When it comes to financing your mobile home investing portfolio, there’s a right way and wrong way to proceed. Even if you happen to have a nice chunk of change burning a hole in your pocket, it does not make economic sense to go that route. You’re going to have to stifle that generations old belief that all debt is bad debt. In our humble opinion at MHP Listings, all debt is not created equal. Some debt is actually constructive debt which can help you build wealth even in these troubled economic times.
Depending upon the park you’re interested in and your personal situation, a lender like a bank might require you to put down 20% or even 25% of the cash price before issuing a loan. There’s really no way around that. You’ll just have to pony up the money. As far as terms of the loan, you’re looking to get a fixed-rate, low-interest mortgage for as long term as they will go for. 30 years would be good; 40 is better. The reason for this ties into our discussion of inflation.
All currency based assets like cash, savings, certificates of deposit, stocks, and even bonds deteriorate in purchasing power in the face of inflation. What many people don’t know is that you come out ahead, even in inflationary times, when your mobile home investing is financed properly. We could embark upon a long, tedious discussion but, to cut to the chase, it works like this. Over time, the purchasing power of money declines, thus anyone who holds a debt for someone else will see the value paid back less than what they planned on.
Here’s an example. Say you take out a $1 million dollar loan at your local bank. Assuming a realistic inflation rate of 10% annually is like knocking $1,000 off the loan because, one year down the road, the dollar will lose approximately 10% of it’s value. Your goal should be to pay only interest for as long as possible while the value of that big, old principal is whittled down to size by inflation.
That’s how you make money investing in inflationary times.
The MHP Listings Team
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