Mobile Home Investing: Is It Worth It?
If you are an investor looking to build or diversify a real estate portfolio, you’re likely seeking out many ventures. However, when the topic of mobile/manufactured home investing comes up, it often causes investors to back away.
Let’s explore the basics of mobile home investing and determine whether it’s worth the effort to add this property type to your portfolio.
Mobile, Manufactured, & Modular Terminology
The terms “mobile home,” “manufactured home,” and “modular home” are often used interchangeably. However, there are differences between the three, and real estate professionals should know those distinctions before making investment decisions.
- Mobile Homes: Prefabricated housing structures built entirely in a factory before June 1976
- Manufactured Homes: Prefabricated housing structures built entirely in a factory after June 1976
- Modular Homes: Prefabricated housing units that are NOT built entirely in a factory. Instead, the major parts of the structure are created in factories, and the material is then moved to a site and used to compose a home based on that area’s building codes.
The Benefits and Risks with Mobile Homes
If you’re considering mobile home investing, it’s wise to be aware of the positives and negatives associated with building a real estate portfolio this way.
- Affordable: Whether you’re buying a mobile-type home as a single unit or buying several units at a time, mobile homes are quite affordable.
- High Demand: Mobile home demands are quite high in park environments since new mobile home parks aren’t being developed as quickly as apartments and single-family homes.
- Low Maintenance Costs: Mobile homes tend to be cheaper to maintain and repair than single-family homes or apartment units.
- Less Competition: If you’re looking for a niche, mobile home investing might be a smart decision as many other investors seek apartments, commercial buildings, or single-family homes.
- Low Turnover: Mobile homes, especially in parks, have a low turnover rate.
- Age: When building a real estate portfolio with mobile homes, it’s wise to avoid older units that don’t meet HUD standards. While “mobile” gets used as an umbrella term, you’ll actually want to invest in manufactured homes (homes built after 1976).
- Package Deals: If you’re investing in a mobile home park, you might be getting a grab-bag of unit conditions. Some may be in excellent condition, while others are barely standing.
- Vacancies: Though these homes have low turnover rates, when a vacancy does occur, it may be challenging to fill the space as quickly as you may with other property types.
- Legal Issues: Again, if you’re investing in a park, you’ll need to make sure that the number of units in the park does not exceed the legal limits for the lot size.
To summarize, the question “is mobile home investing worth it?” can be answered quite simply with SOMETIMES.
Like any real estate venture, making the right decision about mobile home investing requires research and a keen eye. If you’re investing in a new, high-quality manufactured or modular unit, you might be sitting on a very wise choice.