Selling our Manufactured home or building a brick house - question

[Craig]

My wife and I live in a 10 year old large permanently set manufactured
home on 1.4 acres that appraises for about $115,000 including the added
customized options – attached garage, bricking, etc. We
still owe about $40,000 on it. (so we have $50,000 + equity) We are 54
and 48 with household income of $120,000/yr.
We have a car payment of zero interest (370/month) for our debt (payoff is
13,000). . No other debt.

Recently my wife received a settlement of $100,000. We have spoken to several real estate agents who
do seem objective, who said that we will not appreciate any more equity in our ‘manufactured
home’ so we should consider selling it and move on with what ever equity we can get
out of it now. Subsequently, we have
purchased land for $23,000 to build a house which we now have 75,000 left of the settlement. In your opinion,
is the right decision to invest in a brick, stick- built house ($275,000)
for investment purposes and sell the home we have now? Or pay off the manufactured home and be debt
free, even though the home most likely will not increase or potentially may not
hold its present value. (We do have a few things to maintain in this present home for the next few years that will cost 10k-15k estimated which we anticipate never getting a financial return for it).
Also, we might
consider downsizing in 6 years or so regardless. I suppose prior to building,
we could always sell the land that we just bought. Just really needing direction from anyone with a similar experience or not. Thanks for advice!

[frugalwarrior2]

yeah that a lot. I am thinking you are the one thats 54 and prob. make the most??
Not exactly answering you but could you build on the property you live on and use the manufactured home as an income property?
And how set is you retirement? At 54 you have maybe 6 working years to make income before they shove you out the door? or do you have a business. Depends on both your health? We paid off our mortgage and all debt 3 yrs ago and I am so happy we did. My Dh just had another health event. NO WAY I ever want another mortgage. My math says you have $125,000 max for this $275,000 house not incl. cost over runs and moving costs IF you get what you want out of the manu sale? Whats wrong w/ where you are?? Were you happy before the settlement? I would fix the place and invest the rest.

[frugalwarrior2]

Oh about the land you just bought. TAXES. How much. Can you make enough off it to make it cost nothing like let people hunt,store boats or trailers,garden. Because maybe it would appreciate and you could make a bit? Did you do perk test and all on this land?

[old guy]

Home 115,000
Car 15000
Land 23,000
Cash 75,000
SUM $228,000 minus $53,000 loans = Net Worth $175,000.

Rearrange your $175,000 Net Worth to:
House & land $300,000
Car !5,000
SUM $315,000 minus $140,000 loans = Net Worth $175,000

I like the first one better - do you really want to do the "oversized dream house thing" now? And then downsize six years from now?

According to Lottery authorities, winners are broke in 7 years on average - they scatter their winnings on things that seem like "good" investments and the money vanishes. OTOH, a $100,000 lump sum kept intact and invested in an 11%/yr Fund would be $800,000 in 20 yrs, probably a lot more than a $300k house will be worth.

[frugalwarrior2]

Your wife recieved a settlement not won the lottery right?

[Craig]

Thank you all for these answers, really appreciate the opinions and views!. I would not say we were not happy, its just we realized that we were not going to gain equity regardless of how much money we continued to add or improve. It is apparently only going to sell for a certain amount even though we have put $150,000 into this place so far! and will never recoup it. Its Nice, but hard to find comparisons for a good appraisal!! consequently the banks are not going to give us our fair share even though this place looks like a house built from the ground up, and well built. I suppose that if I knew I would get the same amount in 6-7 years when/if I sold it, then I may not be as concerned either.. I just don't want to get less at that time - . However, I do live in a Manufactured Home subdivision with a few protective covenants and it may protect some equity. Ironically, the new home would be just across the street about 1/4 mile away in the next phase of the development ( for brick homes.) We have a size regarding number of bedrooms for potential grandkids issues in which we my wife fears we may to have to take them in.

The 100,000 - It was a medical settlement (not a lottery) and ZERO taxes had to be paid on this. So we really do want to make the right decision. The land is 1 acre lot in a nice subdivision on a culdesac, so you cannot make any money yearly on it by charging for use - even though it would more than likely appreciate - some. I thought about investing but I didn't see where the market funds were doing much at all right now and she does have a few small IRA's and I (48) also have a pension and a small IRA. We are healthy for now - and are fairly active. Thanks again for any and all input.

[old guy]

were not going to gain equity regardless of how much money we continued to add or improve. It is apparently only going to sell for a certain amount even though we have put $150,000 into this place so far! and will never recoup it.

The 'recoup' thing is true for most houses. Think of your property in two halves - the buildings and the land. The value of the buildings is tied to replacement cost and infllation - labor, lumber, plumbing, etc. Eg, if a stick building cost $30,000 to build 15 yrs ago, it will cost about $40,000 to have another one built today. 'Land' is the opposite, it is almost entirely based on 'location, location, location. If you paid $15k for a house on a lot in the outskirts 40 yrs ago, it might be in town now and the property would sell for $400,000. (And the buyer might 'scrape' the old house and build two new ones on his $400,000 lot. )

When people spend $25k to remod a room in a house, they will be lucky to add $10k to the appraisal. But somehow, urban legend has it that you can spend $25k on your house and add $50k or $75k to the value - nope. (I was a landlord for 40 yrs, owned residential houses, you never make money by updating rooms).

You are going to gain equity - but it will be from the 1.4 acres, not the from the buildings.

but I didn't see where the market funds were doing much at all right now and she does have a few small IRA's and I (48) also have a pension and a small IRA.

Make sure that you are looking for a fund that is tied to the generic stock market - it averaged 9.61%/yr for the most recent 25 yrs. That would turn $100k into $990k in 25 yrs.
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