Should You Invest in Rental Mobile Homes?

Source: Market Watch.

Mobile homes can sell for buck-cheap. And you might be tempted to buy a few, fix them up a bit, and rent them out to generate decent, monthly cash.

But don’t get too excited—mobile homes are more challenging than regular single-family homes we’re all familiar with, although they do come with advantages.

For one thing, you have to invest within your means. For example, you can own one or several mobile homes in a park and rent them out to tenants, but the rent you charge must make sense compared to what you spent for the mobile home (renovations and maintenance included, which could be tons).

Another great idea is to buy an entire mobile home park and lease out land to each homeowner, but this alternative is only good if you have enough capital… and the guts to go for it.

In this article, we cover the pros and cons of investing in mobile homes and how to invest safely.

Pros and Cons of Investing in Mobile Homes

Here’s a snapshot of the pros and cons of using mobile homes as an investment for your portfolio:

Pro #1: Lower Cost Per Unit

Mobile homes are relatively affordable compared to regular properties (e.g., single-family ones), which require greater initial investments. For example, you’ve got to account for the down payment (6% of the property price) when you purchase a single-family house, whereas the biggest expense for buying a mobile home is financing a few hundred dollars per month.

Of course, if you buy an entire mobile home park, you’ll pay much more for the land before renting units out, and you’ll shoulder property taxes and insurance policies. The cost can vary significantly from city to city, but in general, owning a mobile home park is much cheaper than owning several single-family properties or a large multi-family complex.

Pro #2: Steady Demand

The demand for mobile homes varies from one area to another, often due to their social stigma. But regardless of whether they’re seen as a “shabby” or “low-cost housing” option, mobile homes are an affordable (and necessary) option.

According to the Manufactured Housing Institute:

• - 22 million Americans reside in mobile homes
• - 62% of those residents say they’ll stay in mobile homes for more than a decade
• - 90% of them are satisfied with their mobile home

Source: Vivid Maps.

Pro #3: Relatively Affordable Maintenance Costs

Repairs and routine maintenance for mobile homes are relatively affordable, although the generally lesser quality of mobile homes makes them need more frequent repairs and maintenance than regular properties. However, if you purchase excellent condition mobile homes, you only have to deal with simple plumbing and electrical in a smaller lot size.

If you invest in a mobile home park, leave home repairs up to your tenants, and make it your priority to maintain shared spaces, roads, and utility connections. And if management does get too complicated, property management companies can easily take over.

Con #1: Density Restrictions

Many plots of land have density restrictions regardless of whether they're zoned for mobile home parks or not, so crunch your investment numbers per how many units are allowed before you dive in.

For example, find out how many units you can put in the land, how much you’ll spend to purchase and prepare the land, and calculate to see if you’ll still generate enough return on investment. If you need to fit three mobile homes in one piece of land and each mobile home will have roughly 3-5 tenants to make ends meet, will the density limit restrict you from the minimum threshold?

In other words, do the math to ensure a viable investment in spite of density restrictions and local laws.

Con #2: Lower Property Appreciation

Mobile homes have improved massively in recent decades. Still, the stigma surrounding them remains. Some cities even have zoning restrictions that don’t allow manufactured properties. As a result, properties with mobile homes typically appreciate less over the investment’s lifespan.

While a traditional property generally grows in value, mobile homes have less long-term security—both if you’re planning to sell a single mobile home or selling the land of your mobile park.

Some statistics show mobile home appreciation climbing similar to that of traditional homes, but that doesn’t mean that mobile homes will overtake or even match the appreciation of regular properties. So don’t invest in mobile homes if your goal is to reap equity gains.

Source: MHVillage.

Con #3: Prone to Natural Disasters

Mobile homes aren’t as durable or sturdy as foundation-built houses, so they’re extremely susceptible to damage and complete wipe-outs from natural disasters. Don’t invest in mobile homes where the area is prone to earthquakes, tornadoes, or hurricanes, as they can all decimate mobile homes like we kill mosquitoes.

Source: Envista Forensics.

Our Opinion on Investing in Mobile Homes

We’ve never invested in mobile homes, but we’ve witnessed those who did, and they didn’t have the easiest time getting it right. If you do it right, it can be a decent investment. But it’s too easy to get it wrong and up with an empty pocket and a broken-down home that nobody wants to purchase.

As they say, mobile homes depreciate like a car—a really expensive car with high mileage.

To invest right and avoid losing money and ending up with an invaluable home, ensure your mobile is of good quality and secure excellent tenants that are financially stable and responsible enough to maintain the home. Trailers can get beat up really fast, so you’ll have to look after them like you would with a fragile asset.

Mobile home tenants are typically lower-income earners, so ensure you support your tenant’s unique needs by hiring property managers that know their situation or educate yourself as a manager about your tenant’s needs. Factor in the possible evictions that may happen every so often, too. They are, after all, the bloodline to your investment—you need them as much as they need you.

Mobile Homes as Investments: Just Be Super Careful

As with any real estate investment, be careful in investing in mobile homes. Focus on strong investments that won’t cost you more in extensive repairs and maintenance than your potential cash flow, and don’t expect to gain equity from the get-go.

Investing in quality mobile homes to make a quick buck can be great if you secure quality tenants that’ll stick to your lease agreement and care for the property. So do your research and invest within your means, where the mobile home market can then generate you reasonable cash flow every month.

Do you need more help with real estate investing? Message us, we’re here to help!

Our has been operating in the Metro Detroit space as property managers for over two decades. We have the knowledge and experience necessary to be successful in real estate investments—our clients can attest to it. Get in touch!