Different Ways to Invest in Manufactured Homes
July 24, 2023
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Manufactured and Mobile Home Investing
When most of us hear about real estate investing, we think of traditional properties like single- and multi-family homes, condominiums, and apartments.
However, we often forget about mobile homes and manufactured homes. And that’s a mistake.
Mobile home investing and manufactured home investing (which we’ll use interchangeably for the sake of simplicity in this article) are often great for your bottom line.
In this article, we’re going to cover the key steps to get started with this kind of investing.
Why These Investments may be Worthwhile
There are a few reasons this kind of investment can be worthwhile. First, approximately 20 million Americans (about six percent of the population) live in mobile homes. So, there’s enough potential there to warrant interest.
Additionally, the onset of the pandemic and economic factors generated increased interest in affordable living that continues today. This growing demand makes mobile homes a solid investment.
The required higher quality standards put into place by the US Department of Housing and Urban Development (HUD) in 1976 also make mobile home investing wiser than before. Better homes mean better outcomes.
So, now that you see a few reasons the investment might be beneficial, it’s time to look at a few different methods for investing in mobile homes:
#1: Purchase and Flip Mobile Homes
This mobile home investing method is like flipping residential houses in terms of the process. Many of the details, however, are what set it apart.
You want to start by looking for motivated sellers with properties that have clear opportunities for improvement. Foreclosed mobile homes may be a decent option here. You could also search sites like Facebook Marketplace, Craigslist, and Zillow for opportunities. Mobile homes range in price from a few hundred dollars to six figures, so find things that work with your budget.
After you buy the mobile home, it’s time to renovate and enhance it to prepare for selling. Mobile homes aren’t residential homes, so the renovation process will look different. Your renovations should consider the weight-bearing capacity of a mobile home and the fact that you’ll need to comply with local regulations.
You’ll also need to consider cost factors, transportation (mobile homes can be relocated unlike residential homes), etc.
Research and effective planning are vital if you decide this is the mobile investing method for you. There are a lot of moving parts (especially if you’re not handy with repairs), so you’ll need to have everything well-organized to make a profit.
#2: Create a Mobile Homes Park
Research is a theme you’ll see over and over related to investing. It’s important to learn as much relevant information as you can before you invest.
After you conduct your research, it’s time to purchase land. Land is a lot cheaper than improved land, and in some states, you can buy hundreds of acres for the same price you’d pay for a house. That said, you need to ensure zoning laws permit you to subdivide the land into lots and that those lots can be used for mobile home spots.
If you get the greenlight, you can move forward. One of the common benefits of just owning a park is that you’re only responsible for the land the homes sit on. The residents own their own mobile homes and are generally even responsible for maintaining their yards.
Obviously, this is part of what gives mobile home parks their earning potential. When you’re a landlord for multifamily homes, you need to keep plenty of money set aside for ongoing repairs and maintenance.
With mobile home parks, you’re only responsible for maintaining the road within the park and common areas like a playground, pool, or community shelter.
It’s important to know that you may need to purchase several separate lots to develop the mobile home park. If you find yourself in this situation, then a blanket mortgage to combine the investment into one easy loan might be a viable option.
Whether buying a manufactured housing community or developing one from scratch is a good investment depends on several factors, including the location. This is where, once again, your research is critical. Do the math and decide if this is a reasonable route for you based on your financial position and expected ROI.
#3: Rent a Mobile Home
Buying an individual mobile home or homes and renting them out may work better for you.
The first thing you’ll need to decide here is what kind of mobile home you want.
Single-wide mobile homes and double-wide mobile homes are the two main kinds of mobile homes. Below is a table that outlines the key differences:
|Feature||Single-wide Mobile Home||Double-wide Mobile Home|
|Size||500 to 1,200 sq. ft.||1,000 to 2,200 sq. ft.|
|Setup Costs||$1,500 to $5,000||$1,500 to $5,000|
|Floor Plan||Tend to be narrow and long||Flexible and larger|
|Price||$43,000 to $59,000||$110,300 to $119,400|
|Dimensions||14 to 18 ft. wide, 66 to 80 ft. long||20 ft. wide and 90 ft. long|
Single-wide mobile homes are usually easier to transport because they fit on a single semi-trailer. Common tenants in these kinds of homes are individuals and couples without children.
Double-wide mobile homes require more land than single-wide homes, and they’re more difficult to transport. Larger families usually occupy these mobile homes.
It’s also important to that shipping double-wide homes requires two separate trailers and they’re assembled on-site.
Double-wide mobile homes are easier to sell than single-wide because they appear similar to traditional homes and work better for many people. A double-wide typically sells for 20 to 50% more than a single-wide of the same condition and age.
After you decide what kind of mobile home you’re going to rent out, you need to consider the mobile homes park it will reside in. You must pay rent on the land, so that should factor into what you charge for rent, in addition to research about typical rent in the surrounding area for similar living spaces. In most cases, the rent you pay to the landowner will only be a few hundred per month (and maybe not even that much) and you won’t need to pay property tax, either.
On the other hand, if you’re the owner of a mobile home park, you might have a harder time attracting renters because the cost of owning a mobile home is so low. Thus, it probably makes more sense to rent the land the mobile home is on and leave the tenants to deal with the hassle of owning and maintaining the actual dwellings.
#4: Partner with a Mobile Home Park Syndicator
The last method we want to mention is growing in popularity. Teaming up with a mobile home park syndicator is a potentially worthwhile investment option because it doesn’t require any heavy lifting on your part.
A mobile home park syndicator (e.g., a “sponsor”) is a company that offers a passive investment in mobile home parks. The company is responsible for finding deals, performing all the tasks required before and after closing, overseeing day-to-day management and property improvements, and managing the overall performance of the investment. The investor’s only part to play is contributing capital.
Working with an experienced syndicator allows an investor to access the advantages of mobile home parks without the time commitment and risks of owning one themselves.
One of the primary downsides is the other side of the positive we just detailed. You don’t make any of the operational decisions. This can be difficult for some investors. And if the company makes mistakes, their mistakes can negatively impact your investment.
An additional downside can be the illiquid nature of this investment. Thus, you need to ensure the syndicator has a clear vision and timeline for refinancing or a sale.
Investing in manufactured homes is a great option. Read our article for more detail on why this investment is often excellent.
That said, it’s important to understand the how before you start investing. This article is a solid entry point into how you can get your foot in the door and start making waves in this industry.