Travel Trailers, One-Bedrooms & Other Mobile Homes Investors Should Avoid Buying
Beware the real estate investor who advises you to “never” or “always” purchase a certain type of real estate. While real estate certainly does have many steadfast regulations, laws, and rules, there are also many variables in every deal that may lead you to close or not close on a property for a various number of reasons.
The answer to almost all real estate questions is, “It depends.” Please keep this in mind as you read the list of mobile homes to not purchase in the future. Every deal is unique and different in some way. Aim to not dismiss a certain type of factory-built home just because you may have preconceived notions or assumptions.
Use the short list below as a guide while investing in your market and helping local mobile home sellers and buyers.
5 Mobile Homes Investors Should Think Twice About Before Buying
1. Mobile Homes With One Bedroom
If your mobile home is located inside of pre-existing mobile home parks, you’ll have to pay monthly lot rent. In many areas of the country, a one-bedroom mobile home will not sell on payments or rent for a sizable enough profit for many mobile home investors. Example: Lot rent is $500/mo. Rent for a one-bedroom mobile home is $650/mo. This equals a skinny profit monthly.
When these homes may prove profitable: These homes may absolutely prove profitable in many situations. It is my opinion that every mobile home in an investor’s portfolio should produce no less than $300 net cash flow per month for that investor. If an investor is willing to accept a skinnier net cash flow monthly, then a deal may certainly be reached. Additionally, you’re in a very heavy seller’s market and you are able to purchase a one-bedroom mobile home in a park with little other homes for sale, the supply and demand could prove profitable–even a good chance for an all-cash sale to take place.
Pro Tip: If a two-bedroom mobile home has one extremely small bedroom, it should be treated as a one-bedroom mobile home.
2. Mobile Homes With Chronic Problems Throughout
The second most common problem a mobile home investor may experience–after overpaying to acquire a mobile home–is to over-improve and spend too much money repairing. When investing in mobile homes inside pre-existing communities, aim to keep your total invested capital under a point that still allows you to make 3x+ your invested capital when resold. This “total invested capital” includes all holding costs, acquisition costs, repair costs, closing costs, etc.
Be aware of mobile homes with chronic problems throughout the entire length of the home. Typical chronic rehab issues are:
- Major soft spots in the floors throughout the home
- Major leaks in the roof throughout the home
- Major weakness in walls and under windows throughout the home
- A combination of all the above
While all these issues can be addressed with time and money, we must weigh our opportunity costs. While you are working on this home, you are spending time, money, and energy not investing in other mobile homes that may be more profitable and along a path of easier resistance.
When these homes may prove profitable: As mentioned above, every mobile home deal is different. If you will be living in the property or you are content with making a minimal profit, you may wish to spend your time repairing a particularly rough mobile home.
Pro Tip: For your first few deals, aim to purchase and resell mobile homes that need few repairs.
3. Mobile Homes in Seniors-Only Communities
As a general rule of thumb, mobile homes in senior communities are tougher to resell when compared to mobile homes located on their own private land or inside pre-existing “all ages” mobile home parks. This toughness to resell in senior communities is likely due to two main reasons: There is a smaller pool of serious buyers, and senior buyers tend to move homes less often than younger buyers. Purchasing a mobile home in a senior community may lead to a delayed resale, a vacant property, anxiety, confusion, and a lowering of price–and after many months, the home may eventually resell for a profit. Again, just as above, we must weigh the cost of doing business. While an investor is stressing over a mobile home in a senior community, he or she may be missing out on investing in two other easier mobile homes located nearby.
When these homes may prove profitable: Many times. While it has been my experience that senior citizen mobile homes can be tougher to resell in most markets, there certainly are senior hot-spots around the country that experience heavy senior buyers in various seasons. It is important to establish a demand from senior citizen mobile home buyers before you invest. If there is a demand from these buyers in your local area, then perhaps there is a need to be filled.
4. Mobile Homes in One-Star Parks
Any park where you do not trust leaving your mobile home vacant is a scary park. Any mobile home community that you do not feel safe walking around in the daytime or at night is not a mobile home park you want to be investing inside of.
When these homes may prove profitable: Everyone has their own comfort level. However, remember that it is not you living in this particular investment mobile home property. A payment-buyer or tenant who is interested in living in a shady, scary, gang-filled mobile home park may be a risky tenant themselves. However, if you purchased a nice quality mobile home inside a scary mobile home park, you could always move/transport the home into a cleaner community. Keep in mind that you will likely burn bridges and terminate any relationship between you and this one-star mobile home community.
5. Mobile Homes That Are Less Than 12 Feet Wide & Travel Trailers
While there has been a recent “tiny house” movement, it is my experience that mobile home residents, tenant-buyers, and renters living in a narrow mobile home will not last long before they feel trapped and must move out. When selling for payments or renting narrow mobile homes 8 feet wide to 11 feet wide, it is only a matter of time before the person’s or family’s needs will require a larger home.
When these homes may prove profitable: If local comparable sales are telling you that you may resell this narrow mobile home or travel trailer for a quick cash profit, then by all means proceed to invest. Likewise, you may also be considering putting this mobile home on your hunting ground to rent out yearly or as an RV in your own mobile home park. These are all great ideas to generate revenue with smaller properties.
In conclusion, none of the above article means anything if you are in a very hot seller’s market, are thinking creatively to create value, or have comparable sales data to justify a quick cash resale. As mentioned above, there are so many variables to whether a mobile home transaction is a valuable investment of your time, energy, and money. While our goals should always be to provide value to local buyers and sellers, we must also take care of the golden goose–ourselves. Take every chance to set your business up for success and to follow the path of least resistance while investing.
Have you ever purchased a mobile home in one of these categories? What types of real estate investments do you steer away from and why?
Let’s talk in the comments section below!