What creates the negative stigma about mobile homes?

Question

Is it the types of tenants they attract, or a deeper social influence that the parks themselves create that apartments and other "tight living spaces" do not?

I must have poor intuition for this sort of thing, because it doesn't make sense to me why apartments would be seen as "normal" living spaces and mobile homes are often seen as trashy.

Jon Klaus · Answer

A lot of good answers so far. I won't rehash, other than to say trailers back in the day were very cheap and had a useful life of 20 or so years. MHs have improved dramatically because of HUD requirements, market demand, better materials and manufacturing techniques, and lender requirements.  Still, the reputation of poor quality remains.  Part of that is price.  How can a house that cheap be any good?

Think Hyundai in the 1980s. Low cost and cheap reputation.  They got a lot better through the 90's, but reputation took until the 2000's to catch up.  They had to offer the longest warranty in the business to help overcome their old reputation.  Now you can pay $30k plus for a Sonata, or almost $60k for a Hyundai Equus.  They've been one of the fastest growing brands over the last few years.

The mobile home industry hasn't had the luxury to go upmarket. They can't compete when they get near the site built pricing.  Customers won't buy.  Stigma from the old days. Plus quality still doesn't match site built. How can it at half price?

Still, they fill a niche in the market very well.  They fit well for the family that needs plenty of space at a budget. In the country they don't carry quite the stigma. Oh, and when you need a new home fast, nothing gets "built" faster than a mobile home.

I have a mobile home in Austin that is completely immobilized. It's got a 100%  brick facade, granite, and stainless. Very few would know what it once was.  However, even though it does have an FHA approved foundation, most lenders won't lend on it.  A few will.

Park models are really a different category. A lot smaller and a lot more expensive per square foot. Going green is great, but it rarely pays for an investor at the low end. It doesn't even pay well in the $350k new home market I'm working in Austin.

I expect the MH stigma to remain, but they can also be very profitable for the investor. I'll cover that in the next post.

Jon Klaus · Answer

Why should an investor buy mobile homes?  I'm talking about mobile homes with land, not in parks on rented dirt.

Two reason; appreciation and cash flow.

They don't appreciate, you say?  No they don't, but neither do most site built homes.  It's the dirt under them that appreciates. I won't spell out that case here, but land appreciates and improvements depreciate. Yes, mobile homes do depreciate faster.

The smallest MH lot I own is one acre.  When development comes through I should be able to sell my land for much more than I've paid. That's happened already. Last August I sold a MH for $72k that I paid $25k for in 2009. The MH depreciated, but the land tripled in value. This is what I shoot for in my mobile home land banking business.

I am merely asking the MH's cash flow to finance my land holdings. So how do they cash flow?  My average capitalized cost per property is in the $30ks.  My average rent is in the $900s.

Yes, I bought most of them 3-4 years ago, but you can still buy these for around $50k and rent them out for @ $900 in my area. I have two mobile homes that rent for more than $1300. What stigma? ; )

So if they cash flow so well, why are they this cheap?  Financing. Bank financing for investors is very difficult still. Pay cash or find private money.  Very few sellers are in a position to offer seller financing.

No, MHs aren't the perfect investment, but they can be very good.

Emily Dixon · Answer

This is an easy question to answer with TWO WORDS:

THE MEDIA

Sam Parkins · Answer

It seems the conversation touches on some aspects to actually raise the value of the homes and create something EVERYONE wants rather than a "stigma".

Along those lines, and maybe best left for separate topic, how hard would it be to go solar in a park? How hard would it be to build up instead of sprawling? Ken Rishel how complicated and expensive is an "ash" sanitary system as you describe it?

There seems opportunity to provide a green product in this day and age where localities usually shy away from the old model of parks. There are certainly niche opportunities in the industry for smaller built self sustaining homes. Is there opportunity for a green park? One that may hold value and or even appreciate as some of the respondents have posted on this topic?

Rich Weese · Answer

Where is Jon K when you need him? He has done very well investing in mobile homes in the Dallas area for several years. I hope he will weigh in here on this thread.

In the meantime, I proudly state I am trailer trash! I own a very nice park model in Caza grande a Arizona located in Palm Creek golf and RV resort. There are nearly 2000 occupants, and my home sits on the 18th green. I developed this lot the way I want it. I think my total cost of development was under $50,000. Again location location location makes a difference in all real estate. I'm sure I could sell this for more than I have spent on it. I also normally rent this out for at least January February and March of each year which takes care of all expenses for the year. I'm then able to use it October November December and April if I want for free. True, there will probably not be very much in the way of appreciation but someone could depreciate this personal property a little bit quicker than real estate.

I want to state I am double trailer trash! I just closed on a 1200 ft.² mobile home in Fortuna California close to a fantastic golf club known as Redwood Empire golf and country club. A beautiful golf course with almost no members and monthly fees of under $200 for unlimited play including a cart for my wife and I. It was much less expensive for me to purchase this mobile home then a single-family residence. It is located within an over 55 community which means I don't have to worry quite so much about vandalism the six months that I am not in California.

Again, I'm not vouching for the potential appreciation but these types of homes are very advantageous for many people. Jon K goes at this completely different and I'm sure he will weigh in on the success he has had. I don't disagree with much of what has been said in this thread but I can assure you the park models or mobile homes are built to a much higher quality now than in the past when they gained the reputation. Rich

Bill Gulley · Answer

Good point Sam, but with just a little more effort many of those hand-up folk could probably skip the MH and move into a conventional home, lots of non-profit housing entities and low/mod income programs.

But it is  choice. And yes David, it is a lot like a car lot.

The question was about social stigma, not profits, MH parks can make money, so can collecting cans! LOL

Bill Gulley · Answer

Speaking of affordable housing, mobiles are only affordable for a shorter period, in the long run, conventional housing is a better solution.

Mobiles are personal property unless attached as RE. They depreciate and never appreciate over time as compared to RE. That's not to say rents would not increase over time and viewing the asset from an income approach, but as to market, they go down.

Mobiles are cheaper to get into. They attract those with limited resources. That's the perception. Those with limited resources are usually lacking in the ability to pay for repairs, so you have deferred maintenance, not just with the home but perhaps with everything, like cars, so you may also get junkers in the driveway. I know I'm getting jumped on by some, so let me add, there are some very good folks in mobile homes, they have the money to drive new cars, take care of the place and are neat as a pin, but that's not the majority view.

A million dollar mobile home spot is not from the value of the home but the location. I've seen lots in the 6 figure ranges as well, patio, decks, pools, garages, nice lawns, club house even a golf course, again, location and amenities, not the can on wheels.

As personal property they usually won't generate the tax base of conventional housing, yet they use and consume public services just as a conventional home, so at the government side, they are or can be a drag on services. Again, in some places there may be exceptions, but generally they are not an economic plus for the tax base.

Around here, most try to get out of mobile homes. Your market is limited to a socioeconomic group, so selling can certainly be accomplished, but vacancy can be high in less desirable areas. A mobile home park will often be an external obsolescence factor to neighboring properties, it shows up in appraisals, devalued do to MH activities. That is also true with a multi-housing project, but not as great.

Here's an exception to the rule, at least inside. There is a Realtor, does pretty well, he can afford a 300K home I'm sure around here, but he has an older double wide on his land outside town. It's old, needs to be painted, a metal pitched roof over it and looks bad. He put posts underneath, bolted the thing down to survive storms and has a foundation. But inside....totally redone, stud walls and sheetrock, super insulated, efficient windows and doors. granite tops, custom cherry cabinets, large Jacuzzi, walk in shower, pitched roof and beams...projection TV and stone fireplace, very cool space for him.  Why you'd ask....he hates the tax man and RE taxes! It probably saves him a couple grand a year, probably puts it in his Benz! He says it's just a place to eat and sleep.

So, really, you never know who is inside.  :)

Ken Rishel · Answer

Melanie - You need to find another lender. Those loans can be bundled and sold if it is a real estate loan using Title II financing. It sounds like the bank you were dealing with isn't very knowledgeable.

There are many sources to finance HUDs on real estate. It is the chattel finance of HUD Codes sans real estate where there is a dearth of financing, except for stellar credit or seller financing.

Melanie Noblin · Answer

Exactly. I was in a closing situation with every aspect of the loan a "GO" when they just happened to notice the home was a MH. They never even noticed before because it doesn't even LOOK manufactured. It's on a good foundation, over an acre with landscaping and a large garage. It is fully sheetrocked with upgraded finishings.

So they denied it on this one MH fact, and said they could not give me a loan they could not bundle and resell. Also this home was appreciating (NOT depreciating) at a steady rate according to the county tax records.

It almost feels discriminatory in the fact that now we will have to be looking at much older, stick, less up to code built homes that are 20-50 years old and need more repairs.

Jason Merchey · Answer

One problem that is a little more likely to pop up I would imagine would be an elderly person on low income living there kinda check to check, and if something goes wrong with their physical/mental health and/or their pension or S.S. checks or whathaveyou, it is harder to kick them out if necessary. In such as case you might start to feel like a "capital-C" Capitalist. I would have an easier time kicking out a Section 8 tenant, for example, because like cats, they tend to land on their feet :o

What creates the negative stigma about mobile homes?

Most Popular Reply