home in a crime-ridden area. Yes, chances are that your resale value plummeted over that. It will be harder to sell your home.
- Your mobile home’s age affects its value. A mobile home built in 1970 carries much less value than an energy-efficient double-wide mobile home built in 2010. Put that 2010 mobile home in Malibu, CA, and its value has sky-rocketed.
- And don’t forget about inflation. It’s another contributing factor to mobile home depreciation.
- The supply and demand of mobile home park communities can be a factor. This can affect your home’s value.
After these points are considered, take note that your mobile home can depreciate at the same rate as stick-built homes. Just be mindful of your mobile home’s location and whether or not the property and site are cared-for.
Ways to stop it (or slow it down)
So we’ve discussed the what when it comes to depreciation and appreciation. Now let’s look at five different ways to stop or slow down mobile home depreciation. With these hacks in hand, you’ll protect your current or future investment.
And if you don’t have a mobile home yet, these tips will help you avoid a money pit as an investor. (For example, if you’re pouring a significant quantity of money into a rental mobile home for investing, you may want to be cautious of where you place that mobile home.)
Be mindful of location, location, location
If you haven’t anchored your mobile home to a specific site yet, keep in mind that location can affect your mobile home’s value.
For instance, if you’re a mobile home investor, you could consider carefully scoping out a park before you move any rental mobile home to the location. Screen parks to ensure you’re placing the home in a desirable location.
On the flip side, are you the owner of a mobile home park? If you’re looking to increase the value of mobile homes in the park, perhaps it’s time for the park administration to craft new park policies. You can create policies designed to increase the desirability of your location. Having policies that improve the look of your park can increase value.
There’s no way you can expect a community that’s dilapidated to increase a home’s real estate value.
Tackle value-increasing improvements
If your mobile home is parked in a decent neighborhood, perhaps it’s the property itself that needs fixing up. Is the fencing falling apart? How about the driveway? Maybe the property itself needs a little tender loving care so that your mobile home does not depreciate.
As far as the mobile home itself, note that curb appeal is a big winner when it comes to appreciation. Does your front door need a new paint job? How’s the porch looking? And how about the windows or siding? Keep an eye on the mobile home’s overall maintenance to maintain its value.
Energy-efficient upgrades can also increase your mobile home’s value. And don’t forget upgrading appliances and adding a fresh coat of paint to the interior.
Really? Paint? Yes! Sometimes it’s the little things in life that give a home its added value.
If a viewer sees a dated mobile home, they’re not going to be interested. Keep your mobile home looking current. Don’t follow fads when it comes to the exterior as its age will be noted more when time passes.
As we noted above, update your appliances. Your fixtures can also age your home — so update those if they’re looking like they came out of another decade. And don’t forget the paint. Stick to neutral colors if you’re trying to sell.
Level your mobile home (annually)
As part of maintaining your mobile home, note that it should be leveled annually. This will affect your mobile home’s value and longevity too. Leveling your mobile home is important. Because the soil is susceptible to shifting over time, it’s smart to level your mobile home about once a year. Failure to do so could lead to costly repairs or make your mobile home unsafe over time.
Additionally, an unlevel mobile home may violate HUD standards and decrease your home’s salability. Even a mortgage lender would balk at working with your mobile home, making it difficult for a buyer to select it.
As a responsible mobile home owner, you would do well to call in a professional to level your mobile home.
Annual mobile home depreciation
So we talked about depreciation and ways to stop it. (Or rather how to prevent it and how to increase your mobile home’s value.) We hope the information distilled above proved helpful.
Now let’s take a look at some other questions related to depreciation.
How much does a mobile home depreciate each year? Great question. It’s not as cut and dry as we would like it to be. As a matter of fact, every mobile home is different — original pricing varies and homes can depreciate in different ways (as mentioned above.)
The calculation for depreciation
To calculate depreciation as it relates to a mobile home, we’ll use the straight-line method of calculation. (For best results, reach out to an accountant for depreciation calculations.)
What’s the year your mobile home was purchased? Find out the sale price of the mobile home. Did it come furnished? If so, reduce the price to 80% of the sale price. On the other hand, if it came to you unfurnished, reduce the price to 95% of the sale price.
That would give you the first depreciation amount.
After you have that number in hand, take away 5% for each year you’ve owned the mobile home. If you’ve owned it for three years, that means you would subtract 15% from the initial depreciation amount.
And there you have it. You’ve done the calculation for your home’s value — with depreciation at work. Of course, we suggest getting an appraisal from your county auditor too.
Depreciation and rentals
Now, how about a rented mobile home? How does depreciation affect a rented mobile home?
In short, there is a 27.5-year class assigned to residential rental property. Manufactured homes can fall into this category — see what The Tax Professionals Blog says to learn more.
Is it still worth it to invest in mobile homes?
Of course it’s still worth it to invest in mobile homes! After all, even traditional homes undergo the ebb and flow of depreciation woes (or appreciation victories).
There are plenty of stories out there of investors finding success in mobile homes. With a mobile home, you can acquire a fixer-upper for a dime and flip it for sale or rent. And some investors may choose to invest in mobile home parks themselves — buying and managing mobile home communities.
You could be another success story when it comes to mobile home investing.
Benefits of owning a mobile home
We looked at mobile home depreciation, ways to stop it, and other questions pertaining to depreciation. We even asked ourselves if it’s worth it to invest in mobile homes. To continue that last thought, it seemed only fitting that we lay out the benefits of owning a mobile home.
In short, those benefits encompass the following: affordability, customizability, and a quick turnaround in a deliverable home.
Below we’ll look at each benefit in detail and see how the mobile home rises to the occasion. As you’ll soon see, a mobile home is a solid and viable housing option.
Affordability — more bang for your buck
In a mobile home, affordability reigns supreme. A mobile home gives you more bang for your hard-earned buck. A site-built home with the same square footage as a mobile home is going to cost more.
Because of the factory model in building a mobile home, manufacturers are able to make building a breeze. And yet this does not sacrifice safety — mobile homes are built according to safety needs that depend on the various weather zones. (For example, mobile homes built for snow-laden Wisconsin will meet the construction requirements for roof pitch.)
And you don’t have to sacrifice customizability for affordability with your mobile home. That’s another big win.
Customizability — space that meets your needs
That’s right. A mobile home is both affordable and customizable. Do you have specific physical needs to be met in the home’s layout? No problem. You can work with someone at the manufacturer’s office to get the design just right.
Did you see a floor plan that you liked for your family’s future home? Does it need a few changes? No problem. You can customize it with the factory.
And with the manufacturing professionals there to help, you won’t have to wade the murky waters of dealing with contractors. The downside to a site-built home is the struggle to get contractors in the right place at the right time.
Quick turnaround in a deliverable home
And last but not least, in mere weeks you could have your dream home delivered to you. That’s what Kid Rock loves about his mobile home that’s nestled in Tennessee. He said it’s easy to replace in the event of a disaster.
It’s a sure perk of having a home built in a factory. Whether you’re going for a single wide, a double-wide, or a triple-wide — a mobile home will come to you faster than a site-built home.
For a site-built home, you’re depending on the weather to cooperate and maybe even the contractors too. Who has time for that? Or rather who wants to wait for that? Few of us do.
Don’t let depreciation get you down
Understand that depreciation isn’t the end of your world. You can slow down depreciation and maybe even see a significant increase in value. Remember, it’s all about location, location, location.
We hope the take away from today’s article is practical and hands-on. We look forward to seeing where your mobile home adventure takes you — whether you’re the investor, the buyer, or the seller.
Want to up your mobile home’s value? Check out these simple tips you can implement to increase your mobile home curb appeal. From landscaping to sprucing up your mailbox, a little goes a long way when it comes to curb appeal.