4 Questions to Ask Yourself When Investing in a Mobile Home

Mobile homes are an attractive venture for real estate investors now. The need for affordable housing options pushes many potential buyers to seek alternative options from the single-family home, and savvy investors who capitalize on this with mobile home options can generate massive profits. But before you take on your first mobile home investment, let’s talk about the questions to ask yourself when buying a mobile home. 

The most important questions you’ll need to address come down to who owns the land on which the mobile home sits. You’ll also need to consider if you’re willing to put in the amount of time involved with managing mobile homes and whether or not your business can survive the repercussions of a bad buyer.

But let’s talk more about that and the other considerations mobile home investors should have below. 

What is a Mobile Home?

What comes to mind when you think of a “mobile home?” You might have a few different ideas, but there’s a pretty specific category of homes that fall into this.

Mobile homes are simply structures that can be moved or transported. Sometimes they’ll have axles and tires on the base, which allow you to pull the home to another destination. More often, though, they’re transported on a trailer.

Some people will put prefab and tiny homes into this category, but they’re not “classically” considered mobile homes. Prefab or manufactured homes are made in a factory and then assembled on site. Tiny homes are small structures with permanent bases. Some tiny homes have wheels and can be considered mobile homes, but not all fall into “mobile home” territory.

In real estate, mobile homes are not considered to be “real” properties. They’re more like cars in that while they are “property,” they’re not “real estate property.” 

Are Mobile Homes Good Real Estate Investments?

So do investors actually use mobile homes in their real estate portfolios? The answer, as with most real estate things, is “kind of.”

Overall, mobile homes are suitable for new investors as they’re relatively inexpensive; you can usually get a mobile home for only a few thousand dollars. If you’re able to buy low, it’s pretty easy to get a good return on a mobile home. I’ve seen investors buy a mobile home for $3,000 and flip it for $9,000…that’s a huge profit margin! 

So what’s the catch, then? Well, the reason they’re so inexpensive is that the money isn’t in the actual home; it’s in the lot rent fees. You see, even if you own the mobile home, that doesn’t mean you own the land the home sits on. Unless you’re planning to travel across the country towing your mobile home, you’re going to need a place to set it.

Many mobile homes end up in what’s known as “parks.” These are just communities of mobile homeowners who lease their space from the park owner. The parks usually come along with utility hookups so that the homeowner can set up their home for a semi-permanent situation.

If you can own the land that mobile home is sitting on, you could be set up nicely for a profitable real estate venture. But even being the landowner who leases spots is not as cut and dry as it seems.

Mobile home investing is very management-intense and hands-on. Leasing land to mobile homeowners and renters means maintenance and upkeep of the land, utility poles, communal spaces, and so on. In addition, the actual structure of a mobile home can become a headache as they’re typically not great constructions. Mobile homeowners often get frustrated by the poor insulation that comes along with their home, which can cause electric and heating bills to rise.

It’s not all doom and gloom when it comes to mobile home investing, though. This is a great time to be an investor in affordable housing options, as many families are getting priced out of single-family houses. If you can offer nice mobile homes and set them up on some type of permanent structure, you could be setting yourself up for some massive profits. 

Things to Consider When Investing in a Mobile Home

While it may seem like a mixed bag dealing with mobile home real estate investing, I don’t think the negatives completely outweigh the positives. If you can do it right, mobile homes can be great additions to any portfolio.

There are a few considerations any investor should take into account that are specific to mobile homes. The majority of them come down to the land.

If you’re planning to have your mobile home on leased land in a mobile home park, read the fine print of your lease. Some mobile home communities require the home to be owner-occupied. This means that you won’t be able to rent it out without violating your lease agreement. 

Even if you can find a community that allows you to lease your mobile home to someone else, it’s important to think about the worst-case scenario. Mobile home investors will pass off lot rental fees to their renters, so you must do your due diligence finding responsible renters. If lot fees aren’t paid on time and in full, it will be your responsibility to get everything squared away, not your renter. Suppose you’re unable to get back to good standing with the community. In that case, they may be able to foreclose on the mobile home, removing your interest (and ability to recoup costs) completely.

4 Questions to Ask Yourself When Investing in a Mobile Home

  1. Who will own the land on which the home sits? The answer to this has two completely different pricing strategies. If you’re able to buy not only the mobile home but the land underneath it, you could see an increase in value for your investment over time. If you’re just purchasing a mobile home without land, that investment could depreciate over time.
  2. If you’re using a mobile home park, will they allow rentals? Check this before putting down any type ofana deposit.
  3. Are you okay running a business that requires higher levels of management? No matter the type of business structure you run as a mobile home investor, you’re going to deal with more maintenance requirements than you would a more permanent structure like freestanding houses.
  4. Are you in a good enough situation financially? Could you walk away because of a bad buyer, lot fees, etc., and keep your business going?

A Workaround I Like to Use When Dealing with Mobile Home Parks

Now, there is a workaround that can afford you a little more breathing room when managing your mobile home. It’s known as “seller financing.”

Essentially, when creating a seller finance deal, you, as the original owner, become the “bank” for your buyer. They’ll pay you the way they would a traditional lender for a mortgage and become the owner once their financing is paid in full. 

By creating a seller finance deal, you’ll be able to recoup your costs and generate profit in both your asking price and interest. However, seller financing won’t absolve you from lot fee responsibilities, so keep that in mind. 

Final Thoughts

Mobile home real estate investing is a complex business strategy for any investor. With a sound strategy, the profits can be massive. A small investment of only $5,000 can be parlayed into enough money for new real estate investors to take on bigger properties. Make sure you understand the difference between owning a mobile home, owning the land, and the level of management you’ll be responsible for before jumping in.

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