Factoring the pros and cons of renting out your mobile home is not that different than if it were a site-built home -- you will still be a landlord and will have to consider the economic realities of rental gaps, balanced with enjoying rental income. Your individual circumstances will largely determine if renting out is the right decision for you. Get some some guidance from a real estate agent to weigh selling the home versus renting, and from an accountant to assess tax consequences.
Pro: Rental Income to Cover Expenses
Obviously one of the benefits of renting a mobile or manufactured home is the prospect of rental income that can cover your payment, taxes and insurance -- and depending on the market where you live and the condition of the home, perhaps some excess income for you. If the market where you live is not attractive for selling, it allows you to keep the mobile home and stay current on payments until the market stabilizes and improves.
Con: Uncertain Appreciative Value
If you ultimately want to sell the home and are renting out in the interim, you need to determine whether the home will appreciate in value. While this is a consideration for all homes, mobile homes do not appreciate on par with site-built homes. Age and condition of home, current market conditions, initial purchase price and inflation rate are all determining factors. If you rent it out now and try to sell later, you may be disappointed, especially if the renters caused damage. And, an older mobile home is more difficult both to price and for buyers to obtain financing on.
Pro: Tax Deductions for Expenses
Expenses associated with renting out a mobile home, such as repairs, maintenance and mortgage costs are still yours and could add up handsomely. You may also have some depreciation deductions. Discuss the significance of these with your tax accountant to determine whether they make sense for you and if they will be enough to offset tax on the rental income.
Con: Deferring Capital Gains Tax
If the mobile home was your primary residence where you lived for at least two out of the past five years, you can sell it without incurring a capital gains tax on the sale, depending on your exemption status as a single or married person. Therefore, if you rent for a long period of time, you may lose this deferment and pay taxes on the profit from the sale, which could wipe out any tax advantages you achieved during the rental period. Check with your accountant to discuss the repercussions of this.
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