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.

 

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.

 

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.

 

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.

 

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.

 

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.

 

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

 

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. 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).

 

As for the Roth, I'm going to go against Greebo for once. 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.

 

Are you certain the auction isn't JUST for the mobile home? You win, you have to move it.

 

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.

 

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.

 

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.

 

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.

 

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.

 

Greebo I'm 40 btw and would risk the 3k. Mek says the $ will be back in there within a few months. I stand by the fact it is only 3k. It will only be missing for a few months. I know we disagree and you are by far way better with numbers than I am but in my opinion this is why it is called personal finance.

Yes that is over 100K IF he never puts the 3k back in. However what will 10 acres be worth in 30 years? I know what our acres are worth after only 13 years and it is huge. I about fell over when we finally had an accessor recently for the first time in 13 years! Yowsa!!!!! What will his saved rent for the time he lives there be worth if saved for 30 years? There are many ways to look at it besides just the 3k.

I hope that came out right explaining why I felt the way I do and came out respectfully because I do bow down to your math and numbers skill but still disagree.

 

Greebo I'm 40 btw and would risk the 3k. Mek says the $ will be back in there within a few months. I stand by the fact it is only 3k. It will only be missing for a few months. I know we disagree and you are by far way better with numbers than I am but in my opinion this is why it is called personal finance.

Sure - it's his call - but as DR says, there is wisdom in many voices - he can make his own mind up, but I stand by my take on this.

Yes that is over 100K IF he never puts the 3k back in. However what will 10 acres be worth in 30 years?

Three mile island... don't count chickens.

I know what our acres are worth after only 13 years and it is huge. I about fell over when we finally had an accessor recently for the first time in 13 years! Yowsa!!!!! What will his saved rent for the time he lives there be worth if saved for 30 years? There are many ways to look at it besides just the 3k.

I hope that came out right explaining why I felt the way I do and came out respectfully because I do bow down to your math and numbers skill but still disagree.

I get your idea - but my big issue here is its SHELTERED MONEY. It's sitting there in nice protected account. IMO the only right thing to do now with that is FORGET IT EXISTS until he's 65.

 

Greebo I 100% expected you to stand by your opinion just as I do We are all just ggiving Mek more ways to look at it right?

LOL don't count chickens? BUT aren't you counting chickens assuming the 3k will be worth over 100K in 30 years? Yes it is sheltered but there is no 100% guarantee as to how it will grow. I mean yes we can spout statistics (and wow do I hope they are right as we have a very good chunk invested) but there is no guarantee what the markets will do over the next 30 years.

I might be biased a bit seeing what has happened with land and owning acreage. Some of the riches folks i know in the midwest here are big land owners. Not homes~ land.

Now I always opt for cash if possible but sometimes a bit of risk nets some pretty big rewards. I'f one really racks their brains to possible sell something to make some quick cash to raise most of the 3k.

 

I told mek in chat - I'd rather see him borrow $3k than take it out of his Roth to do this.

 

Well they do do personal notes at the credit union that are very competitive. I recently took out a 30 day note and had it deposited in my checking so I could just write a check for my new car at the dealer. I did this because I takes 3 days for ING to deposit the $ into checking and I had a surprise Saturday off to go car shopping and out dealer is over an hour away. It cost pennies to pay it off in 3 days when I got the ING deposit.

However I did have a hand dandy sheet that told me what the note would cost if I paid it in 30 days or extended it longer. The interest rate was fairly decent on a personal not I thought at just under 6%

 

I do have $1-1.5K set aside for tuition while unemployed. Maybe I could use that, half of baby EF and then either small personal loan or tiny bit from Roth (maybe just what is sitting as cash right now anyway) for the property. Then get one of those graduate plus student loans for the tuition.

I don't think I'd need to pay whole amount at auction, so maybe I could withdraw from tuition savings the minimum I'd need to pay at the auction proper and just re-deposit it if I didn't win. And if I did win I'd have some amount of time to get the rest needed. Even if I decided to use the Roth for the property, the Roth could remain untouched if not needed.

Thanks for helping me figure out what I need to do to make this idea into a plan.

I need to write up more details, such as how the mobile home (MH) property will save my wife 90 miles of commuting per day if we live there vs. where we live now. I also need to get numbers for current mortgage payment (a little under $800/month including principal, interest, taxes and insurance) and taxes for the MH.

The MH is assessed at $24K (AV = assessed value hereafter), school taxes are $22.550163/$1,000 AV and locality taxes are $10.69654/$1,000 AV. In the worst case, there is an additional special (fire, light, etc.) tax of $1.28234/$1,000 AV plus $200 flat annual. This is total of $1,028/year.

 

The MH is assessed at $24K (AV = assessed value hereafter), school taxes are $22.550163/$1,000 AV and locality taxes are $10.69654/$1,000 AV. In the worst case, there is an additional special (fire, light, etc.) tax of $1.28234/$1,000 AV plus $200 flat annual. This is total of $1,028/year.

Oh no, that's not the worst case at all...

 

Mek I really like how you are thinking a bit out of the box.

With your wifes commute that is a chunk of gas $ plus saving her a big chunk of her time.

Just be sure if you proceed to make sure there are no loans outstanding attached to the property. A trip to the court house should help get you started.

 

What I haven't seen here are answers to the two questions that are being asked by both camps.
What are the liens?
Is the trailer livable?
Without answers to both of those questions, we are just playing numbers/chicken games.
Also remember that you may not get the MH because someone else is bidding as well. And of course you would NEVER EVER get caught up in the heat of the moment and bid beyond your means.
That said, I think that if you can look at the 3k as rent paid in a large chunk, it would be okay. And you should live in the MH for a LONG time. More than just a few months. If it is that good of a deal, stay there for a year or more. You don't want to get caught in a situation where you must move/buy a house because where you are living is untenable.
And while comparing the current house to the MH remember that at least for a while you will be paying for both. Depending on how much your utilites are they might even out, (min at house, MH is smaller), your mortgage on house, and two sets of taxes.
There are two really bad scenerios here. One is that you take the money ot of the Roth, don't get the MH and don't return the money to the Roth because you find someplace else to spend it. Or you buy the trailer and find out it is invested with bugs and mortgage liens. Homework, homework, my friend.

 

Should a title company be local to the property in question?

 

Preferably - so they know their way around the legal systems in that region.

 

You should be looking for the county court house where the property is located, so that you can do a search for the property you want to buy, and see what is owed against it, and or any liens. It should be public record. Some counties , you are able to access this information online.

Read my earlier post again in this thread. The neighbor thought he was golden. The company that held the mortgage told him, he wasn't. He had only paid the lien against the property for the taxes owed to the county.

 

You should be looking for the county court house where the property is located, so that you can do a search for the property you want to buy, and see what is owed against it, and or any liens. It should be public record. Some counties , you are able to access this information online.

Read my earlier post again in this thread. The neighbor thought he was golden. The company that held the mortgage told him, he wasn't. He had only paid the lien against the property for the taxes owed to the county.

Thanks. I found this from a site of one of the counties we are looking at.

Are there any liens on the properties?
The county does not list liens. If all parties have been properly notified, the liens (other than Fed or State) are eliminated by the foreclosure action and therefore no longer exist at the auction. If notice is not properly given, liens can sometimes be reinstated. That's why all our rules make no warranties. Liens can only be researched in person at the County Clerk’s Office. The clerk supplies instructions for doing this research.

There are more properties we are interested in within this county than the other one (with the MH in question). Also, this county's auction will occur after I am laid off, so I will be able to go spend some quality time at the county clerk's office.

Now I need to find out how things work in the other county.

 

ouch, I am again glad I do not live in NY... here in my county in va property tax rate is 4.30/ 1000, and no school taxes or anything like that