Thoughts on Manufactured Homes?

Question

Hi BP community,

After listening to episode 851 with Jason Velie on the podcast I have become inspired to look into manufactured homes. I find this asset class interesting because I am new to REI and as far as I'm aware, there is far less competition and the price of entry is more affordable.
I thought I would connect with this community to get your insights on manufactured homes, particularly in the Central Florida market. I'm curious to know if there are any specific factors or considerations I should be aware of. What are your thoughts?

Thank you!

Andrew Lawlor · Answer

I initially had a similar plan in 2021 but shifted gears swiftly upon discovering that they depreciate faster than stick-built homes, their lead time isn’t much faster or cheaper than a ground up build, and home owners insurance can be tricky due to certain criteria you need to meet (i.e. must be on a foundation). On the upside, some prefab companies offer financing which is much easier to obtain than a new construction loan. If you end pursuing the prefab, just make sure to do your due diligence. Hope this helps!

Jason Wray · Answer

Dillon,

If you are going to use  a Bank/Lender you want to make sure you are focusing on certain requirements.  Due to guide lines most banks and lenders have guide lines that require a few things.  MH must be a double wide, In Florida must be on a permanent foundation/concrete slab, and have hurricane tie-downs.  Must not be older than June 1976 while other lenders want to see something less than 20 years old.

MH cannot be moved from another piece of land must be brought in by builder and axles removed.  You will also need a foundation inspection report in order to pass all the above as well as inspection.  All in all Mobile/Manufactured can be a great investment since they are in most cases 50%-60% less than  a SFR build from ground up.

If you are buying as a primary you can include the land into the sales price if you locate a lot and want to put in a MH.  Rents in some cases do not seem to be effected unless the MH is much smaller than the local comps.  I am here in Saint Petersburg, Florida and Manufactured homes are all over the map.

Stay away from buying mobiles or manufactureds in MH parks where the lot is rented.  There is very little money in those unless you are buying the mobile home park.  You can make money but there is a little more of a hassle collecting rents due them being transient in nature.

Logan M. · Answer

You can do a modified BRRRR if you get your money out through option money or a seller-financed down.

Emmanuel Johnson · Answer

Sounds like a good idea, i will dig deeper into it

Zach Kidd · Answer

Like any other class of housing, these require research and specific knowledge to make them work for you. The difference between Mobile Homes (on wheels) and Manufactured Homes (no wheels when completed) is critical.

@Jason Wray nailed it about rented lots vs owned lots. Also, beware of communities with a "buy in" or similar. That can be many thousands of dollars for the mere privilege of owning a property in the community. The largest I've seen was $40k, which was included in the $60k sales price.

Beyond that, it's still a viable class to pursue. The attraction is a lower price point for entry, while maintaining something close to a market rent. You can fix & flip for cheaper, BRRR, almost anything you can do with SFH you can do with Manufactured Homes.

They are simple builds and easier to maintain. But their failure points will happen earlier, and more often.

Insurance is a huge issue regardless, especially in Florida. Financing will be much tougher.

And you need to understand the local risks too. Some areas are prone to sinkholes. If there's freshwater bigger than a puddle, there will be gators to contend with (totally not joking). Tourism areas don't want to see Manufactured Homes and will actively fight you. Permitting and zoning will be huge issues. If you're looking to buy in a certain locale, do some digging and pick up the phone. Make sure the municipality doesn't pull a sneaky and require the home to be moved on transfer of ownership.

But if you can figure out the entry money, I think there is plenty of meat on those bones.

I would definitely start with a seller-financing approach and build up from there.

But it's also very scalable. You could develop a parcel, move new construction homes in, and sell them, lot or not, for a very nice profit.

Dillon O'Connell · Answer

Awesome thanks guys! Now I am aware that you cannot get investment loans on this asset class which makes the BRRRR method a bad strategy but what are your thoughts on fix n flips using hard money loans?

Thoughts on Manufactured Homes?

Most Popular Reply