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Discussion Starter · #1 ·
Just had the mortgage lesson last night at FPU. DR firmly put mobile homes in the bad category. So of course I come across a single-wide mobile home with a 2 or 3 car garage and 10 acres in an area we'd be willing to consider on a tax auction list. Assessed at $24K. I'm willing and able to pull $2 - 3K from my Roth for the 100% down plan.

I'm thinking that at absolute worst, we could just use the garage for storage as we stage our house to sell. Next step up, is we can live in the mobile home after selling our current house while slowly looking for a deal on a house and really hammering BS2 with the decreased housing and commute costs. Then even if we decide to move from the mobile home, we could price it at $10K (less than half assessed value) and still be way ahead.

At best, we find that we can live like no one else in the mobile home for a few years, and then just maybe do another 100% down plan on an actual house (perhaps at another tax auction) a few years down the road once out of BS2 and getting BS3 at least minimally done.

Am I thinking studpidly about this?

If this is a reasonable idea, what else do I want to think about regarding tax auctions?
 

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Just had the mortgage lesson last night at FPU. DR firmly put mobile homes in the bad category. So of course I come across a single-wide mobile home with a 2 or 3 car garage and 10 acres in an area we'd be willing to consider on a tax auction list. Assessed at $24K. I'm willing and able to pull $2 - 3K from my Roth for the 100% down plan.
To live in, right? Ok - so here's the thing - DR puts them in "BAD" because they lose value as fast as cars.

But if you can get it for $2-$3k WITHOUT touching the Roth (coming back to that), to live in for a few months, you can save a TON on Rent - and then sell it for whatever you can get for it later and still come out a head.

What DR really gets down on is people who pay new prices for mobile homes and lose thousands per month on the value.
Am I thinking studpidly about this?
I don't think so.

If this is a reasonable idea, what else do I want to think about regarding tax auctions?
There may be a mortgage on the property that you would assume by buying the property. You need to carefully check out the title and be sure it's clear of ALL liens. Spending a couple more K on a good real estate expert to help you with this could save you tens of K's.

But no, I wouldn't take money out of the Roth to do it - yes I know it won't have a penalty, but the OPPORTUNITY COST of that sheltered money being taken out will be way way more than a few K. If you take out 3k from the ROth and over the next 10 years we see 10% returns (annualized, which are not unlikely when we start to really bounce back), then you'll take out 3k that in 10 years will have been worth over $8k so the opportunity cost there is around $5k.

I'd do it cash, not with sheltered money. Remember the Mice and Mutual funds lesson.
 

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The only thing I can see is that tax auctions around here come with a quit-claim deed that can be redeemed by the original owner...as opposed to a foreclosure auction with a clean deed.
 

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I think you may be optmistic about the price you are going to pay, but I see it as all win.

One way to look at the Rothe utilization is in lieu of paying the bank interest on the money over time you are just paying the Government 10% interest up front.

Not sure how you would finance it, but the 10% may be the cheaper alternative. Some banks will not offer mortgages on mobile homes and leave you with either a CC or signature loan as your only option.

You would have no rent and if you could make do with it for a while possibly pay cash for the home of your dreams. Also, depending on the condition of the trailer, you may be able to rent it and make a few bucks after you move out of it.

I did a similar "investment" in 07 and it worked out great for me. Although I still don't have a house the trailer is making rent money for me now.
 

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I'd consider this a land purchase that just happens to have a mobile home on it. Greebo's advice is excellent as usual. Cash is king.

As for mobile homes/trailers without land...I wish I'd known about Dave Ramsey before we bought our double wide ten years ago in Salinas, CA ...at least we only paid half the going rate because ours needed lots of work, and it was a cash purchase but it was still one of the worst 'investments' we ever made (next to our current home worth half what we paid), especially when we relocated and the %$#@! managers of our park wouldn't approve several potential buyers. We paid lot rent on that doublewide for a year which pretty much negated our profit when it finally sold.
 

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Discussion Starter · #6 ·
If we had that much cash I'd wholly agree. However we don't and are unlikely to be able to save that much my mid-late August when the auction is. I'd rather draw from Roth for this particular possible transaction than clear out the baby EF.

There are many opportunity costs involved.

Regarding the removal of money from the Roth, we would be able to replace that in at most 6 - 12 months (the expected time would be 3 - 6 months after selling current house with no impact on current BS2 plan) while still working on BS2 after selling our current house.

If we pass on this opportunity we'll likely rent a storage unit to stage our house which will decrease our cash flow right when I am unemployed. We also will have to deal with the hassle of contingent sale / buy timing, as we'd have to close on sale of our house / purchase next house at same time.

Even if we rented again, we'd still have timing issues as we are not able to float a rent payment on top of our mortgage payment.
 

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If I understand correctly its the property and the mobil home for assessed value of $24,000. What is the property worth because thats what your buying. A mobile home is like a car. Total depreciation.
If you live in the mobil home you can save a ton of rent. Is it in liveable condition w/o a lot of expensive rehaul? Could you use it as a getaway cabin later?? Are there any liens/unpaid taxes.
You planning to sell the property so i would look into what it might cost to get the mobile home off the property too. Some buyer will want it gone. Sounds like a good idea in general but have either of you actually lived in a mobile home? Ask people on here what the pluses and minuses are.
 

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Are you certain that the trailer is in livable condition or will you end up sticking money in it?
 

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I would do it for the land only. Forget that there's a mobile home on there, it adds no value to that 10 acres. Every state has different rules on tax auctions, though, so I really recommend hiring an attorney to help you with that part of it. Make sure you really know what you are buying before that auction comes up.

As for the Roth, I'm going to go against Greebo for once. :p Even the gov't is now (finally) saying that recovery is years away. If it even comes, IMO. The 2nd wave of the recession (depression) is coming, be aware of that, and your retirement accts will get hit hard again. May as well use the cash for something tangible than see it just completely disappear into thin air for no one to be able to use.

BTW, I'm assuming you don't have kids? Because then it would get awfully tight in a mobile home... But if it's temporary, like a year or less, I could see us doing it, and we have 4 kids and homeschool, plus numerous indoor pets.

OK, as for selling your current house, 3-6 mths is a little optimistic, imo. You'd have to make sure it was below what it's actually worth in order to sell it that quickly, AND it has to be staged perfectly - pristine condition. It took us 10 mths of dropping our price, and no 2nd showings at all, dropping those realtors, waiting 6 mths, and then setting the original price below comps, and we finally sold it in a day (which is God's doing, not ours - that is nothing short of miraculous in these economic times). A lot of the houses we are seeing right now as we look for a new one have been out there for a few months already, at least. We've even seen some with snow still in the pics, so they've been out since at least the beginning of this year. If you have a short sale, you're in even bigger trouble. We offered on a short sale and it's fallen through. We have spent nearly 4 mths on it, when we could have been looking for something else instead. If it's NOT a short sale, price it like it is, or better yet, below, or it will not move, guaranteed. I feel like a professional realtor at this point with all the houses I've seen, selling our old one, and going through the short sale and offer processes twice now. LOL

Anyway, that's my 2 cents (or 4). :)
 

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As for the Roth, I'm going to go against Greebo for once. :p Even the gov't is now (finally) saying that recovery is years away. If it even comes, IMO. The 2nd wave of the recession (depression) is coming, be aware of that, and your retirement accts will get hit hard again. May as well use the cash for something tangible than see it just completely disappear into thin air for no one to be able to use.
The reason you're going against me is because you don't understand how retirement accounts work.

You are thinking about retirement accounts as if they represent money.

They do not.

What the ROTH represents (if its structured properly) is not money, but SHARES. Those SHARES may go down in value, but Mek's not even 40 yet. In the next 10 years, what he should be doing is holding onto the shares he has and be buying more of them while they're on sale. Then, when they go UP in value again like a rocket (which they will, eventually - they always do sooner or later - just look at the DOW and S&P after every downturn we've had in this country), he'll be raking in the value hand over fist.

Even though Mek won't pay 10% to take his contributions out, this is the prime time in his life where taking them out is the worst POSSIBLE choice to make.

Unless you think we're simply gonna fail as a nation in the next few years that is - and if that happens, it won't matter WHERE the money is invested, it'll be gone, and we'll be down to simple barter for services.
 

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You would need to do plenty of homework before going to the auction and bidding.

Our next door neighbor bought the house through the county property tax auction. Thought he was golden. Taxes were maybe $ 3,000 owed. So sounded like a real good deal.

Found out the company that was holding the mortgage on the property wanted their money. Which was roughly $ 60,000.
He had to pay them off. Totally not in his plans at all.

Also check for any other liens, right of ways , etc, in the abstract. Same neighbor I just mentioned, found out his driveway actually is on the neigbors property. He got lucky there as the new neighbor is a doctor who built his own driveway and set his house way back in. Saved the first guy a lot of hassle by doing it that way.

We own a solid well built with 6 inch walls, doublewide that we bought new 20 yrs ago. We did a upgrade 4 yrs ago. The county has us assessed at $ 96,000 for house and 2 acres. I think that's crazy money. But we live in NY, and have very high taxes.
 

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Discussion Starter · #13 ·
OK, yes, I do need to more research. A quick search finds this: Impact Tax Lien Foreclosure on Mortgage Foreclosure

However, given the current illiquidity of the real estate market, I am unsure whether romoving funds from the Roth or not being able to use time to our advantage while selling our current house and while buying our next house has the bigger opportunity cost.

Let's say we just go ahead as previously planned and try to sell our house and buy a different one simultaneously. It is very easy to imagine a situation where we either lose out on a really good buying deal because we don't have a buyer for our own house, or that we need to sacrifice thousands of dollars in order to quickly sell our current house in order to execute a good deal purchase.

Once we sell our existing house we could even immediately replenish the Roth from any gains we receive.

I am sure the auction is for the entire property. There are other plots of land and even houses scheduled for the auction.
 

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Discussion Starter · #14 ·
You would need to do plenty of homework before going to the auction and bidding.

Our next door neighbor bought the house through the county property tax auction. Thought he was golden. Taxes were maybe $ 3,000 owed. So sounded like a real good deal.

Found out the company that was holding the mortgage on the property wanted their money. Which was roughly $ 60,000.
He had to pay them off. Totally not in his plans at all.

Also check for any other liens, right of ways , etc, in the abstract. Same neighbor I just mentioned, found out his driveway actually is on the neigbors property. He got lucky there as the new neighbor is a doctor who built his own driveway and set his house way back in. Saved the first guy a lot of hassle by doing it that way.

We own a solid well built with 6 inch walls, doublewide that we bought new 20 yrs ago. We did a upgrade 4 yrs ago. The county has us assessed at $ 96,000 for house and 2 acres. I think that's crazy money. But we live in NY, and have very high taxes.
Do you know the situation well enough to whether he really was obligated to pay the mortgage or whether the owner of the mortgage maybe just talked him into (lied, conned, etc., etc.) paying it?

There are people calling in to DR's show all the time about what to do about collections agencies trying to collect on debt that was properly discharged through bankrupcty, etc. His response usually is that there are companies that buy bad, uncollectible debts for not even pennies to the dollar and if they get lucky and convince 1 person out of 100 to actually make payment when there is no obligation they still come out ahead.
 

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The reason you're going against me is because you don't understand how retirement accounts work.

You are thinking about retirement accounts as if they represent money.

They do not.

What the ROTH represents (if its structured properly) is not money, but SHARES. Those SHARES may go down in value, but Mek's not even 40 yet. In the next 10 years, what he should be doing is holding onto the shares he has and be buying more of them while they're on sale. Then, when they go UP in value again like a rocket (which they will, eventually - they always do sooner or later - just look at the DOW and S&P after every downturn we've had in this country), he'll be raking in the value hand over fist.

Even though Mek won't pay 10% to take his contributions out, this is the prime time in his life where taking them out is the worst POSSIBLE choice to make.

Unless you think we're simply gonna fail as a nation in the next few years that is - and if that happens, it won't matter WHERE the money is invested, it'll be gone, and we'll be down to simple barter for services.
Yeah, I'm more of a doomsday type. :p That's why I went against your advice. I do understand that it is shares (thanks to a previous post by you), but I don't see it going up anytime in the near future, or long-term, unless something drastic happens to change the direction of our country. But that's a purely political topic, so I will stop there. :)
 

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Do you know the situation well enough to whether he really was obligated to pay the mortgage or whether the owner of the mortgage maybe just talked him into (lied, conned, etc., etc.) paying it?
When you buy a property on a tax lien, what that means is some bloke didn't pay the taxes on the property, and thus lost the property. It doesn't eliminate the mortgage on the property, and while the borrower is technically the responsible party on the mortgage, the fact is that you CAN end up with a property via tax sale that a bank STILL has a right to via foreclosure.

Which means if you don't want to lose the property to the bank, you pay the bank.

Thats why a title search is so very important.
 
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Honestly, I'd take the $$ out of the Roth, too, assuming that you don't run into any problems with the tax auction. I wouldn't do it because of market timing, or because the economic recovery is a long way off, I'd just do it because you have a good opportunity right now. You will save $$ in rent and storage space, and have a really good shot at making money on the deal. I just don't have any good advice about tax auctions.
 

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Discussion Starter · #18 ·
When you buy a property on a tax lien, what that means is some bloke didn't pay the taxes on the property, and thus lost the property. It doesn't eliminate the mortgage on the property, and while the borrower is technically the responsible party on the mortgage, the fact is that you CAN end up with a property via tax sale that a bank STILL has a right to via foreclosure.

Which means if you don't want to lose the property to the bank, you pay the bank.

Thats why a title search is so very important.
I'm still researching, but what I am finding (albeit from non-government sources as of yet, but multiple non-government sources) is that in NY, the only liens that remain attached to a property after a tax auction are Federal liens, such as IRS. Could you provide a NY reference for your assertion that the mortgage remains attached to the property?
 

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Honestly, I'd take the $$ out of the Roth, too, assuming that you don't run into any problems with the tax auction. I wouldn't do it because of market timing, or because the economic recovery is a long way off, I'd just do it because you have a good opportunity right now. You will save $$ in rent and storage space, and have a really good shot at making money on the deal. I just don't have any good advice about tax auctions.


I agree with you. Especially since it is only 3K. If it was much more I'd likely think differently.

Here in our area land is king and worth quite a bit. There is only so much. Dh is looking very throughly into 40 acres of hunting land a few miles from us that are a few years behind on taxes and will go up for auction if they are not paid by the end of Dec. In WI you will be responsible for any leins on the property you buy at a tax auction or the bank etc can come after the property.

I would buy the trailer and plan to live in it and save for my dream home. Be it built there or bought else where. We have friends that bought land with an old crappy trailer. They saved to build a garage. They had it built with an apartment above it. They lived there while they saved for the basement. They built the basement , made it a living space and put a roof on the walk out basement. Yeah it looked odd!

They lived in that walk out basement and rented out the apartment above the garage. They kept saving and saving the rent until they could afford to finish the house. Yeah it looked kind of odd and people thought they were crazy but within just a few years they had a gorgeous paid for home.
 

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I'm sorry, but "it's only _____" is the kind of thinking, IMO, that leads to big regrets.

What it is, is 10% now and a huge opportunity cost.

Mek is 35.

If he retires in 30 years, that $3,000 at a 10% annualized rate of return over 30 years is ONE HUNDRED SEVEN THOUSAND EIGHT HUNDRED AND FORTY EIGHT DOLLARS NINETY TWO CENTS.
 
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