We often hear about unfortunate events happening at trailer parks such as say tornadoes. These potential places of disaster are also places of financial disaster. This is where poor people get taken advantage of and robbed economically. While most readers likely won’t be considering such housing I still want to make people aware of the financial pitfalls as a lesson.
The troubling reasons for this are many
- First of all trailers, ie mobile homes depreciate in value unlike houses, condos and townhouses. FYI tiny houses are basically trailers not houses so all the same pitfalls apply.
- Second, while you may own the trailer you often don’t own the land underneath it. You pay lot rent. That rent can be raised at any time. That is exactly what has happened as savvy investors have bought trailer parks as investments and raised the lot rent a lot.
- Third, trailers cost a lot of money to move from lot to lot. You have to have someone move them with a really big truck. That is if the trailer can even be moved at all without damaging it. So that means if the park owner raises the rent you may not be able to move the trailer as that could cost thousands.
- Fourth, trailers cannot be financed like houses can with a mortgage. Instead they are financed more like vehicles and there is no mortgage interest tax deduction.
- If you were to say own the land the trailer is on you would be better off from a land rent standpoint but you still have a depreciating asset and poor finance to contend with.
The moral of the story is avoid these places like the plague for financial reasons. There is a funny John Oliver episode on exactly this.
A better set of alternatives
If you are going to pay rent just rent an apartment so you can move easily if they raise the rent too much. Adios landlord and hello rental deal.
If you want to buy something and can’t afford a house consider a condominium, townhouse or smaller, older 2BR house (1000 ft2). That way you can get good financing, better rates and a mortgage interest tax deduction potentially. Just be wary of condo fees and HOA fees. If fees or taxes get too high you can sell.
Investing in trailer parks
If you are somewhat investment agnostic there may be good money to made off trailer parks given the dynamics of the market and captive audience. Just don’t exploit people. It’s bad karma.