My son is looking for housing in a university town 3 hours away. For a variety of reasons he does not have to and will not live on campus.
Rent is very high and it is turning out that borrowing money from a family member and buying a mobile home will be cheaper than rent (if he keeps 2 or 3 roommates most of the time).
To give you and idea about our finances, he is eligible for a Pell grant this year, about $3000. We so far have only equity in our primary residence and our checkings/savings have always been below the cutoff for them to consider. In the future will owning something worth about $30,000 affect our FAFSA? Even though we will have minimal equity? Would it be better if it is in son’s name or our name? We have a trailer we can probably buy tomorrow so frantically trying to figure out the pros and cons on this as far as financial aid (we’ve thought through most of the other issues)!
In most states, a mobile home is titled as a vehicle unless it is permanently affixed to land you also own, and even then you need to have it transferred from the DMV to the county land records (so you would pay real estate taxes rather than sales taxes/vehicle taxes/registration).
FAFSA doesn’t require motor vehicles to be included in assets. I don’t know about CSS schools.
However, the U of California asset forms DOES include mobile homes as ‘real estate investments’ so you need to check to see how your state/school considers mobile homes. From the UC parent asset worksheet:
[quote]
Section B - Real Estate Investments: Complete this information for all of the real estate your parent(s) own such as mobile homes, condos, duplexes, rental property, land, summer homes, etc. Do not include the home you live in
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FAFSA asks about “investments, including real estate.” I wouldn’t consider a mobile home/trailer, in and of itself, to be an investment. If your son buys land to put it on, that’s a different story, but likely he’s going to be paying rent for a lot.
In my opinion, buying and owning a mobile home would be similar for FAFSA purposes to buying and owning any other piece of non-investment personal property (like a car, camper trailer, boat, etc.), and it would not be reported on FAFSA as an asset.
Sure, rental income would need to be reported, but tell me what basis there is to report the trailer (sitting on rented land) as a FAFSA asset, other than a feeling you might have?
It really depends on state law and how the mobile home is transferred (deed or title) and taxed. In some states, no matter what you do, that mobile home will forever be a vehicle. You can make it as immobile as possible, build a foundation, put in a hot tube and pool and hide all original siding and doors, and it will still be titled and taxed as a vehicle. In other states, once you drop it onto your own land and cut off the tongue and wheels, it should be transferred to real estate deed and taxed that way (if there is no lien on the vehicle).
So what if you rent out part of it and it has income? You could do the same with a car and rent it per use to someone to make income. You could rent your boat out and even sleep on it and it’s still a boat. The loan on the mobile home will most likely be a vehicle loan, not a 20 or 30 year mortgage. Some mobile homes depreciate rather quickly so aren’t really an investment. In Malibu? Sure, those in parks along the ocean are worth millions but the average mobile home may not appreciate at all (and thus the bank gives the loan as a vehicle, a depreciating asset, not as real estate).
At one point I think I had the titles to half the ‘hunting cabins’ in Georgia on my desk, which were really just a bunch of junky old mobile homes. Most of them were buried deep in the Georgia clay, and most of them had been immobile for 20+ years. They were still titled as vehicles (although few had current registrations) and I had to provide a title when sold, along with the deed to the property.
So buying a mobile home for $30k, paying utilities, paying pad rent, paying for transportation to/from campus is cheaper than living in on-campus housing?
^^^ I would imagine it could be. If he has roommates to help defray the cost on a month to month basis. But what happens in the summer months? Will those roommates still want to stick around and pay rent? Maybe, maybe not.
Wow, thanks for all of the responses. We are Montana so I will do some searches to see what mobile homes are classified as. If my son keeps 2 roommates, their rent (plus we are requiring him to pay a minimal rent) will just cover payment, utilities, insurance, and a tiny cushion for fridges that die etc., so it will not really be much income. And yes it will be at least half the price of living on campus (anyone say scam?!)
It doesn’t matter what state law says. It doesn’t matter what the IRS says. What matters is what FAFSA and (if applicable) Profile say. If OP buys a mobile home, moves it to a rented pad and OP’s son lives in it, on what line of FAFSA and/or Profile is the mobile home reported as an asset, and using what rationale?
Rent payments from roommates will be considered income, regardless of the asset status, & the amount might be high enough to significantly lower the Pell.
Btw he’s more likely to find plenty of roommates for a regular apartment to keep costs low…Nothing wrong with the trailer of course, but I can’t imagine that a lot of other kids would wanna do that, so you run a risk of not being able to pay the loan.
My view is that under the circumstances that you contemplate, a mobile home is not a FAFSA reportable asset and owning one will not affect your son’s Pell grant.
Edited to add: as noted above, rental income will need to be reported, and that may affect the Pell grant.
If he can’t find two roommates for the mobile home - then how does the cost (did you include pad rent and transportation to campus and internet access) compare to a dorm room?
Is there really enough room for 3 bedrooms, kitchen, bathroom, study space, TV?
Is this for fall 2016? Won’t most other students already have a place to live (as far as finding 2 roommates)?
Lots of students scrambling right now and he has at least 5 possibilities already. The rent is including all utilities and internet, etc. 3 bedroom, 2 bath and yes room for desks and all. The finances really do make it worth it. I’m thinking our income is low enough the rent won’t make a lot of difference but we will have to consider that.
It does. If state law calls it a vehicle, it is a vehicle. If state law calls it real property, it is real property and I’d argue you have to report it as a second residence or even raw land. This will be determined by how you hold ownership. FAFSA states you do not have to include vehicles as assets, and doesn’t distinguish between the $2000 Honda parked in my driveway and the $80k car parked in John Elway’s driveway, a vehicle is a vehicle. A mobile home can be either a vehicle or real property.
Do the FAFSA instructions say to include anything other than a car (boat, snowmobile, $10,000 bicycle?) as a vehicle? FAFSA can define ‘vehicle’ any way it wants and only exclude cars, or cars under $30k, or exclude houseboats and mobile homes if it wants to, but until it does, I think you can define it under state law in your state.
This is from a USNews article by Lynn O’Shaughnessy. If you don’t include the $100k boat, why include other vehicles?