SCHAUMBURG, IL

Edited by. A.B. Dada, co-written by Matt Miller
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A reader of my old “mobile home millionaire” newsletter has been talking to me for a year now, but the past 6 months he’s been quiet. Sunday I received an interesting e-mail that I wanted to repost, with his permission. The rest of this article is the e-mail, followed by my comments. I edited the e-mail a little bit for clarity, spelling and grammar, and removed a few personal comments. I also asked him for some more details to add to the e-mail so people understand a bit more about his background.

A.B. Dada
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E-mail from Matt Miller to A.B. Dada, Sunday October 29, 2006

Dada,

It has been 6 months now that my family has lived in the mobile park that you and I discussed a year ago. I wanted to give you an update on the situation, and also my personal gratitude for helping me make a decision that seemed impossibly difficult to make.

As you know, I am married to my wife of 10 years and we have two children, 8 and 5. I’ve lived in the Batavia, Illinois area all my life, and am employed in the computer engineer field with the same employer since I graduated college 12 years ago. (editor: Matt is 35) As we previously talked about, I make a little over $66,000 per year and my job is very secure. My wife works part time during the day when the kids are at school, and she brings in an additional $12,000 per year.

For 3 of the 10 years of our marriage, we rented. In 1999, all of our friends and family said we need to take the plunge and purchase a home, especially with prices on the increase. We did buy a small 1000 square foot home in Batavia, which we lived in for 4 years. In late 2003, we were convinced by friends and family to upgrade to a nicer, newer and much bigger home. We negotiated what we thought was a reasonable price of $230,000 for a home in Batavia, and secured a reasonable fixed rate 30 year mortgage. We lived fairly comfortably with our 20% downpayment, and we started to see the prices of homes around us increase within a year of us closing on the home.

Our newer home was significantly larger than our starter home, about 1900 square feet. Within a year, our friends and family convinced us to take a home equity loan to build out a nice deck, refinish the bathrooms and kitchen, and fill our guest bedrooms with nice furniture for guests, who we’ve never had over. Our home was appraised during the HELOC process at $280,000 just one year later, and we had already paid about $50,000 in equity into the home based on the downpayment and principal payments on our mortgage. Since we had a mortgage remaining of about $180,000, our equity doubled within a year based on the HELOC appraisal. We were looking to acquire about $20,000 to update our home, but the bank convinced us we could stretch our budget by acquiring an adjustable rate mortgage for $60,000. We took a nice vacation, bought a new car, and spent a lot more on our home than we initially were planning. We felt like millionaires, even though we were bringing in less than $55,000 a year. Our new debt burden was $240,000, or $10,000 more than we bought our house for 12 months earlier.

For a year, we felt like royalty, because our home was re-appraised at over $300,000 in 2005 by a local realtor who performed a free market analysis to show us how we could sell our home and upgrade to a bigger one. We did not. In late 2005, we were shocked that the home jumped up again to $330,000, which meant we were back to almost $100,000 in equity on a $45,000 down payment and 2 years of mortgage payments. It was at this time that I found your newsletter because of a friend of mine who was reading it and talking about the pending housing crunch. As friends and family had told me, Chicagoland was not going to ever be effected by a housing bubble because it was only a coastal thing. We took another home equity line of credit extension in late 2005 to buy another new car and pay down our maxed out credit cards.

The story changes there when my wife’s job was cut back to the point that it wasn’t worth it for her to get dressed and drive to only bring in what it cost her to travel. She took a leave of absence to help our youngest enter school and keep our huge house maintained. The cost of maintaining the home just in utilities was 400% higher than our rental was just years before.

The credit cards started rising again, the car insurance costs went up a bit, and the housing insurance costs were killing us. We were considering renting again, but everyone told us to sit tight because our house would go up in price again, and interest rates were not likely to go up any more. My wife and I talked about the situation we were in, and realized that most of our friends and family made less income than our household, but lived in bigger homes with nicer cars. It was at this point that I let her read your newsletter, and her and I made the same decision your family made; we were going to sell our home to liquidate our debt. We listed our house on the market and were lucky to sell at a peak price of $330,000 just before winter hit. After closing costs and commissions, we were able to walk away from the house with a net profit of $65,000. We paid off both cars, all our credit cards, and moved in with her parents for a few months to consider our options. In the end, we had about $10,000 left after everything was paid, but we also paid over $5000 per year in property taxes, not to mention the high utility and insurance bills.

Her parents were on the verge of retiring, and they had also extracted a huge amount of new equity out of their house they’d lived in for 30+ years. They had a mortgage payment of over $1200 per month just for the new loan they received, adjustable of course. They hadn’t had a mortgage in 5 years before that. The $1200 per month ended up being significant as they lived in the same area but had a higher property tax bill, and had higher utility costs as their home was older and not very efficient. They offered us their two guest rooms if we helped with their mortgage, so we pitched in $1000 per month in rent and utility costs.

My wife and I looked at various rentals in the area, which were going for a great price since so many renters because owners in the previous few years. We’d be able to rent a house similar to our last one for about 60% of the mortgage. My wife, though, realized that living in a mobile home may not be a bad way to skip a lot of the problems associated with renting a house (homeowner wanting to sell, unstable rent, or neighbors if we rented a multiple-unit condo). Just like you, we had never even visited a mobile park, and we were really shocked to find a few of them existed in the town I grew up in.

After a few visits to more apartments and houses for rent, we found a deal on a mobile home in our community; it was less than 4 miles from our recently sold house. The owners of the mobile home were retired, and hadn’t lived in the unit for 6 months. They were willing to sell it at half the market value just to get out. A few days later, with a check in hand and no real estate agent, we closed on a 1600 square foot mobile home for less than $20,000. We paid cash by using our remaining equity profit and a bonus I received at Christmas time from my boss, as well as a few months of savings.

That was 6 months ago. I received a raise, and my wife was hired back to her old office when they realized how much she did. Our housing costs monthly are $390 for lot rent and $150 a year in property taxes. Our yearly cost is $4800, which is less than our property taxes in our home that was slightly bigger. The house we lived in has a property tax bill of almost $6000 for 2007 it seems. Our double-wide is newer, and very energy efficient. I have never seen such low electric and gas bills, and we spent an extra $3000 to get stronger tie-downs for the tornado-force winds in Illinois. We actually have more space in our home since we followed your advice and sold everything we could on eBay or craigslist (which netted us an extra $5000 on the $20,000 worth of junk we sold).

It is 6 months now, and we really are royalty. Our friends and family made fun of us for 5 of the 6 months, calling us “trailer trash.” I know from your last newsletter that you call yourself “trailer trash with cash,” and I can agree 100%. In 6 months, we have now saved over $13,000 over living in a house. We put some in silver, some in a medical savings account, some in a variety of CDs, and some in regular paper cash. In the next 6 months, with my Christmas bonus sure to be a bigger one, we believe we’ll have saved another $15,000 if not more. This is more than we have saved in our entire lives, in just one year.

My manager at work thought I was crazy, but now he loves the fact that I am not stressed like many others in my office. I don’t stress about bills. My wife and I haven’t fought in over 8 months, not over one single thing. My kids are actually happy (they are going to the same schools), and their friends don’t make fun of them at all because we are able to splurge on the kids with the time we have. I am considering cutting back to 30 hours a week at my work to focus more on the family and my church (again, as you said in your newsletter).

2 years ago, I was scared because I felt that everyone was doing better than me and I had no idea why I couldn’t be so happy as they had been. Now I truly am happy, and many of my friends and family are finally admitting that they didn’t understand everything either, they were just going with the flow. Many of those friends and family can’t sell their homes now because they are upside down on their mortgages, and the property tax and insurance and utility costs are huge.

You saved me $30,000 a year, at least, because of your crazy ideas. I can’t tell you how happy I am that I am now trailer trash with cash. Like you, we will be watching for the foreclosures and maybe one day move into a home if the price is right and we can buy it for cash or at least pay it off in 7 years. For now, though, we are stable, and we have a brighter future each day.

I am going to send you a check for $500 for your lifetime newsletter membership, even though you said you are discontinuing it at the end of 2006. If you do, keep the money as a thank you for the information you gave me. I also wanted to mention that two of my friends are considering moving into my mobile home park when their homes are foreclosed on, as they can’t pay the bills and they can’t sell for what they owe on them. We are also considering selling our fairly new cars and buying nice used ones, which would give us at least $20,000 more towards smart savings and a brighter future.

Thank you again for all your help, especially in answering my e-mails so quickly and helping me through what could have been a terrible time. We owe you!

The Millers
Batavia, Illinois

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Reply by A.B. Dada
Matt and family:

I am so glad you were able to do what no one would ever think of doing: downsizing. You were lucky, you sold at the peak. Your kids are young, so make sure you do spend as much time with them as possible. As they get older and more responsible, consider taking back your 10 hours a week at work, and consider working an extra job a few nights a week to bring in a little more cash while you are still young.

I appreciate the check you mailed me, and even if I do end the newsletter you can believe I will still drop you a monthly note about the lifestyle. I have seen a few dozen people make the same move you did over the past few years, and they all seem just as happy. We can’t convince the world, but we can convince those around us that we did the right thing.

Hope your family is blessed with your new stability!

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