Sorry, You Don’t Even Qualify to Buy a Mobile Home!

We just arrived in Ohio from an overseas assignment and started looking for a place to live. It was June 1991. Marieta and I had been married for about seven months and we had a child on the way; baby due in November. We had met and married in Australia and now we were starting our new adventure in the USA. We were staying on Wright-Patterson Air Force Base near Dayton, Ohio at the temporary living quarters, affectionately known as the TLQ.

Welcome to the TLQ:

I think the TLQs were home hunting accelerators. One or two days in the TLQ and you became desperate to find a home – quickly! The accommodation consisted of one long slender room. Half way into the long room was a small half wall that marked off the beginning of the bedroom. All the way to the back on the right was the small bathroom. What I remember most about the TLQ was how uncomfortable it was; especially the temperature. It was either too hot or too cold. Summer in Dayton meant you ran the air conditioner most of the time but when you did the room became uncomfortably cold. When you turned it off it was uncomfortably hot. And, it also made a difference where in the room you were located; some areas were alright while others were unpleasant. It sounds strange but that’s what I remember about this accommodation.

The other thing I remember is the price. They were charging me $25 a day to stay in this uncomfortable room. I wouldn’t have minded too much if the government was paying but they weren’t; it was coming out of my pocket. And for me it wasn’t too bad because I could get up and go to work each day to a reasonable office situation but my poor wife Marieta – who was several months pregnant – was stuck in the room essentially all day. Not a good situation. It would be cheaper for me and a lot more comfortable to hurry up and find a place to live. I could find a nice place to live in Dayton Ohio for a lot less than $25 a day.

House Prices too High!

We seriously looked at buying a house but that option fell by the wayside fairly quickly. I was now a Captain in the Air Force and I felt my pay was quite good. But while I was away from Dayton for the past four years something happened that took me by surprise – the price of homes in Dayton went up faster than my pay! Can you believe that? I was shocked. That was a pretty painful real world “gottchas” in my property investment career. Lesson learned – my pay doesn’t keep up with the rising cost of housing! I’m glad I learned that lesson fairly early on in life. We were looking at about $80-100,000 to get a small modest home in Dayton. I thought that was outrageous. So, I tried to make an end run but as you’ll find out, that failed.

I Got It, We’ll Buy a Mobile Home!

My next plan of attack – my end run – was to purchase a mobile home from one of my office mates. I’d been out to visit him and his family a few times and they kind of sold me on the mobile home concept. First, it was cheap; only $11,000. I could almost pay cash for it. Next, the government would pay me full housing allowance even though I would probably only need a fraction of it to pay the lot fee. And since the lot was on base, I wouldn’t have to pay local property tax. I was excited. I saw a way to have a place to live and make some money as well.

Not everybody was happy with my idea. Marieta was not excited about the prospects of living in a mobile home. She wasn’t thrilled about the look of the neighborhood. It looked like a permanent RV camp site. She wasn’t thrilled with the idea of living in something that didn’t feel like a real house. To her it felt like living permanently in the TLQ. But, she was willing to go along if it meant we could save some money and then get something nicer in a year or so.

When I told my Dad my plans to buy a mobile home, I had to wait several minutes for him to stop laughing. His line of questioning was fairly direct, “What are you doing that for?”

I carried on about how it would work out very well for our household bottom line and how it would allow us to save for a nice home later on. He wasn’t moved.

“What are you doing that for?” he repeated in a deadpan voice. I got off the phone feeling pretty bad. My Dad thinks I’m a loser for wanting to buy and live in a mobile home. Well, it turns out he didn’t have to worry because a small hiccup in my past prevented the deal from going through.

So, next step was to apply for my big $11,000 loan. I went to the bank and a few days later I found out I didn’t qualify. I was amazed! I had nearly the whole amount in my bank account but I didn’t want to run the account dry buying the trailer. So, I went for a loan that I planned to pay off in maybe 6 to 8 months. But the bank rejected me.

When I called the bank and asked for an explanation, they said it was something on my credit rating but they couldn’t tell me. I had to request my credit report to find out. So I did. When the report came in I still didn’t know why because I had no idea how to read it. It looked fine to me. Then I finally found someone who figured out it was a college student loan that showed up on my rating as going unpaid for 120 days. Then I recalled back to what had happened. It was a non-event that somehow got into my credit rating – without my knowing it – and just sits there like a time-bomb waiting to explode when you least expect it!

Here’s what happened. I took out a $5,000 loan while attending college; mostly, because the other guys were doing it to buy fancy computers. So, I jumped on the bandwagon. After graduation the loan payments were supposed to start. But, I was off to officer training school in San Antonio, Texas and then off to my first duty assignment in Denver Colorado. About 6 months into my Denver assignment I received a letter from the Bank saying my repayments were overdue. I immediately called the bank and explained my situation. This was the first notification I’d received concerning the matter. The bank representative was very nice and told me not to worry. Besides, as a military member I had a two year reprieve. I could wait another couple of years before making any payments. No problem; situation under control.

Two years later I received a letter from the bank saying it was time to start paying back the loan. I paid it back in full almost immediately. The debt was cleared.

Little did I know the damage to my credit rating had already been done. My not paying those first 120 days cost me a big black mark on my credit rating. The bank just notified the credit report folks and the credit folks dutifully responded. How come after I called the bank and explained my situation, the bank didn’t call the credit folks and take the black mark away? How come the credit reporting agency didn’t ask for proof from the bank of my so called credit deficiency? How come the bank could just call up and black mark my credit? I found this whole situation disturbing. But, it also stopped me from buying the mobile home.

Once I found out I was turned down for the loan, I notified my work mate the deal was off. It became somewhat comical as he couldn’t believe the bank turned me down for an $11,000 loan. It was the equivalent of telling the teacher, “my dog ate my homework!” Yeah right? His wife was even more disbelieving. The feeling I got from her was that I was backing out of the deal and didn’t have the guts to say so. So, I came up with this cockamamie excuse.

My Dad thought it was great. “Now you don’t have to buy that damned trailer”, he proclaimed. He never called it a mobile home. It was always a trailer to him. He finished up by asking me, “Why don’t you go and get a decent place to live?”

So, there you have it. My first attempt at purchasing a home – I use the term “home” loosely – ended in failure. I got shot down for an $11,000 loan on a mobile home. How embarrassing. Well, you’ve got to start somewhere and I suppose this was my start. I was out of the race before the gun even went off. But, at least I got up to the starting line. I’ve learned over the years to never belittle humble beginnings because we all need to remember, might oak trees were once little seedlings.

Started renting in Huber Heights

I got in the car and made a quick dash out to look for a place to rent. I headed right for the base bedroom community of Huber Heights. I liked the town immediately. Good affordable housing with great proximity to the base. I think Mr Huber knew what he was doing when he built this town.

We went right to the Huber Real Estate rental office and landed a very nice two bedroom townhouse for $550 a month. They had a deal where if you paid on or before the first of the month, you could knock off a nice portion of the rent. I can’t quite remember how much but I believe it was on the order of $50! What a great concept. If you’ve ever been on the collecting side of rent you can see how this plan would be brilliant. Keeps your cash flow coming with minimal hassle. The tenant has a tremendous incentive to pay on time. We always paid on or before the 1st of the month. We were good tenants. What a great claim to fame; “Hey grandson, did you know your grandparents were good tenants. We always paid our rent on time. And our landlord became very wealthy.” Now that’s something to brag about.

Looking Back:

It was difficult for me to come to terms with some hard facts. First, I had a hard time understanding why my pay didn’t go up as fast as the cost of living; especially housing. Four years earlier, when I lived in Columbus going to school at Ohio State, I could have bought a house in Huber Heights for about $60,000. That same house had gone up to about $80,000 plus! During those same four years my pay went from about $25,000 up to about $36,000. So, I was behind by about $10k! I should have bought the house 4 years ago even though my pay was less. This was hard for me to understand. Somehow, I just figured my pay would go up and prices would just stay the same. As you can see, I had a real solid financial education. NOT! I can only remember one financial lesson in High School and none in college. The High School lesson was – wait for it … here it comes … are you sitting down? – the teacher showed us how to balance a check book! That was my formal financial education. Thank God for high school.

Next, I had a difficult time ignoring the inputs of people who also didn’t have a financial education; for instance – my Dad. I loved him, but I shouldn’t have been looking to him for financial advice. Now you may say that’s a bit harsh, but is it? My Dad had virtually no experience in mountain climbing. Would I ask him for advice on how to climb Mt Everest? Would my father be upset if I didn’t ask him for mountain climbing advice? Would he be upset if he found out I sought the advice a mountain climbing expert? Probably not. Why doesn’t the same logic apply to financial advice? My Dad struggled with finances. He seemed to worry about money a lot. He seemed uncomfortable with money. He never seemed to have enough. It didn’t look to me like he was moving ahead financially. Why then would I listen to his advice? But, that’s what I did.

When my Dad laughed at my idea to buy the mobile home, I was shocked. I thought it was a great idea. It had a lot of merits. I thought he would have congradulated me on my astute financial planning. But, he didn’t. And when I heard his reaction, I felt rejected. I took it personally. My Dad was laughing at another one of my stupid ideas. And, here’s where I fell down; I listened and believed him. He was my Dad. He always knew what to do. He’s got more experience than me. I’d better listen to him or I’ll make a big mistake and he’ll tell me, “I told you so.”

Now I know better. This is – wrong, wrong, wrong – thinking on my part. I should have dismissed my Dad’s input and moved on with my plan. It’s called “doing your own thinking.” I was still in the mode of letting others do the thinking for me. I didn’t want to look stupid or have people laugh at me. Especially, my father. But, I’ve learned over the years you don’t take advice from people who don’t know. And, if people want to laugh – regardless of who they are – let them.

Let me explain the deal. I was going to buy a mobile home for $11k. The Air Force was going to pay me a housing allowance of $600 per month, plus another $100 known as a variable housing allowance. The lot fee was going to run about $100 per month which included utilities.

My father had never seen the mobile home so how could he correctly judge the situation. It was quite comfortable and the trailer park was located on base, therefore close to work and shops. It was a very livable environment. Not a place to brag to your friends about, but probably not a bad place to live either; especially if you’re just starting out and you’re looking to move ahead financially. It’s called making sacrifices. Not big ones, just little ones. And, it’s also called “not trying to keep up with the Jones’s”, a foreign concept for a lot of people.

So, to me it looked like a no brainer. Let me get this straight … I can buy this home for $11k. First of all, I could have paid this off in about 6 months or less; I had the cash in the bank. If the bank wouldn’t give me a loan, then I could have gone to another bank. Or, I could have worked a deal with the sellers. I could have worked something out. But, I just gave up because I listened to my Dad (my fault not Dad’s).

Next, I was only up for $100 a month for lot fees which included utilities. Oh, by the way, there was no property tax on the home because it was located on Federal land; the Air Force Base; another benefit. So, the Air Force pays me $700 a month and I only have to pay $100 a month. That looks like additional income to me – income that can be saved for a down payment on a house.

Once we’d saved enough money to buy a house we could have moved out of the mobile home. Now, the mobile home would probably not appreciate in value so I may not be able to get my $11k back. But, there’s a more creative solution. I could have moved the home onto a private trailer park and leased it out creating another source of passive income. Passive income is my favorite income.

Yes, it seems to me, buying the mobile home would have been a great way to get started in property investment and would have accelerated the process. But, instead I had to have a “normal” home and pay “normal” rent. The problem with “normal” is you end up with the masses who struggle financially.