Did you know real estate investing doesn’t only refer to single-family homes? When done right, investing in mobile homes can be a profitable way to add to your real estate portfolio. Check out everything you must know about mobile home investing to see if it’s right for you.
What Is a Mobile Home?
A mobile home, or manufactured home, is a home built in a factory. They usually measure 14 to 18 feet wide and 66 to 88 feet long. To be placed on the land, they must be transported by a truck fit for oversized loads.
The term “mobile” in the name is a little deceiving, since the homes can’t be moved once placed. The home must be permanently affixed to the land to secure mortgage financing.
The “mobile” part refers to the prefabrication that occurs in the factory, and then the home is moved to its permanent location, versus a traditional home built on-site.
The Appeal of Mobile Home Investing
Investing in mobile homes can help you diversify your portfolio. This is especially important if you can’t invest out-of-state, taking advantage of different real estate markets. Adding mobile homes to your portfolio gives you access to a different renter’s market, giving you more opportunities for profits.
Different Approaches to Mobile Home Investing
Just like investing in traditional homes, there are different ways to approach mobile home investing.
Purchasing and renting out individual mobile homes
The most common method of investing in mobile homes is to purchase and rent them out to tenants. You become the landlord, just like you would for any other home you rent to tenants. You’re responsible for the maintenance and repairs, as well as vetting tenants, collecting rent, and managing leases.
The risks of renting out mobile homes include vacancies and selecting bad tenants, but these are risks with any type of real estate investment.
Buying a mobile home park and leasing land to homeowners
When individuals purchase mobile homes, they purchase just the home, not the land. This differs from traditional single-family homes.
But if you don’t want the hassle of acting as a landlord to the mobile homes themselves, you can purchase the mobile home park and lease the land to people who purchase the mobile homes. You’re still a landlord of sorts, but with much less responsibility for maintenance and repairs.
Flipping mobile homes
You can also flip mobile homes, much like you can flip traditional homes. When you flip mobile homes, the idea is to find undervalued homes and sell them for a profit. Look for foreclosed mobile homes or owners about to go into default who desperately need to sell them.
Like traditional home flipping, you should renovate the home, keeping your costs as low as possible, and then sell the property for a profit.
The Benefits of Investing in Mobile Homes
Investing in mobile homes can be a good way to enter the real estate market or diversify your portfolio. Here are some of the benefits you may enjoy.
Lower cost per unit compared to traditional real estate
Buying traditional real estate, especially for investment, usually requires 20% to 30% down, plus you’ll have a much higher monthly mortgage payment. Mobile homes cost much less than traditional homes and typically don’t require a down payment as large as that of a traditional home.
Even if you finance a large part of the purchase, your payment will likely only be a few hundred dollars, making it an affordable investment.
Demand for affordable housing
Depending on where you invest, there may be a large demand for affordable housing. Twenty million Americans live in mobile homes, and not all of them can afford to purchase one. If you invest in mobile homes, you give this large market somewhere to live and increase your chances of earning a profit.
Affordable maintenance
Since mobile homes are smaller than traditional homes and have fewer features, maintenance costs are lower. This helps keep your profits up and puts less stress on you when handling properties, especially if you own multiple ones.
Downsides of Mobile Home Investing
Like any real estate investment, there are downsides to investing in mobile homes to consider.
Density restrictions
If you’re considering purchasing an entire mobile home park, not just a single property, pay close attention to zoning restrictions.
Most mobile home parks have limits as to the number of units that can exist on the land. If the number is less than you anticipated, your investment may not be worth it.
Less appreciation compared to traditional homes
Mobile homes typically don’t appreciate at the same rate traditional homes do. It comes down to the amenities and care the owner gives the property.
It also depends on the area’s zoning restrictions and overall demand for mobile homes. There’s always the risk the property won’t appreciate or could depreciate.
Vulnerability to natural disasters
Mobile homes are naturally more prone to natural disasters, such as earthquakes, tornadoes, or even strong storms. This puts you at risk of higher costs and lower profits. If the disaster is bad enough, it could even wipe out an entire mobile park.
Tips for Getting Started
Investing in mobile homes requires the same effort and strategies as investing in other real estate assets. The key is to have a strategy and to do your research, as mobile homes have some different nuances to consider.
Jumping in headfirst without understanding local rental demand, mobile home appreciation, and zoning requirements could lead to a bad investment. The more time you spend strategizing and choosing the right area, the higher your chances of having a profitable investment.
It may take a little longer to find a willing lender if you need funding, since not all lenders offer financing on mobile homes, especially those purchased as an investment. When considering investing in mobile homes, be sure to use the SMARTER strategy.
Final Thoughts
Investing in mobile homes may be a good option if you’re considering adding to your real estate portfolio. Understanding the market, creating a strategy, and determining how much involvement you want in the rental property are the keys to choosing the right mobile home investing strategy.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.