Couple have fixed income but rising mobile home costs

Milt and Jean Burdick’s mobile home in Brea is tidy, comfortable and in a beautiful setting.

Like other homes in the mobile-home park in which they live, it looks out on the verdant parkland of Carbon Canyon. Roses tended by Jean bloom in profusion near their front door. And inside, a $20,000 renovation added granite kitchen counters, new carpets and double-paned windows.

But for the retired couple, the rising cost of rent for their lot space is a source of worry and tension.

“If I could, I’d walk away and live a more peaceful life,� Milt said.

Until this year, a long-term lease on the space held rental increases to 4% annually. But now that the lease has expired, the mobile-home park owner can, under California law, raise the rent every 90 days. And there is no cap on how much the increase can be.

In January, the Burdicks received a notice that their rent was being increased 9% as of April 1 from $948 to $1,032. If another notice comes this month, their rent could shoot up again in October.

“If you’re on a fixed income and you can’t fix your costs, it’s just too much risk,� said Alfred McIntosh, a fee-only certified financial planner in Los Angeles who examined the couple’s situation.

Milt, now 77, bought the used mobile home in 1998 for $32,000 in cash. He was twice divorced and had retired from a career as a mechanic in the airline and aerospace industries. Years after moving into the home, he met Jean, now 79, at a Parents Without Partners dance. He had three sons, and Jean, who was widowed, had five children. When Jean moved in with Milt, she sold her home in Torrance.

Milt and Jean married in 2003.

Their combined income, primarily from Social Security and pensions, is now about $51,000 a year. Their savings amount to $312,000, spread among a checking account, a savings account and retirement accounts.

They own two cars, both of which were bought with cash. They have no credit card debt or any outstanding loans.

Utilities cost them nothing additional — electricity, water and gas service is included in their lot-space rent.

Their monthly expenses are not lavish. The couple estimated they spend about $200 on restaurant meals and about $300 on doctor visits and medications. Jean spends about $200 on hair, manicure and pedicure appointments.

They have a dog — a sweet-tempered, three-legged cockapoo named Smokey — that costs them about $150 a month.

For movies and hobbies, such as gardening, they spend about $50 a month, and during the summer months they attend free outdoor concerts. For vacations, they’ve generally gone on camping trips with friends.

They are so frugal that generally at the end of the year they have a $1,000-to-$5,000 surplus from their incomes, and that goes into their savings.

Their big splurge this year was to be a five-day trip to Hawaii in August. But primarily because of worry over increases in rent and what it might mean to their futures, they canceled it.

“It’s like being in quicksand,� Milt said. “You know you are sinking. You know there’s solid ground somewhere, but it ain’t in sight.�

Their fears were compounded by concerns that the mobile-home park might not be the best place for them as they age.

“What if one of us becomes disabled?� Milt asked. “We’ve gotta look at that. This park isn’t set up for that.�

They are not, however, ready to move into a retirement facility. “What I’d like,� Jean said, “is to live in our own home.�

Their mobile home, built in 1974, probably doesn’t have much value, despite the renovations they made. Selling it might bring in less than Milt originally paid, and moving it to a mobile-home park with a more predictable rent is probably not an option — many of the better parks won’t accept a home that old.

The planner encouraged them to consider buying a house. Because their current home is older, it isn’t worth much and the couple’s insurance company will cover it for up to only $5,000. And because of the housing crisis, there are plenty of real estate bargains to be had.

The Burdicks said they’d be happy living almost anywhere in Southern California, as long as they liked the neighborhood. There were advantages, however, to restricting their search to Los Angeles and Orange counties, where Jean’s supplemental medical insurance would remain in force. In those areas, she could continue to pay nothing for regular doctor visits, and they could both take free exercise classes.

But outside of those counties, they might be able to find homes to their liking at prices so low it could be worth giving up the insurance advantage.

For example, McIntosh showed them online listings for two- and three-bedroom homes in an area in which they were interested — Sun City in Riverside County. The price tags on those homes were as low as $75,000, mostly for fixer-uppers. McIntosh said it would be more practical for them to spend about $180,000 for a nice home in good shape.

Ideally, he said, the Burdicks would put down 20% and finance the rest both because of the tax break and because interest rates were at an all-time low. Including taxes, their monthly payment would amount to about $900.

“Wow,� Jean said.

He said that after buying the house, they should start putting $300 a month into an account for home repairs that could arise.

Another advantage to buying now is that as the economy gradually gets better, as expected, the house is likely to increase in value.

“At some point, one or both of you might find you want to go to an assisted-living center,� McIntosh told them. “This way you would have some value to use to do that. You don’t have that option today.�

The planner also had advice for how they should invest their savings. Right now 98% of the couple’s assets are in equities. “That’s much too aggressive for their situation,� McIntosh said. He advised them to put 60% of their savings into a mix of bond funds and the rest in equities.

He also said they should not fear taking vacations — he suggested that they annually budget $4,500 for getaways.

But primarily for peace of mind and to better secure their future, they should give up the mobile home and move to a place where costs are relatively stable.

“How will we exist if these rents keep going up the way they are?� Milt asked. “It’s the fear of not being able to live a decent life.�

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