Manufactured Home - Investment?

Question

Good Morning BP Community, I hope everyone is doing well!

I just came across a FSBO manufactured home on Zillow that was built in 1998 and is listed for $65k. I have been perusing through previous threads that briefly covered this topic. I wanted to get some additional thoughts from those who have much more knowledge/experience in this space. From what I gathered, manufactured homes will generally depreciate. This home was recently renovated (Brand new kitchen and Bathroom, Flooring, Painting, ETC) and has 2 beds and 1 bath.

I am currently a renter, so my initial thoughts were to potentially occupy for one year by qualifying for a low down payment and then rent out once the year is over. What are some thoughts on this? Can Financing be an issue?

Also, the description did mention that there is a lot fee, but did not specify the amount. Does this mean that someone owns the land?

Thank you so much in advance and any other information would be greatly appreciated!

Best,

Paul Shannon · Answer

If there is a lot fee, that means you own the home, but not the land.  In this case, you are correct....you would be buying a depreciating asset and I recommend against it.  If you are investing in mobile home parks, you want to be the guy who owns the land, not the trailers.

Alternatively, sometimes you can find manufactured homes that are erected in stick build neighborhoods.  The home, while manufactured, should be tied to a permanent foundation (as opposed to on wheels with a skirt around it).  In this case, the owner owns the home and the land.  Generally the manufactured home will appraise and comp out more closely to the single family stick-builds around it.

The second scenario is a potentially viable investment.  The first is not.

Marlon P. · Answer

@Paul Shannon

I know, it’s being hard to decide. Recently there’s a 3b 2b MH that was sold for $210k on the same street and I believe their mortgage should be around $1350 which is the price I’m planning to rent out if I put my MH(3b 2b)

Since I already have an existing mortgage on that land paying the existing small stick built house I’m renting out; my lender plans to add the total investment amount $ to place the MH to the existing debt so no cash or downpayment to get the MH placed there.

I’m not familiarize with modular homes but I’ll start digging into that and compare prices.

I want to keep both properties forever though as long as I can cash flow through rent. The profit of the total rent after paying mortgage covering both houses, ill probably get around $1300 clean money.

Paul Shannon · Answer

That's a tough one.  I don't think having the main entrance on the side of the house will affect your rental acceptance necessarily.  Although it may affect your ROI when you go to sell, b/c most buyers won't want that.  How long will it take for the cash flow to pay you back for your cash investment?  If its a couple of years, its probably a worthwhile investment.  Assume it won't appreciate or it even may depreciate and run your numbers based off that assumption.

Marlon P. · Answer

@Paul Shannon

Thanks for the input, the second escenario it’s my case. I’m o the process of putting a double wide MH on a stick built neighborhood and I also have a 512sq ft stick built home on the same land so I will be able to rent out both of them separately.

Do you have any recommendations about the design for the MH. My case is that I the available land it’s narrow and I can only place a 27-28 wide MH to meet the set backs of the city of Shelton, WA and I found a brand new MH on Factory Expo, Oregon for $47k 3 b 2 bath, but the main entrance is located on a side so I don’t know how aesthetically might that affect the fact that all the houses around have the main door facing the street and my MH will not. I can try to get one meeting that aesthetic aspect of front door facing the street but it will cost maybe 30k more. Will that be worth doing it so I can have a more secure warranty of rental acceptance???

Thank you in advance for reading

Michael D'Alessandro · Answer

Thank you both so much for your help!

Rachel H. · Answer

@Michael D'Alessandro Yes, if there's a lot fee then they are only selling the home. Someone else owns the land. As long as the home is on that piece of land (someone else's), you'll have to continue to pay the lot fee and abide by their rules. If you decide to go forward, be sure to keep that in mind. Hope that helps!

Manufactured Home - Investment?

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