Mobile Home Rentals: Are They Worth It?
For many real estate investors, mobile homes aren’t necessarily top of mind. But with over 22 million Americans living in these types of homes, it may be worth a passing thought. Mobile homes have come a long way since their early iterations and may well be a worthy investment. Like other properties, however, purchasing and renting mobile homes has both advantages and disadvantages. Let’s discuss the pros and cons of mobile home rentals to help you decide if this option is right for you.
Defining a Mobile Home
Certain types of mobile homes were actually redefined as “manufactured homes” after the federal government passed the National Manufactured Housing Construction and Safety Standards Act. All “movable” homes constructed after 1976 are, technically, manufactured.
So what is a manufactured home? Unlike traditional, “stick built” homes, which are constructed directly on a lot, manufactured homes are pre-fabricated and then moved to a plot once they are completed.
The rental properties we are discussing in this article are manufactured homes, not properties with wheels, such as trailers (which are still considered “mobile.”) These are often considered personal property as opposed to real estate. In some cases, manufactured. homes may also be considered personal rather than real property. Obtaining a title and affixing the home to land that qualifies as real property will ensure it falls under the “real estate” category.
Pros of Renting a Mobile Home
Lower Cost
The most obvious advantage of mobile home rentals is that they are cheaper up front. A used, single-wide unit (90 x 18 feet) can cost as little as $10,000. This means acquiring a mobile home can be done with far less cash on hand than purchasing traditional real estate. Furthermore, you can pay your mortgage down much more quickly and begin reaping rental profits at 100 percent far sooner than another type of rental.
High Demand for Mobile Home Rentals
More than 20 million Americans live in manufactured homes. For many, rental rates are far more achievable with mobile homes than other rental properties or a mortgage, especially with interest rates at historical highs.
Mobile Home Tenants Stay for Long Periods
One of the biggest headaches for a landlord is replacing a tenant once they have decided to leave. A survey conducted by ResidentRated found that the average tenant stays in a building 27.5 months, or just over two years. On the other hand, mobile home renters anticipate staying at least ten years* in their house.
*The primary source of this information is a study conducted by the Manufactured Housing Institute. Unfortunately, you must be a member to access the study directly. We are relying on a second hand source through a quote issued by Charles Krawitz, VP of Commercial Lending for the Alliant Credit Union.
Mobile Home Rentals Cost Less to Maintain
A manufactured home will necessarily cost less to maintain than, say, an apartment building, or even a single family traditional home. Their smaller size entails less complicated plumbing and wiring. Furthermore, the presence of a conscientious tenant for prolonged periods (see above) ensures proper scrutiny and requests for maintenance.
Cons of Renting Mobile Homes
Mobile home rentals are not without their drawbacks. Like any investment venture, you’ll need to consider the risks and determine if they outweigh the potential advantages. Some of the biggest issues to weigh when looking to rent a manufactured home include:
Less Equity
Once upon a time, mobile homes were viewed with a certain stigma. While this is true to a certain extent today, advances in design and community infrastructure mean that these homes do not necessarily lose value over time. Like many real estate endeavors, the ability to build equity in a mobile home depends largely on the location.
Certain areas have zoning restrictions against manufactured homes. You’ll want to avoid renting in these areas, since the collective perception of mobile homes means your property’s value is unlikely to appreciate.
Greater Impacts from Natural Disasters
Natural Disasters can cause far greater damage to a manufactured home than one that was constructed directly on the lot. They are generally smaller and lighter, making them more susceptible to wind and flood damage. Building in areas that are at higher risk for hurricanes, tornadoes, blizzards, floods, and other natural disasters may mean your insurance rates go up as well.
Mobile Renters More Susceptible to Economic Shifts
During the COVID-19 lockdown, 43 percent of manufactured home renters were in the industries most impacted by job-loss due to the pandemic (compared to 27-35 percent of other types of renters). If this is any indication, we can infer that any economic shift that negatively impacts these industries in the future may well affect the ability of mobile renters to pay their rent.
Hard Money Lenders for Mobile Home Rentals in Colorado
Whether you are looking to purchase a mobile home, flip one, or buy an entire park, the professionals at Pinetree Financial are here to help. We lend on a case by case basis for all sorts of projects in the state of Colorado. Our loans are fast and flexible and tailored to suit your individual needs. Call our office or go online today to set up your consultation.