5 Reasons Not to Invest In Mobile Homes

In This Article

Personally speaking, I believe that clarity is immensely underrated in today’s world.

Without clarity we find ourselves drifting through life, love, and business unclear about our next moves. Even worse we move forward with false ideas or misunderstood directions that may cause us to fall and stumble in confusion and costly errors. Clarity in any new business venture can likely be discussed for hours and hours concerning the ins-and-outs of every particular step of the business in which you begin.

This article comprises a quick list of 5 reasons why some investors may wish to steer clear of investing in mobile homes for profit. As a mobile home investor for the past 11 years I have come to understand both the positives and negatives of the manufactured home investing business. Below are some negatives.

1.) You Will Very Likely be Made Fun of at Times

When the money starts coming in you will be the one laughing and considered smart. Until then, however, many of your so-called friends and even family members will question and even laugh at your notion of starting down this road.

Mobile homes obviously have a reputation of being less valuable than traditional site built homes, and in many respects they are. To many unseasoned folks this translates as mobile homes being less profitable and therefore less worthy of our respect.

In reality however mobile homes, mobile home buyers, and mobile home sellers are just a worthy, kind, honest, wonderful, and deserving of our time and respect as anyone else.

2.) You Will Be Required to Talk Face to Face With People

Mobile homes require that you speak directly with sellers and buyers.

More than a real estate business mobile home investing is a people business. If you would rather work deals with a Realtor and/or simply stay behinds the scenes this business is likely not the best fit for you. With this statement said this is only from the experience I have had. Perhaps you are able to generate significant profits not interacting with mobile home owners however in my deals the greatest profits are the ones made directly by speaking with sellers and buyers.

3.) Many Older Mobile Homes Do not Meet Lending Requirements

To purchase a mobile home on private land or inside a mobile home park usually requires you using cash, private money, and/or some degree of creative purchase terms to control the property. This is because many lenders of mobile homes hold high requirements for underwriting mobile homes as well as the requirements needed by the mobile home borrowers themselves.

Large nationwide lenders as well as many local banks, the ones I have spoken with, require a minimum of 10% down from a borrower with good or better credit. While this is not a challenge for many of us the stronger difficulty comes with qualifying the mobile home for the lender’s criteria. The age, size, condition, set-up, location, and additions of the home all come into question when dealing with a lender deciding to put out their money for this loan. Some examples of requirements I have seen made by lenders on mobile homes are:

1. the mobile home must sit on a cement foundation or slab
2. the mobile home must be newer than 20 years old
3. the mobile home must pass all current applicable codes
4. the mobile home must sit on land owned by the same owner as the home

4.) Many Deals Do Not Result in Big Paydays

Due to many funding sources being difficult, but not impossible to obtain your exit strategy is one that will more likely result in renting or selling your mobile home for monthly cash-flow instead of a large cash payday. While the laws have changed in recent years and selling a home with seller financing is strict, the ability is not dead. With this said your ability to create an exit strategy of selling a mobile home for a large cash-payday will have to be properly understood and due diligence preformed before any purchase is made.

“John, but what about buyers with all cash?”

In short many end-user-buyers interested in purchasing a mobile home, whether on private land or inside a park will not have the $10,000 to $100,000 available to purchase a home outright. While it does happen, it is the exception.

5.) You May be Asked to Obtain a Mobile Home License to Continue Investing

Some states require that you become a licensed mobile home “dealer” after you have purchased a limited number of mobile homes inside a park within any 12 month period. This license does only apply to mobile homes inside parks. In a recent post on BiggerPockets I outline many of the states and discussed their state laws concerning becoming licensed once you purchase and resell “X” number of mobile homes per a 12 month period.

Conclusion

While I do not wish to deter anyone from their personal income goals and/or getting started with mobile home investing I would rather be frank and upfront with everyone rather than painting a rosy picture that mobile home investing is all smooth sailing. Over the past 11 years I have loved mobile home investing and it has been worth every moment of the ups and downs.

Love what you do daily,

John Fedro

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.