Only 10% of the population makes more than ~$113,000 a year, but if you live in the San Francisco Bay Area, it seems as if everybody is making six figures or more due to sky high housing prices. Let's hear from my friend Chris, who so happens to make a healthy income working at one of the world's most valuable companies. He also owns a mobile home!
Sam recently dropped by for a visit to Google, where I’ve been working for the past 4½ years, and we got to talking about the cost of living in Silicon Valley. All of my friends who live in other parts of the country are buying their first starter homes, and I earn good money at Google.
My wife and I really wanted to buy a house, a nice place with room for our growing family, but the thought of putting everything we’d saved into a million dollar fixer upper just didn’t make much sense to either of us.
Ownership Economics Of A Mobile Home
When we found out that we were expecting our second child in 2013, our 1100 sq ft apartment ($2400 per month) in Mountain View started to feel too small. But 3 bedroom apartments in Silicon Valley were $3500 or more per month ($42K+ per year after tax) and that would require us to save less while building no equity.
The choice was more space, but a significant hit to our finances or less space with an infant and toddler. Or, maybe we should move farther away from the office so that we could get something cheaper, but my commute time would go up, which would mean less time with the kids.
We started doing research and arrived at a non-traditional solution to the problem, which got us a bigger single family house with a yard, saved us money, and allowed us to build equity while not increasing my commute time. How?
We bought a trailer, AKA a mobile home, AKA a double wide.
Our house was delivered to a little plot of land in a mobile home park in North San Jose, direct from the factory in Sacramento, on the back of two semi-trucks. Each half was put on stilts, pushed together, and then the seams covered up and patched.
Are we nuts? Maybe, but here is the logic behind our non-traditional decision.
Why We Bought A Mobile Home
1) Our home is brand new, no one else has ever lived in it, and it came with an 18 month new home warranty. It’s also bigger, 1604 sq ft, with 3 bedrooms and 2 bathrooms.
2) We spent $225,000, which seems like a lot when compared with the home values across the country, but in Silicon Valley, $225,000 is cheap. It's hard to even find a studio for $500,000 these days. And we don’t need to do anything to it beyond the normal maintenance that any home requires.
3) We still have to rent the land, which at around $1000 per month is not cheap. But, when you combine our mortgage and rent payments (including utilities), we are still paying less than we were in Mountain View for a two bedroom rental for $2,400. And we are earning equity. Oh, and because we live in San Jose, we have rent control so we know how much our rent will increase each year.
4) Rising home values in Silicon Valley are also raising the values of mobile homes. We didn’t buy the home as an investment, but our realtor tells me that our home would list at $325,000 now, a gain of $100,000 in just 18 months.
5) When you walk into the house, you don’t know you are in a trailer. We have flat 9 ft ceilings, modern appliances, granite counters in the kitchen and both bathrooms, and the same plumbing, insulation, and windows that you find in a normal modern home. And, for the first time in our married life, we have laundry in our house which makes a huge difference when you have little kids.
6) We aren’t going to be here forever. Both my wife and I don’t want to permanently settle in California. If we were going to be here for another 10+ years it would probably make more sense to establish more permanent roots. But we don’t expect to be here longer than another 5 years, and probably even less than that. We plan to move to a cheaper part of America where we grew up.
7) And finally, we get to do whatever we want to our home. Want a different color paint on the walls? How about running some wires for surround sound up through the floor? Can we have a gas or charcoal BBQ grill on the patio?
We don’t need to ask anyone for permission to do these things anymore and we don’t have to worry about the kids making too much noise for the neighbors. Freedom is a great feeling.
Sam wasn’t convinced until I walked him through the logic. Most people I talk to about it still think I am crazy, but we are happy with our non-conventional solution. And we are spending a lot less per square foot than anyone I know.
RECALIBRATE YOUR EXPECTATIONS (Sam)
I first started this article with the approach that if a Google employee can only afford a mobile home, then everybody else is kind of SOL. But what I realize now is that life is about choices.
Perhaps the real reason why people can't afford to buy real estate in expensive areas is because people are shooting way too high. After only 5 – 10 years of work, some think they deserve the 2,300 square foot, 4 bedroom, three bathroom home on a quarter acre lot. Unfortunately, if you don't have at least $400,000 for the downpayment, you just can't afford a $2 million+ home in Palo Alto, CA. Shoot lower!
I admire Chris and his wife for choosing to keep lifestyle inflation under control. They bought a mobile home they could comfortably afford while shunning the trappings of a richer lifestyle. Surely, many of his colleagues are multi-millionaires living in multi-million dollar homes driving Teslas into the office every day. It's hard not to get influenced by others.
Related: Why The Housing Market Won't Crash Any Time Soon
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I’m 65 and retired with more or less 12 million dollars (the market gos up and down). I did this with only a high school education. Before I bought my first house, I lived in the cheapest rentals to save money for a down payment. Live cheap and save for that first house! Then I did the move up to a nicer house (the American dream), over the years. Then about 30 years ago I realized that every house I had sold in the past to move up, was now worth much more. So I never sold another house and just used reasonable financing on my current home to buy more homes without ever selling. I bought 4 separate properties after the 2008 melt down! the I bought things and traveled with my money, but I always separated my money into a fun money pile and and an investment pile. You need both ! I hit it big buying Nividia stock 15 years ago. I have about 6 million in stocks and 6 million in real estate. It’s not that hard to make money in America, but it does take time and effort.
Q 1. Voted OTHER. First off in a HIGH COL areal I would believe I am a ‘temporary worker only’ and would not settle there. As such, I would rent the cheapest hovel I could find, bank the rest until such time as I could accumulate enough o’FU’ money to leave, and relocate, or retire to do as I see fit. When I worked in Chicago (a high COL area to me) that is exactly what I did. L:after on, circumstances changed, a relocation 1st to Detroit, then Buffalo, and finally to Madison, WI. There, enough cash allowed for purchase of a nice ranch home until we moved further north but what we wanted worked from the home until retirement.
Certainly, everybody’s mileage will vary as their aspirations and expectations may not be in line with mine.
No question CASH power gives one more choices that is all, but often that is all one needs!
I never considered a trailer. In my mind, mobile homes and trailer parks are still associated with low-lifes and crime. We have a trailer community in my middle-class Long Island town and it’s not even marked with a sign from the main road that feeds it; it’s as if they don’t want people from the outside to know it exists. Obviously from the article and comments, there is a wide diversity of mobile home communities and some may be highly desirable. I chose instead to buy a condo in what’s called a converted garden apartment complex; I live alone and bought 800 sq. ft. for under $100K some 27 years ago. It’s fine for my needs, it’s kept its value, and while others are busting their humps trying to making $3K mortgage payments or more each month, I am paying just a few hundred a month plus maintenance and could retire my adjustable mortgage in a month or two if I were so minded. But why bother when interest rates are so low?
12 yrs ago we were really restless for a different house and went shopping. We found buying that buying a new home would double our mortgage with a proportional property tax increase. While thinking it through we realized we could spend 20% of our current home’s value on a full remodel (roof, exterior paint and every surface and fixture in the house) and be 80% satisfied. In twelve years the property tax savings offset the the total remodel cost and the windfall savings was not having twice the mortgage. Bottom line–retiring in December with our home paid off and housing is less than 5% of our net worth.
“We bought a trailer, AKA a mobile home, AKA a double wide.”
I think what they bought is called a pre-fabricated home. My Dad bought 950 sq. ft. pre-fab and put it on a quarter acre in southwest FL in 1995 for a total of $80K including the land. He turned down an offer of $250K in ’05 and ended up selling it in 2010 for $125K.
I make enough money that I make more than 95% of the people in my town. The only way i see fit to go into a 1.2 million dollar home is to put down at least 700k cash.. i wouldnt be happy knowing i have a million dollar mortgage. One slip and the fall is a hard one. My mortgage is about 3k and i want to lower it down to 1800 if not less. If you make 20k a month but have a mortgage of 8k or more you are house poor.
I have talked many times with my significant other about how much space we need. We have both come back that 1200-1500 sqft is all we need. The area we live in is somewhat affordable with a starter home in the $350-$400k. For us though we are in no rush and we have been talking about moving into a tiny a house for a while or even a mobile home like Sam did.
It is all about choices. I can live 20 minutes from work and spend $1200 a month for a 1 bedroom apartment or 5 minutes from work and spend $1800. One sacrifices time but sometimes that is okay. So many other friends I have complain about the cost of living and how expensive the area is, but they are also out every night for happy hour and every weekend going to concerts. It all comes down to trade offs.
Now I know how much it costs to buy a trailer in San Jose.
I wonder how much someone would pay to rent one.
I think renters are typically much less snobbish about construction type than owners, and they would probably assign a smaller discount to the trailer lifestyle.
What sort of investment return could one achieve buying trailers in high-cost metro areas and then renting them out to people?
Maybe if I become the President of the HOA, and also consult a Structural Engineer, then I could even stack the trailers and create a low-cost modular apartment building for exceptional ROI?
You aren’t the first to think this, but unfortunately this is not allowed, at least in California. The people living in the home must be on the lease (and on the title) with the mobile home park directly.
This is totally insane but, as a fellow Bay Area resident (San Francisco) I get it. We had to make some big concessions when buying our condo in the city as well.
Also, I think one of the most important points was at the end: “After only 5 – 10 years of work, some think they deserve the 2,300 square foot, 4 bedroom, three bathroom home on a quarter acre lot.”
You are so right about this. Feeling entitled to nicer stuff is a recipe for financial disaster. Whenever I find myself wanting something because I feel I deserve it, it’s usually a sign that I need to check my ego and revisit my long term goals.
Hi Chris,
Thanks so much for sharing your story. As someone who has very recently started to become financially conscious, I’m excited to read about other people who are choosing to spend below their means so that they can plan and save for the future and/or use their money for other things that are more important to them than living a luxurious lifestyle. It’s very encouraging to me to know that keeping lifestyle inflation under control is possible and realistic. I’m currently working towards getting rid of quite a bit of student debt, so I can use all the encouragement I can get!
Best,
Sarah
I remember when we finally paid off our student loans. That is a great feeling, and we had to sacrifice to do it but I don’t regret it at all. Keep up the good work!
Chris,
The home itself is good and from the interior pictures I would not have been able to guess a mobile home. I would have never thought of this so great job thinking outside the box.
Curious did you consider buying may be a duplex. I think you could have bought a duplex for 1 million range in 2013 and that would have appreciated 200K+ by now. I know hindsight is 20/20 but curious. I think a duplex would have kept your payment to same as what you have. I know you have to share a wall but if you choose carefully you should be good.
I totally vote on the side of adjust your expectations people. I worked in NYC for 8 years. I had co-workers who lived in Bethlehem, PA and commuted 90 miles each way to work so that they could keep their 2,000+ sq ft house on 1/2 and acre. I though they were nuts. I’ll take my queens co-op that might only have been 650 sq ft but each inch was used and it was next to a 4,000 acre park thank you very much.
I like to say most places are affordable even to an average income. You just need to decide where you are willing to sacrifice be it space or distance.
90 miles each way counts as a “super commuter”! I think I’d die 3 years early due to the traffic stress if so.
But yes.. what’s wrong w/ 650sqft and a nice big park close by?!
Not buying the 100K in appreciation in 18 months without land as part of the deal. Someone is blowing smoke to this nice man/family. If he is planning on moving in 5 years to a lower cost location then he is missing on a huge opportunity to make significant dollars buying a house (fixer) where he is if he can pull it off. The big killing in primary residence is when you sell and move to cheaper part of country (or state) and reap the 500k tax free exclusion. Sorry Chris but the mobile home stigma is real and you likely won’t lose money but you will miss some big appreciation IMHO (5 year horizon). Not saying mobile homes are bad, especially one this nice, but a Googler?, whose salary will likely grow significantly over 5 years?. I say stretch and by that fixer.
His alternative is to rent.
it sounds more like a choice than an alternative, he didn’t say he couldn’t qualify. It is the rare googler that can’t afford to buy at least a fixer in that part of town. I still say with a 5 year horizon and a plan to move to a cheaper locale he is missing on a big opportunity to cash in tax free (using exclusion) IMHO.
I totally agree re claim of $100K appreciation in under 2 years- even in Silicon Vally – where I lived for 30 years and just left this past month, May 2019. I see mobile homes selling in the under $300K range. The space rental fees have skyrocketed. They typically start at $1000/month and are not listed on the realty sites such as Trulia and Redfin. Such come-ons
Nothing wrong with a mobile home. Modular homes are all the rage now anyways for logical reasons!
Ha, just saw this article – https://www.businessinsider.com/google-employee-lives-in-truck-in-parking-lot-2015-10 – Googler sleeps in a van in the parking lot.
Those bastards scooped me!
But I think living in a big truck as a new college graduate isn’t as interesting. As a college graduate with no dependents, looking to get ahead, he shoulda lived in a car. A truck is living large!
I almost choked laughing while eating and reading your comment on this one! haha! If a person making 6-figures already living in a vehicle, I must be wasting it big time and have no future having bought my 4000+ sqft house 1 year after college graduation. hahah!! Man, what people have to do to make it on your list?
Unless there’s something unique about mobile homes in CA, that was a very BAD investment. Mobile homes go down in value. They are like cars. He doesn’t even own the land which would hold value. That 225k mobile home went to 50% value as soon as he bought it.
Someone previously commented about buying a 10k mobile home and putting in $2500 of fixes. That MIGHT work as a good buy, but buying a brand new is very bad advice.
Never buy a mobile home.
As I said, I don’t view this as an investment. It is simply a way to mitigate loss and keep our costs manageable so that we can save.
But, I can tell you for a fact that our home has not lost 50% of its value. Given the market for trailer parks, the price people are willing to pay per square foot for a home that is less than 10 years old is going up. How long this will last, I have no idea. But right now, the value of our home is increasing.
And you know this b/c of your experience buying a mobile home in the Bay Area? Care to elaborate WHY buying a mobile home is a bad investment?
It often comes down to schools for most people, especially if you have kids older than 5. North San Jose has terrible schools (we just moved after living there for 3 years). Sending two kids to private schools in the bay area is approximately $4,000 a month. Add your mobile home mortgage and land rent and the total goes up to approximately $6,000.
I would rather buy a home in a neighborhood with better schools. You can still find 1600 sq ft town-homes in Santa Clara and Sunnyvale between 1 and 1.2 million. That’s way less than $6,000 a month even if you include property taxes. Of course you need the downpayment but if you can afford the downpayment, you build equity, get tax deduction, reach the ideal mortgage limit.
Now you could say North San Jose public schools are just fine, and I’ll say its subjective.
Schools are a huge concern, as are being close to our family so our kids can grow up with aunts and uncles. Right now, we don’t send our kids to any schools (the preschool at our church costs $12,000 per year) and once kindergarten gets close, that is going to be the time when we are going to need to make the call about leaving or staying.
I used to live in the Midwest, so all I learnt was never to buy a mobile home as it loses value over time, and you have to pay rent on the land, a lot of hassles. Someone explained to me a mobile home is like a car, it loses value. A house will increase value. They gave me an example of a brand new mobile home costs $40K, when it time to resell it, they can only recoup $10K.
Anyhow, from your writing, and the situation in SF and San Jose, it makes sense to live in a mobile home.
From the previous article regarding the Twitter lay off employees getting $40-60K, if those guys got stucked in $1M mortgage, and child care, private tutors and lessons. I’m sure they’d be more happier having a paid off mobile home and only having to worried about the $1K land rental. The $60K suddendly last longer than the 0.4-1.4m Sam has predicted. LOL :)
Sam, after these two articles, suddenly, SF doesn’t seem like the place to be anymore!! :)
Now, now, let’s not have crazy talk here. SF is #1!
That’s really neat, I think that’s a fabulous idea. Loving this non-conventional idea. I’m surprised that we don’t see more mobile homes here in Vancouver. Vancouver’s housing price is crazy too.
It makes a lot of sense especially since you don’t plan to settle in the area. I wouldn’t mind living in a mobile home as long as it is in a relative safe area. Renting the land is a pain, though. I don’t like that idea, but it sounds better than the alternative of paying sky high price for a studio.
Enjoy the CA sunshine!
I lived in a mobile home when I was growing up. My parents then upgraded to a house. But I think the mobile home was nicer. We each had a separate room. My parents probably should have bought some rural land, moved their mobile home, and then they could have built a house from scratch. But knowledge is power. They didn’t know about their options.
I have very divided feelings about this post. I admire this guy for thinking outside the box and not getting beholden to dumb expectations about what a home should be. He’s right that life is about choices and this family seems to be making good ones. My family is trying to live the same way in an expensive east coast city (2 high incomes, 1 tiny apartment, staying positive and focusing on what we prefer about it to a far-out place with more space…the usual). That said, as frugality becomes increasingly necessary for people making above average salaries, I am getting more and more frustrated with the choices rhetoric. I am concerned for people who make average or below average salaries as the choices they have must be rapidly shrinking. I have always been frugal and have simple needs, but it strikes me as a serious social problem that it’s becoming the only way to get by. Even for this family with a high income, the alternatives were clearly bad–to me this is not really an abundance of choices. I admire the author’s optimism and agree with his personal finance advice, but I wish circumstances were different.
Have you read:
Not Rich At $200,000 A Year
Scraping By On $500,000 A Year
I have, but that doesn’t at all address what I was talking about. There are a lot of people and families (in fact, most) living off dramatically less than the incomes you write about. While I don’t expect every article to be written for everyone or apply to everyone, the situation the author describes is indicative of a growing social problem that I expect will effect all of us. Even as someone in a high-earning couple in an expensive city, I recognize that high housing prices cannot be solved by people making better choices. We cannot prop up housing values and work for housing affordability. As more and more people are part of the group that doesn’t have choices, I wouldn’t be surprised if the political will to make housing affordable wins out over the current status quo. That’s probably irrelevant, though, and I am just losing patience with trite lessons about all the choices we have. Perhaps I have just learned those lessons already and I am not the intended audience for this blog anymore.
I would give my left arm to live in one of the mobile home parks in Malibu (Paradise Cove or Point Dume). Ocean views, surfing and cool community – yes!
Yes! A good location and good life!
If folks on the East Coast ever visit Malibu or Laguna Beach… I don’t think they’d ever want to go back.
Hi, great article “If A Googler Lives In A Mobile Home, Why Complain About Living Costs?” Will you provide the name of this mobile home park and the pre-fab manufacturer from Sacramento? If you cannot disclose publicly, please email me directly. Thank you!
I think it’s a fine solution, so long as the neighborhood is safe and the math works out.
I sincerely doubt, though, that they’ve seen $100,000 appreciation. Unlike houses, mobile homes generally /depreciate/. The mobile home sales experience is like time shares. Very slick, lots of numbers thrown at you, etc.. Best to step away from the reality distortion field before you buy. Drive around and look at used mobile homes; how much would you pay for them? Not $325K. The land may appreciate, but the home doesn’t. And they don’t own the land. Also keep in mind that realtors who deal with mobile homes often charge higher fees, so he’s probably paying at least 10% of that supposed $325K value in a sale.
My wife and I looked into a mobile home when we bought our first piece of property (5 rural acres). Our budget was low and a new mobile home seemed like a good way to get temporary lodging for a low cost (we were looking at ~$100K for a double-wide). But then you start to add in the extra costs. Delivery. A pad. etc… And then you realize that when you’re ready to build, you’re going to get a fraction of what you paid back. And you’ll probably have to help pay to have the home taken away. etc… Maybe some of that is less of an issue in a mobile home park.
But anyway, if it works out for your buddy, more power to him. I’m just not sure the numbers are quite as good as he’s thinking.
Nobody ever knows what they can finally get until they sell. But, I wouldn’t doubt the mobile home appreciated in value over the past two years the way the market is.
Price increases cascade out. The risk is what happens during a downturn. The fortress in the center (prime properties) gets defended the best, and the outskirts get hit worst.
The good thing is, $225K was spent… not $2.25M if there is a downturn.
SF prices are just ludicrous (and I live in the Washington DC area) but I like that Chris made smart choices based on his needs, not the demands of the area. It seems to be about choice and not societal pressure and I like that. There are negative connotations with “mobile homes” but I’d rather take that than the absurd prices in SF and losing sight of what’s important.
Well said Jim!
Chris and his family are definitely smart not bowing to societal pressures. They are going to have an incredible retirement outside of CA.