Modular home Duplex/Triplex rentals

[Jacob Lambert]

Hey guys I'm a pretty new real estate investor. I live in Arkansas so it's a pretty rural state even in the capital city. I have been eyeing a few rental properties and duplexes in and around the city and found some of interest. I recently came across the idea of possibly purchasing lots within the city and considered putting Duplex and triplex modular homes on them as they are a good price and have come a long way from the stereotypical "trailer park" look they had back in the day. With nice designs affordable pricing and manufacture warranties it seems like a sold strategy, but I thought I'd get the opinions of some more seasoned rental investors! Thanks for y'alls feedback!

[Andrew Johnson]

@Jacob Lambert I don't live in Arkansas but I do invest there.  I think you have a nice idea but I'm not sure how it would work in practice.  Let's leave out the issue of zoning for the moment.  Modular homes still require utilities, permits, etc. and those aren't always the cheapest things to do.  And in areas where there are cheap multifamily lots, well...let's just say that you might be able to buy a home that's already built far cheaper.  Basically, you can buy-and-rehab for less than the "replacement cost" (or, in your case, the cost of a modular home).  

This is, however, just based on my quick calculation of costs that I did maybe 12 months ago when I had a similar thought to yours (just not in Little Rock).  The average price of a modular home is around ~$75/sq ft.  A smaller duplex would be 750 sq ft per side so that's 1,500 sq ft total giving you $112,500.  Add in the cost of a vacant lot (which will widely vary) but for fun we'll use $25K.  And you then have to add in running utilities, permits, holding costs, etc.  I don't know what all of that runs but it's not free.  Let's just guess (horrible guess) $13K so we can keep numbers round.

You end up with $112K + $25K + $13K = $150K.

Then start doing a search for multifamily in Little Rock and the surrounding suburbs and I see 13 multifamily properties under $150K.  And that's list price, you can probably buy for less that than that.  So the net result was that I can buy and existing home cheaper and still have the budget left to rehab it if I wanted.  There aren't zoning issues, construction issues, etc. to deal with either.  I can start (hopefully) getting cash-flow from that purchase in the first 30 days.  I wouldn't have to wait 6 months to get a property developed and rented out.

Now if you want to pop a double onto a $10K lot in Ward...well...that's a different story...I never look at those numbers...because...well...Ward...