A Guide To Mobile Homes

Mobile homes offer unique opportunities for real estate investors and property owners.  

These prefabricated structures have been around for decades and decades, but they continue to evolve.  

In this article, we’re going to cover what you need to know about mobile homes to run a park or invest wisely in this asset class. 

The Difference Between Manufactured Homes, Modular Homes, and Mobile Homes 

In this article, (for purposes of simplicity and clarity), we’re going to use the terms manufactured homes and mobile homes somewhat interchangeably because mobile homes are still the most common term on the internet when referring to this category of homes. 

However, manufactured homes, modular homes, and mobile homes technically refer to different kinds of homes. 

The main thing that differentiates these homes is the construction. 

 Mobile homes technically only refer to manufactured homes built prior to June 15^th, 1976. These are now obsolete due to Department of Housing and Urban Development policy changes during that year.  

Modern manufactured homes are developed according to federal construction codes enacted by HUD. They’re built in factories as well, but they closely resemble site-built homes. 

Modular homes are built in factories as well. That said, they’re constructed per local state building codes (some states adopted the federal code, though, so that’s something to keep in mind). Modular homes usually need heavier lumber packages with more materials for the walls and framing than manufactured homes. There are also often subtle electrical, HVAC, and plumbing differences. 

Ways to Invest in Mobile Homes 

The stigma attached to mobile homes used to prevent a lot of people from investing. That is not the case today. How do you go about investing in this asset class, though? 

There are several good options: 

Buy and Flip Mobile Homes 

This mobile home investment method is like flipping residential houses in terms of the process. 

You want to start by looking for motivated sellers with properties that have obvious opportunities for improvement. Foreclosed mobile homes may be a reasonable option. You could also search sites like Facebook Marketplace, Craigslist, and Zillow. Mobile homes range in price from a few hundred dollars to six figures, so find investments 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. 

Research is a critical part of this process. It also helps to be able to take care of minor repairs and renovations yourself.  

Develop a Mobile Homes Park 

After you perform 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. 

One typical advantage of simply owning a park is that you’re only responsible for the land and not the actual homes. The residents own their own mobile homes and are usually even responsible for maintaining their yards. 

Whether purchasing a manufactured housing community or developing one from scratch is a good investment depends on several factors, including the location. This is why, once again, your research is critical. Do the math and determine if this is a viable route for you based on your financial position and expected ROI. 

Rent a Mobile Home 

If you don’t want to invest in an entire park, then this may be a better option for you.  

The first thing you’ll need to figure out is what kind of mobile home you want:  

After you determine 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 be sure to take that into account when you charge rent. 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. 

Partner with a Mobile Home Syndicator 

A mobile home park syndicator (e.g., a “sponsor”) is an organization 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 contribution is investment capital. 

The Pros and Cons of Investing in Mobile Homes 

Now that we know how to invest, we need to know if it’s worth it. Let’s take a look at the pros and cons: 

Pro #1: Affordability 

When it comes to real estate investment, mobile homes cost significantly less than most other kinds of housing.  

If you invest in a mobile homes park, you will need to consider the cost for the land before you can rent out individual mobile home lots. You also need to consider property taxes and insurance policies to cover the value of said land. However, overall, mobile homes are affordable and offer great ROI. 

Pro #2: Low Maintenance and Repair Costs 

Typically, if you own a mobile homes park, you don’t own the actual homes that your tenants reside in, so maintenance and repairs are their responsibility. You’ll still need to ensure the upkeep of the park, but that’s not the same as an apartment complex or multifamily house. 

Pro #3: Consistent Demand 

The need for affordable housing continues to grow in modern America. Factors like home prices reaching historic levels, new mobile home parks not being developed due to government zoning and gentrification, and baby boomers retiring in record numbers are creating demand for affordable housing. 

Pro #4: Low Tenant Turnover 

This factor is significant because tenant turnover is an incredibly pricey expense for most landlords because of cleaning units, marketing to new tenants, and the loss of income while units sit vacant.  

However, since tenants own the mobile home they reside in and lease the land, tenant turnover is less common.  

Additionally, those who live in mobile homes move less frequently because the expense and complexity of relocating a mobile home. The costs can range from $3,000 to $10,000 depending on the size and location as well as the local regulations (which may prevent moving them on the highways). 

Pro #5: Supply and Demand 

Every year, demand for manufactured homes increases while supply decreases. The affordable housing crisis marches on, so this is a trend that probably won’t stop any time soon, either. 

Pro #6: Long-term Tenants 

Mobile home dwellers are less likely to move than apartment dwellers because of the high costs associated with moving and the already affordable rent they usually pay. This means you typically have reliable income and don’t often have to deal with vacancies. 

Pro #7: Everyone has a Stake 

If you own the land and lease it, and your tenants own the mobile homes they live in, then you can see how everyone has good reason to take care of everything. Mobile home parks often make it so that everyone is incentivized to keep things in good condition. Obviously, this is great for business. 

Pro #8: Financing 

This asset class has an extremely low default rate. Thus, the risk associated is quite low compared to all other real estate classes. 

Pro #9: Taxes 

Infrastructure and land improvements are depreciable, and this is great when it comes to tax returns. Read our article [8 Excellent Reasons to Invest in Manufactured Homes] for more information about why taxes are an advantage related to mobile home investing.  

Con #1: Stigma 

Although it’s nothing like it used to be, there’s still a negative stigma attached to mobile homes that makes investment riskier. Some cities even enact zoning restrictions that prevent manufactured homes in certain areas.  

This stigma can create less long-term security than you might have investing in traditional single-family homes, which typically appreciate in value over time.  

The antidote to this issue is placing an emphasis on the type of place or mobile home you invest in. Quality matters and you should place an emphasis on it. 

Con #2: Sewage Infrastructure 

If a park has a private septic system, the park owner must take care of maintenance and repairs. This is often costly and unpleasant. Leaks or backups into homes are common and may cause health concerns if they aren’t taken care of efficiently. Obviously, this system comes with risks for investors and owners. 

Con #3: Natural Disasters 

Mobile homes are more vulnerable to earthquakes and other disasters than most other types of homes. Thus, you may want to carefully consider if natural disasters are common in the area and if the risk is worth it. 

Amenities You Should Consider for a Mobile Home Park 

If you decide to invest by purchasing a mobile home park, amenities are an excellent way to upgrade the value of the park.  

A community center, recreational facilities, barbecue areas, and laundry facilities are four examples that you should consider. 

Community Center 

Constructing a place that acts as a central hub where residents can socialize and participate in community activities is a win-win. The value of your property may increase, and you build community.  

You can have meeting rooms for people to host club meetings or educational workshops. You can build a kitchen, so that people can come together to eat. Think of this as a place where tenants can build friendships and feel a sense of belonging in your park. 

Recreational Facilities

 Amenities like playgrounds, basketball courts, and swimming pools enhance the value of a park and provide outlets for tenants.  

Barbecue Areas

 These areas are particularly appealing for mobile home parks because there’s often space for them. Designated outdoor spaces with picnic tables, barbecue grills, and seating areas within a mobile home park offers residents the opportunity to enjoy outdoor meals, host gatherings, and socialize with neighbors. 

On-site Laundry

 Most people will pay for the convenience of on-site laundry. And it’s a mutually beneficial amenity because it’s also more affordable than laundry off-site.  

Renting and Marketing Mobile Homes and Mobile Home Parks 

Rules and Critical Lease Terms 

If you’re a mobile home park owner, it’s important to include critical lease terms before you sign new tenants. It’s also important to create rules that protect your property and set clear guidelines from the start. 

In particular, there are six rule types you need to address to ensure your mobile homes park runs smoothly: 

1. Occupancy Guidelines: These rules should set maximum tenant limits, establish subletting rules, guest policies, and transfer of tenancy expectations. 

2. Maintenance and Repair Responsibilities: These rules should clearly state tenant’s responsibilities and landlord’s responsibilities. These should also explain how reporting works and what to expect in terms of inspections. 

3. Noise and Nuisance: Anyone who runs a mobile homes park knows the importance of noise. A consistently loud mobile home park can drive good tenants away. Thus, it’s important to create rules that detail acceptable noise and explain expectations for your park. 

4. Pet Policy: Will you allow pets? Will you restrict breeds? How will you handle pet registration? You need answers to all these questions upfront to create a better experience for everyone.  

5. Parking Regulations: Create rules that address designated parking areas, guest parking policy, parking permits, and parking restrictions.  

6. Safety and Dispute Resolution: Clearly define procedures and expectations involved in the dispute resolution process. Be sure to comply with local laws and establish clear escalation procedures as well. 

In addition to these rules, here are some critical lease terms to keep top of mind: 

• Rent: Specify the amount, the due date, acceptable payment methods, late fee charges, the grace period, and the process for rent increases. 
• Rental Term: Define the initial term, the duration, the renewal and termination policies, early termination expectations, lease extension procedure, and notice period required. 
• Severability Clause: An example of a severability clause is something to the effect of: “In case any provision in this lease is deemed invalid, the validity of the remaining terms shall not be impacted in any way.” 
• Security Deposits and Refunds: Set the amount, the due date, and the refund requirements. 
• Warranty of Habitability: As a landlord, hold yourself accountable. This statement usually promises you will keep the mobile park space (and the homes if you own them) safe and livable for tenants. It’s a good faith showing on your part and something wise tenants will expect to see in the agreement. 
• Duties and Rights: Every lease worth its salt details the duties expected of tenants and the duties expected of landlords. 
• Indemnification Clause: It’s wise to include a clause that tenants cannot hold you responsible for any damage or loss to any property or person upon the rented premises. You don’t want tenants coming after you for damage they caused while living in your space. 

Marketing Tips 

Marketing is a key part of any form of renting. Appealing to wonderful tenants is just as important as any rule or lease term. Here are six tips to put your best foot forward: 

1. An Effective Website: Develop a solid wireframe, build trust with positive customer reviews, make contacting your organization easy, and get creative.  

2. Highlight Unique Selling Points: These differentiators might be an appealing location, certain amenities, or distinctive features that make the mobile home park attractive to potential renters. 

3. Maintenance and Pictures: Keeping the park in great condition is important. It’s also important to show the park in a good light online. Pictures are worth a thousand words (and maybe even more when you’re trying to rent). 

4. Details: The more relevant details you provide in listings, the better your chances of finding high-quality renters. 

5. Positive Online Reviews: These reviews play a key role in modern consumers’ decision-making. People want to see that others have a pleasant experience with you and trust you. Positive online reviews are essentially another form of word-of-mouth.  

6. Flexible Lease Terms: Flexible lease options cater to a wider variety of potential tenants and make you more appealing to different kinds of renters. 

Moving a Manufactured Home 

Even though it isn’t the most common occurrence, people do move manufactured homes. And, if you’re in that position, it’s important to know what goes into moving this kind of home. 

First, you need to take a careful look at the cost. A transport-only move, which involves attaching a move-ready home to a towing vehicle, usually costs between $600 and $3,500.  

A full-service move, however, typically costs between $3,000 and $14,000. This kind of move includes the disconnecting and reconnecting of utilities, skirting, and transportation. 

Second, you’re going to need a permit. The specific information you need to get this permit depends on your location.  

Next, you must hire a certified manufactured home mover. The law requires you to work with a licensed, bonded and insured professional moving company. Research is key here. Make sure you find a reputable, experienced professional. 

You also need a manufactured home that is up to code. The dwelling must meet the Manufactured Home Construction and Safety Standards set in 1976. 

Additionally, you need to disconnect your utilities if you don’t go with a full-service move and provide your landlord with notice. 

Lastly, you need to secure loose items. You don’t want anything flying around wreaking havoc on your interior during the move. 

Conclusion 

Manufactured and mobile homes are growing in demand due to economic circumstances and their consistent affordability. Thus, it’s important you know as much as possible about this asset class.