Whether you call them trailers, mobile homes, or more accurately, manufactured homes, they are worth incorporating into your real estate investment plan.
Manufactured homes are the most affordable type of housing available and there is a huge demand for affordable housing in the United States today. Consider that in December 2004, the median price for a home built on the site was $ 187,000 and the median price for a new manufactured home was $ 50,000. With strict building codes and new technology, the quality of Manufactured homes continue to improve.
For the investor, manufactured homes generate the highest cash flow of almost any investment. The reason is logical: The market rents for manufactured homes are only slightly lower than those for comparable built-on-site homes, but manufactured homes cost substantially less to buy.
Let’s clarify the terms of this business. Although mobile homes and manufactured homes are often used interchangeably and both refer to factory-built housing units, mobile homes are mobile housing units built before June 15, 1976, and manufactured homes are mobile homes. built after that date. Although most mobile and manufactured homes are technically mobile because they have wheels and can be moved, most of them are installed on site and never relocated.
Mobile homes can be located in parks or on private land. In parks, owners generally rent their lots to the park owner, who sets the rules and regulations for the park, maintains common areas, and can provide various amenities. In most cases, when a mobile home is located on private land, the home owner also owns the land.
If you are unfamiliar with the mobile home market and have some negative preconceptions about it, let’s deal with that right now. Yes, there are mobile home parks that fit the negative stereotypes you may have heard about problem occupants and run-down facilities. But there are many more middle-income families and retirees who choose to live in manufactured homes, and these are people who take pride in and take care of their homes and neighborhoods. Manufactured homes have never been more respectable and desirable than they are today, and that trend is likely to continue as construction costs on site continue to rise.
Finding and Investing in Manufactured Homes
Opportunities for mobile / manufactured home investment are greatest in younger and smaller cities, suburbs, and rural areas. While you’re not likely to find mobile homes in New York City or downtown Boston, you probably won’t have to look far to find a market for this type of affordable housing.
Study your market and test the waters by buying a few units. Look for second-hand homes that may need a little repair; they can be purchased for a fraction of the cost of a comparable new unit. Once you are familiar with this aspect of real estate investing, consider becoming a park owner.
If you are interested in multi-unit housing, manufactured home parks are a great alternative to small and even medium-sized apartment buildings. Not all parks are the same. They vary enormously in size and amenities. The three basic types of parks are family, retirement, and RV parks.
Family parks allow renters of any age and are the easiest to find. However, they tend to have higher tenant turnover and are more management intensive. Retiree communities over 55 have lower tenant turnover and are easier to manage, but more difficult to find tenants due to age restrictions. RV parks have the highest turnover with large seasonal variations and high intensity of management. Unless your location is superior, this type of park is the hardest to find tenants.
One strategy for investing in mobile home parks is to buy a park with a high vacancy rate, high income potential, and poor management. Fix the administration, fix the park and fill the empty units. Then put the park on the market at its new value and make a quick profit. Or keep the park and enjoy your higher income.
Essentially, any proven real estate investment strategy (wholesale, foreclosure, lease option, etc.) will work just as well with manufactured homes as it does on-site, and will generally generate higher cash flow. Because manufactured homes cost less to buy, they are excellent opportunities for a beginner without a lot of cash, even when they are wildly attractive to seasoned investors who want solid returns. They are most likely perfect for your own wealth building plan.