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In The News


Take Your Home on the Road

Category: RV News
Source: MSN
Publish Date: Monday, September 24, 2007
Summary: If you daydream of the open road, making an RV your primary residence has proved to be a workable, adventurous, even affordable lifestyle. Here’s a map to making it work.

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By Lawrence Wheeler and Kim Anderson

It comes with a monthly payment, a tax deduction and the occasional plumbing problem. But it also comes with a steering wheel and an ever-changing address.

Ask a dozen full-timers, "What made you decide to go full-time in a recreational vehicle?" and you'll get a dozen different answers. Some want to escape; others want to connect. But ask them what keeps them on the road full-time, year after year, and the answer from all will be essentially the same: the freedom to do whatever they want, whenever they want.

If your daydreams run along the same lines, hitting the road forever has proved to be a workable, adventurous, even affordable lifestyle.

Though full-time RV living has been long considered the domain of retirees, age is less a criterion than enthusiasm. (The fastest-growing demographic is 35-to-55). Dark-natured loners won’t thrive in the outgoing, gregarious atmosphere of the typical RV park. And those who cherish spread-out room and privacy might find the closeness of RV quarters less than ideal.

But for those with a wandering heart, life on the road is gratifying and relatively inexpensive. Payments on a $150,000 motor home would typically run about $1,000 a month; gas, camping fees, insurance and maintenance might run an additional $800 a month. There are full-timers who, with just a monthly Social Security check and modest pension, keep their annual budget well under $30,000 and even put some money in savings. (You’ll find a sample yearly budget for full-time RV life below.)

Research, rent, travel

So how do you know if full-timing is right for you? If you have never traveled in an RV before, you'll need to do some homework.

First, familiarize yourself with the various types and styles of RVs. Attending an RV show is an excellent way to compare and narrow choices to fit your lifestyle.

Then, arrange test drives of different types you think you could live with. After finding one you're comfortable driving, rent a similar model -- with a similar floor plan -- for a short vacation. This is where the homework will pay off; you can learn firsthand what works and doesn't work for you.

If you discover you need a different type of RV than you've rented, repeat the "research-rent-travel" scenario. Taking the trouble to find the right RV for you can save a lot of grief and substantial money. Also, by learning what you need to be comfortable you can determine how to fit the RV into your budget.

The finances

To become a true full-timer requires you to cut all ties to your "real" house. Although some elect to rent a storage unit for furniture and personal possessions, committed full-timers often sell or give away anything that won't be loaded into their RV. Many a seasoned veteran will tell you that of all the things they miss about their former lives, their house -- with the expense, upkeep and maintenance -- isn't one of them.

You’ll still need to make arrangements for mail and communications, and you need an “official” state of residence for tax and insurance purposes, as well. (There’s a strategy to choosing your new home state you’ll read about below.) But first, the basics.

Pop-up campers start at around $3,000, travel trailer pricing runs from about $8,000 to $20,000 and fifth-wheel trailers range up to $100,000. Motor homes are available from $45,000 to $300,000, with "ultimate motorcoach" bus conversions priced in excess of a million dollars.

Rates for RV loans are subject to many variables, just like home mortgages, but a recent sampling shows:

  • Loans in excess of $100,000 can be financed at 6.25% with a 20-year term.
  • Loans between $50,000 and $99,999 can be amortized over 15 years, with a 6.4% rate.
  • Loans of $25,000 to $49,999 are available at 7.5% for up to 15-year terms.
To meet the IRS standard for deducting loan interest, an RV must be used as security on the loan, have cooking and toilet facilities and not be rented out for more than 15 days per year. (For more information, go to the IRS Web site or call the IRS at (800) 829-3676. The pertinent IRS guides are Publication 936 "Home Interest Deduction" and Publication 523 "Selling Your Home.")

The same IRS statute also applies to boats, so you could conceivably deduct an RV as your primary residence and a qualifying boat as a secondary residence. And if you work from an office space in your RV, even that may be a deductible business expense. Check with your tax adviser for details.

Making the transition

Once you've decided to take the plunge, shop for financing and insurance before making your RV purchase. Check out online companies that specialize in RV loans and insurance; they may offer lower closing fees and competitive interest rates. Dealers often charge a commission on RV financing and may not have the best rates.

Consider buying a used RV with low mileage. A source of great deals is first-time buyers who didn't do their homework and bought more or less RV than they needed. This is a great way to save money; the first owner can expect to lose 15% to 20% of the RV's value when it's driven off the dealer's lot. Moreover, RVs are notorious for needing to have the "bugs worked out." The first owner usually deals with the aggravation of the new RV's bugs, to try to keep from losing still more value.

RV clubs offer discounts on RV insurance, camping fees, RV-towing insurance, extended warranties and even health insurance for their members. Some clubs offer mail-forwarding services for reasonable fees, ranging from about $85 to $200 (plus setup fees and postage deposits). Independent mail forwarders are also available, so joining a club for this isn't essential.

Make sure you get an RV-specific insurance policy, not simply a vehicle policy, and insist on total-replacement-value coverage. This RV-dedicated policy is intended to pick up where your homeowner's policy left off. Make sure it has:

  • Contents coverage, including possessions in storage, if necessary;
  • More personal liability and property damage coverage than passenger-vehicle policies; and
  • An emergency hotel allowance -- especially important if your RV is in the shop for an extended time.

Choosing a new home

Several states have residency advantages for full-timers. This could save a bundle when purchasing a high-dollar RV. Popular home-base states include Arizona, Oregon, South Dakota and Texas. South Dakota, for instance, offers the following advantages:

  • No state income, inheritance or personal-property tax;
  • 3% excise tax on purchase of vehicles, RVs, etc.;
  • No intangible tax on investments;
  • Low vehicle-licensing fee;
  • Among lowest states for per capita taxes;
  • Private passenger-car insurance rates lower than all but four states;
  • Driver's license costs $8 for five years;
  • No residency requirement for voter registration.
Full-timing is less complicated when your RV isn't your only transportation. Choices for secondary transport, your “dinghy,” range from golf carts and motorcycles to full-size trucks. Compact cars and SUVs are favorites among motor-home owners. Anticipating your intended use will help you choose a dinghy (also called a "toad" because it's a towed vehicle) that will fit your lifestyle. Adventurous, outdoors-minded campers like the versatility of a four-wheel-drive dinghy for exploring; for others, a compact commuter works better.

Dinghies offer opportunities to get places you can't go with your house behind you, and make it possible to take that quick run to the store for milk without breaking camp. The most convenient dinghy choices are vehicles that can be "flat-towed” -- all four wheels on the ground, attached with a tow bar --- with no modifications to the drivetrain. (The most common are front-wheel-drive cars with manual transmissions.) For additional details on towing a dinghy, see this guide (PDF) from MotorHome Magazine.

Sample annual costs for the RV life

Expense

Annual cost

Explanation
RV loan

$12,000

This is a midrange $150,000 motorhome payment. Down payment and loan length will determine your monthly payment.
Living expenses

$3,000

Food, laundry, cleaning supplies, toiletries
Insurance

$6,000

Includes health/dental insurance as well as RV coverage, plus auto insurance if your set-up includes a dinghy.
Camping (Daily fees can range from $2 to $65, depending on amenities.)

$3,000

Can be reduced by joining a club or association, staying at sites listed in free-campground directories, and taking advantage of extended-stay rates. Remember, most RVs are designed to "dry camp" without need to connect to power, water or sewer for weeks, which helps avoid the average $35 daily fees charged at "official" campgrounds. Many truck stops are RV friendly and have free water and dump stations, as well as fuel and propane.
Fuel

$3,000

The type of RV you choose will have a significant impact on this expense, as will travel distances. A thousand miles per month is considered a high average for full-timers. Fuel type is also a consideration -- gasoline-powered RVs get 8-to-9 mpg; diesel RVs get 12-to-16 mpg. Fuel economy for pickup trucks pulling fifth-wheels falls in between.
Preventive maintenance

$1,200

Depending on distances traveled, and the age and condition of your RV, this figure will vary widely. But remember, it is cheaper to maintain than replace. Routine oil changes save engine components; tire rotation, balancing and front-end alignment help get the most miles from tires. Washing and waxing your RV helps it hold its resale value.
Communication

$600

Cell phone, e-mail, postcards and letters allow you to share your experiences.
Club/association fees

$300

Though you need to budget these expenses, most will be offset many times over by such features as reduced campsite fees, cheaper insurance, and roadside-assistance plans. You may wish to belong to several different clubs.
Utilities

$300

Propane, electricity (in some instances separate from campsite fees), satellite or cable TV, dump-out fees, etc.
Entertainment

$2,400

Tourist attraction admissions (shows, fairs), dining/dancing, fishing/hunting all fall into this category. Be sure to budget for fun -- it is a mandatory part of full-time RV living.
Miscellaneous

$1,200

Mad money, clothes, shoes, souvenirs, etc.
TOTAL

$33,000

This sample lists many extras and amenities full-timers could avail themselves of. While not extravagant, the total could be drastically pared down.


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