Is Buying and holding a manufactured home a good idea?

Question

Hi all,

I'm considering buying a manufactured home to rent out, but I'm wondering if there are any special considerations I should know about before buying.

For example, when it comes time to refinance will I have a problem? Are there any challenges when it comes to rehabbing?  Anything else I should know?

FYI, the home is 3 bed, 2 bath, 1400 sqft on .34 acres.

Thanks in advance

Bill Neves · Answer

@Jen Boyd

Not sure if you were asking me or someone else.

Modular homes are put on a foundation but are NOT manufactured homes. No metal frame. Built to local building codes NOT HUD building codes. Built in sections in a factory, delivered by truck and put together on site.

Manufactured homes have a metal frame and are built to HUD building codes.

MOST Manufactured homes never move once placed on site. Cost is prohibitive in most cases.

BOTH can stay where they are placed, can be as large as and 'can' look like traditional houses.

Modulars can look exactly like Manufactured homes and may not.

BOTH are "made of better/more durable construction than homes built on site".

Some areas will allow modular homes but may not allow manufactured homes.

Manufactured homes used to be called mobile homes and are still called that in many cases.

I buy, fix and sell manufactured and modular homes and I sometimes call them mobile homes.

Bill Neves · Answer

@Corey Woodruff

It's not the best answer for buy and hold. Not actual real estate. Personal property.

However, appreciation isn't always a factor. That's what I USED to think too.

We sold a 1968 2/1 a few months ago for $25k. Great shape and great park.

With the market and economy, we're seeing much higher prices than I thought possible.

It is area affected too. In the south with seasonal resident areas, it's not the same as year round residents.

Cars are bought and sold similar to mobile homes and look how many people make great money in that business. Just a different biz model.

BiggerPockets is for real estate but there are a hundred ways to do that.

Bill Neves · Answer

There are some differences with manufactured homes.

Some of the materials are different. For the most part they're pretty straight forward.

Newer ones have sheet rock walls, standard plumbing, etc.

Good idea to walk through a few and talk differences with a handyman or contractor who knows manufactured homes.

Lower cost of entry is the attraction for those of us who work with them.

You can get financing if you live in it. If it's an investment, can't get a standard loan.

If on land or a city lot, you can rent, no problem. BUT if in a park, make sure the park management will allow rentals BEFORE you buy. Some parks do and some don't.

Have fun!

Corey Woodruff · Answer

I definitely wouldn't count on appreciation but if you get it at a good deal and plan on keeping it strictly for renting then yes I think at a good price manufactured homes can cash flow nicely BUT use for strictly buy and hold only cause you won't get much resale value because of depreciation, they always seem to go down in price in my market anyway

Bill Neves · Answer

Hi @Paul Falardeau

I know how you feel about ROI numbers. I felt the same way for 10 years when I did regular stick builts only and was a mobile (manufactured) home snob.

What I found was the ROI is actually MUCH higher. We can buy fix and sell 10 deals with $100k instead of 1 stick built. And the cash flow and returns are a much higher percentage.

Example - we bought one for $10k, put $3500 into it for fix up. Sold it for $25k cash 28 days later and netted $11,500.

So $13.5k in, $11.5k out in 1 month is 85% ROI and over 1000% annual. How's that?

NEVER saw that in stick built flips.

Bill Neves · Answer

Lenders if you live in them in parks:

Triad, CU Factory Built and 21st Mortgage. Google and ask for broker in your area.

On land or city lots, see regular lenders.

Stephanie Garcia · Answer

great information. I have been looking into manufactured homes as well. Does anyone know of a lender to lend on these? I'm looking to keep more long term.

Thanks,

Stephanie Garcia

Paul Falardeau · Answer

Thanks everyone.  Even though the upfront cost may be low, the ROI may not be there.

The education I'm getting here on BP is priceless!

Jen Boyd · Answer

@Bill Neves thank you so much for that explanation, much more clear to me now.

Is Buying and holding a manufactured home a good idea?

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