A key distinction between mobile homes and standard houses lies in the depreciation of mobile homes. This reality often poses challenges for both prospective and current owners, particularly in the context of buying or selling a property.
WHAT IS DEPRECIATION?
Depreciation is an accounting term that refers to how much of an asset has been used up. Therefore, it is a method of allocating the cost of a tangible or physical asset over its lifetime.
Taking this into account can help businesses by allowing them to earn revenue from an asset while expensing a portion of its cost each year – something that factors into tax deductions when tax season rolls around.
However, the effects are quite different for personal property like a mobile home. Mobile homes are not considered real property because they aren’t tied to the land. So they fall under the category of vehicles and chattel property.
Mostly, this idea of depreciation means that your mobile home won’t be able to sell for as much money as you spent when you first bought it.
But it usually isn’t a straightforward calculation. The actual rate depends on several factors, including the type of depreciation. There are four main types, namely:
Straight-line
Double declining balance
Sum-of-the-year’s-digits
Units of production
In general, accountants tend to use the straight-line method for these assets. To get a rough estimate of how much your mobile home has depreciated, we recommend that you use a calculator like one of these.
The salvage value is the money that you can expect to get when you sell an asset that has depreciated. You can work this out by subtracting the amount the mobile home is likely to depreciate over time from its initial price.
DO MANUFACTURED HOMES APPRECIATE OR DEPRECIATE IN VALUE?
The answer is neither. Depreciation is an accounting term that doesn’t reflect the actual value of an asset.
While the location, condition, and demand for the home can affect its price, manufactured homes are not subject to depreciation.
In fact, the median value of mobile homes has increased by 39% from 2014 to 2019, which is 6 percentage points more than the 33% increase in the median value of a single-family home. And, new manufactured homes command higher prices than pre-owned dwellings.
As long as they’re well-maintained in desirable locations, manufactured homes offer a great housing value and retain their value.
DO MANUFACTURED HOMES HOLD VALUE?
We’ll start with this backward by first answering the question, “can manufactured homes appreciate?” After answering that, we’ll move on to “do manufactured homes hold value?” Appreciation is a hotly debated topic, with few definite answers, but there is good news. With a few tweaks, it’s possible for your mobile home to appreciate like a stick-built home! Let’s take a look.
APPRECIATION
Ordinarily, when you hear the word appreciation related to mobile homes, we aren’t talking about how much you love your mobile home. Though you might be very devoted to your living space, we’re actually talking about a different concept — one that’s a bit more technical.
So, that helps us see how appreciation could be related to mobile homes. If you purchase a mobile home and you want to know if its value could increase, you may be wondering about appreciation.
LOCATION
We’ve all heard the age-old realtors’ mantra, “location, location, location.” While you roll your eyes at this, you may be pushing aside one of the most important aspects of mobile home appreciation, and value. What exactly does that saying mean though? In essence, it means that based solely on location, homes can experience huge increases or decreases in value.
For instance, if your manufactured home sits on land that you own, that’s likely to turn out better for you. Leasing or renting property is just another expense that has to come out of your pocket on a monthly basis. Additionally, the $300 that you would be spending every month to keep your house where it is can be saved, or put towards other important things, such as the upkeep of your home.
CONDITION
As we mentioned in the previous paragraph, by owning the property your mobile home sits on, you can use what would have been rental money, to keep your house in good condition. A manufactured home in good condition will significantly up the value, which we’ll talk about in a moment.
Obviously, every house is going to experience problems as it gets older. That’s why regular maintenance will keep your house worth more. Incidentally, frequently checking on common problems, and fixing them right away will always be good. Simple renovations include plumbing, electricity, foundation, and numerous other areas of your mobile home that may be subject to damage. Your mobile home has probably served you well, and if the walls could speak, no doubt they would loudly protest you letting your house fall into shambles.
Now let’s take a look the question, “do manufactured homes hold value?”
VALUE
A manufactured home in good condition does hold value and will continue to hold value if maintained properly. Thus, it’s important to keep up with house repairs, and also to keep an eye on your land. The aesthetics of any home, manufactured or not, are extremely important, not only to your neighbors but to any prospective buyers, if you plan on selling one day.
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