When you hear the word investment property, you likely think of homes and apartments. However, mobile home investing also falls into this category. Read on to learn about these investments to determine if it’s right for you.
Why Invest in Mobile Homes?
Investing in mobile homes has many benefits, but the main ones include:
- Higher returns – Mobile homes and manufacturing housing offers real estate investors attractive returns. The market has less competition from other investors than the traditional real estate market.
- Lower capital costs – The cost to invest is much lower than with conventional properties. That can lead to faster cash flow and less overall risk.
- Limited competition – While many markets are over-saturated with single and multi-family housing, there is a limited supply of mobile home rentals.
- Aggressive depreciation – Traditional property investments are depreciated over 27.5 years, but mobile homes can be depreciated over 15 years, given they aren’t fixed to a foundation.
While mobile home investing is attractive in many ways, it’s also a limited market. In fact, information on these real estate investments is very hard to come by.
So doing due diligence is tricky. It may take a good bit of time and effort to ballpark your numbers. Fortunately for you, we’ve done most of the heavy lifting.
Read on to learn about this why you should consider or avoid investing in mobile homes, average prices, and how it varies from traditional investment property.
Mobile Home Types
Mobile homes, trailers, and manufactured housing are terms often used to mean the same thing. And they do all refer to homes that are built in factories and moved to the home site rather than being constructed on-site.
1. Manufactured homes
Strictly speaking, manufactured homes are the ones built after 1976. That was when the U.S. Department of Housing and Urban Development introduced stricter building codes for factory-made homes. A manufactured home is constructed as a single unit and mounted on a permanent chassis.
2. Mobile homes
Mobile homes are the ones built before 1976. They were constructed to less strict standards. After so many years, few of these homes are still around. But there are some.
3. Modular homes
Modular homes are also factory-built. Unlike manufactured homes, however, they’re built in two to five pieces and not mounted on a permanent chassis.
Instead, pieces of modular homes are moved to the site separately and assembled on a fixed foundation. State and local building codes govern modular homes, rather than the federal ones that oversee manufactured homes.
“Trailer” can refer to manufactured or mobile homes. However, most modern manufactured homes are only moved once, from the factory to the home site.
Recreational vehicles, or RVs, are travel trailers that are designed to be moved as frequently as daily. They are much smaller and lighter and, while they may be used as permanent residences, are more likely used for temporary housing by vacationers.
6. Tiny houses
Finally, there are tiny homes. These are built on wheels and are mostly small mobile homes. Typically they are no more than 400 square feet and sometimes as small as 100 square feet.
Mobile Home Parks
Location is another significant difference in mobile homes. Some are located in mobile home parks. Others are on land owned by the occupants.
The actual mobile homes in parks may be owned by their occupants, but the occupants rent the land from the park owner. Mobile homeowners who live in parks have to follow the rules of the park, and so do investors.
There are also different types of parks, which each have restrictions that limit the type of renter or buyer of a mobile home investment. These include:
- Adults only
- Seniors only
Other restrictions may include:
- Types of pets
- Number of residents (adults and/or children)
- Owners vs renters
- RV-only parks
Mobile Home Widths
Unlike site-built homes, mobile homes are based on width. The three types are single-wide, double-wide, and triple-wide.
- Single-wide homes are typically from 14 feet wide to 18 feet wide. Lengths may run from 60 to 90 feet. However, 14 feet wide by 60 feet long is a typical measurement.
- Double-wide homes have become popular over the last decade. These resemble two single-wides that are moved separately and joined together on-site. 24 feet by 60 feet are typical double-wide dimensions.
- Triple-wide homes are the largest mobile homes, with up to six bedrooms and four bathrooms. They consist of three sections joined together. They may be more than 40 feet wide and up to 90 feet long.
Pros and Cons of Mobile Home Investing
As with anything, there are pros and cons to consider. Mobile home investing is a unique strategy, but there are things to consider.
Things We Like
- Low capital cost – According to a June 2019 U.S. Census Bureau report, the average newly built mobile home sold for $84,400, vs the average single-family home price of $316,900. A real estate investor can acquire several mobile homes for the price of a single conventional home.
- Diversification of risk – Lower per-unit cost also allows investors to have more properties, which reduces portfolio risk. The lower cost of mobile homes makes them attractive to the growing number of senior citizens downsizing after retiring on fixed incomes. As a result, the number of mobile homes is growing.
- Growing market demand – The Census also reported that 96,600 mobile homes were manufactured and shipped in 2018. That compares to only 64,300 as recently as 2014. The number of mobile home investors is much smaller, and there aren’t as many sophisticated competitors.
Reasons to Avoid
- Lower appreciation – Mobile home investing is quite different from investing in conventional homes. Mobile homes are less likely to appreciate in value than site-built homes.
- Limited market info – There are many sources of local market data for conventional residential investors. It’s harder to get market information about mobile homes. Investors mostly have to do their own research.
- Networking takes time – Networking is more important in mobile home investing. Building relationships with mobile home park owners and managers, dealers, and contractors takes time and effort but is vital for understanding markets and finding mobile home investing opportunities.
Unique Investing Techniques
In mobile home investing, know-how is vitally important. Studying the market, learning the players, and networking to find deals is an essential first step.
Study the Mobile Home Market
Before trying to make your first deal on a mobile home, get a good feel for the market. This can involve:
- Listen to mobile home investing podcasts
- Reading books on mobile home investing
- Attending mobile home investment seminars
- Studying websites of mobile home investors
- Joining mobile home investing clubs
Perhaps best of all is connecting with a mentor who can provide real-world tips and advice. A real estate investing club is an excellent place to find a potential mentor.
Find Local Parks
Almost all communities have mobile home parks. Locate the ones in your target market by doing an Internet search or by driving around.
Visit the parks to get a feel for what they look like, amenities and number of lots. Pay attention to restrictions. Some regions of the country have lots of seniors-only mobile home communities.
Introduce yourself to the managers and owners of your local parks. It’s essential to develop relationships with park owners and managers because they control who can purchase homes in their communities.
Also, identify and develop relationships with local mobile home dealers. Do the same with contractors who provide mobile home repair and maintenance services.
These relationships will help you when it comes time to identify a deal, make the deal, and keep the homes in good condition.
The best way to find motivated sellers is through your network. These are sellers who haven’t put their properties on the market yet.
Buying off-market properties avoids getting in bidding wars with other investors. It allows you to make quick deals with motivated sellers at minimum costs.
If the property you acquire needs repair or maintenance, now is the time to tap your network of contractors. You will also need the approval of the park owner where you want to buy.
Renting and Selling Your Property
Mobile homes rent for less than conventional homes, so that opens up a market for tenants that other properties can’t compete in. You can advertise homes for rent or sale on Craigslist, Zillow and other websites.
It’s just as important to screen mobile home tenants by having them fill out applications as it is with conventional rental properties. Be sure to implement credit, background, and employment checks.
Protect Yourself With Insurance
Insurance is essential for covering yourself when you invest in mobile homes. If you borrow money to purchase a mobile home, your lender will require you to have hazard insurance before funding the loan.
If you are selling a home and doing owner financing, you will require the buyer to maintain insurance as well. This will protect you from loss in case the home is damaged or destroyed.
Even if you buy for cash, it’s a good business practice to carry insurance. If you are renting the home, you will want a landlord policy that protects you against property damage or loss.
According to NerdWallet, the annual cost of a mobile home insurance policy ranges from $250 to $1,300, which is on par with a typical single-family home policy.
You can also require tenants to have renter’s insurance. This can help screen renters. And the renter’s policy can compensate you for any damages due to the renter’s negligence.
Should You Invest in Mobile Homes?
Investing in mobile homes is a mostly untapped opportunity to make money providing housing. You can buy mobile homes for much less money, letting new investors get started quickly and helping to spread the risk.
It’s more based on relationships and networking than investing in conventional homes. Still, mobile home sales are growing, and the future is bright.