What Investors Should Consider When Buying Insurance for Mobile Homes

What Investors Should Consider When Buying Insurance for Mobile Homes

3 min read
John Fedro

John Fedro has been actively investing in individual mobile homes since 2002 and in parks since 2016. Additionally, he’s been assisting other mobile home investors since 2006.

Experience
Investing since 2002, John started in real estate accidentally with a four-bedroom mobile home inside of a pre-existing mobile home park. Over the next 11 months, John added 10 more mobile homes to his cash-flowing portfolio. Since these early years, John has gone on to help 150+ sellers and buyers sell their unwanted mobile homes and obtain a safe and affordable manufactured home of their own.

Years later, John keeps to what has been successful—buying, fixing, renting, and reselling affordable housing known as mobile homes. Like almost every long-term investor, he’s made more mistakes than he can count. John discusses many of them on his blog and YouTube channel, where he shares his stories, experiences, lessons, and some of the experiences of other successful mobile home investors that he’s helped.

John has written over 300 articles concerning mobile homes and mobile home investing for the BiggerPockets Blog. He has also been a featured podcast guest on BiggerPockets and other prominent real estate podcasts, authored a highly-rated book aimed at increasing the happiness/satisfaction of average real estate investors, and spoken to national and international audiences concerning the opportunities and practicality of successfully investing in mobile homes.

John now spends his time actively investing in individual mobile homes and acquiring parks. He focuses on enjoying his time and partnering with other investors around the country to grow their own local mobile home cash-flowing portfolios and reputations.

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Property insurance exists for a reason. Oftentimes our investment properties are some of the most valuable purchases we make in our lifetime. However, just because used mobile homes in parks may be purchased for below $10,000 doesn’t mean insurance isn’t just as valuable on these properties as on more expensive types of real estate.

If there is no loan or lien against your mobile home, then you be the sole decision-maker to keep and maintain insurance on your rental/investment properties.

  • Property Insurance for Investors: Strongly advised
  • Property Insurance for Home Owners: Strongly advised

Understanding Value

When obtaining insurance for a used mobile home, your insurance planner/agent may consult the NADA value for the mobile home you are aiming to insure. The insurance company may only insure your mobile home to the dollar amount the home is currently worth based on this index. In most cases, the NADA value will be found and obtained by your insurance agent; this is not information you will need to provide.

Pro Tip: Aim to reach out to your local Real Estate Investors Association to seek referrals and recommendations from active investors about quality insurance companies in the area.

mobile-home-newbies
Related: 10 Tips for New Mobile Home Investors From Active Mobile Home Investors

Roof Failure

Roofs are not made to be permanent. Depending on the construction of your roof and the materials used, a life expectancy of 20+ years may be in order. In addition, the location of your mobile home certainly is a factor of the wear and tear your home may experience over the years. Extreme weathers and falling debris will certainly affect your roof’s condition over time. In the event of a catastrophe or sudden roof collapse, insurance may help pay for the cost to repair or replace the roof in its entirety.

Fire

In 2015, a structural fire happened every 63 seconds in the United States. Fire damages are very real and will consume almost everything it touches. Additionally, smoke damage can be equally harmful to materials and living animals. While I have been able to purchase mobile homes with a small amount of fire damage due to a grease fire or electrical outlet fire, there are many other mobile homes that are completely destroyed by small fires that burn out of control. In times like this, it is great to have insurance to help cover damages.

Appliances

While appliances may not be covered in your insurance policy, damages resulting from these faulty appliances will likely be covered. Any time an appliance breaks and water is allowed to flood onto an exposed piece of wood, wall, or countertop, water damage may occur. Quickly aim to remove standing water as soon as possible to avoid water problems, wood rot, and mold in the near future.

landlord-lessons

Related: 7 Ways to Invest in Mobile Homes With Less Than $25,000

Broken Pipes

Water is the enemy to most mobile homes. When pipes break under a manufactured home, the water is allowed to flow on the ground and simply return to the earth. When pipes break inside of your mobile home water may pour onto your floor, flooding the home and damaging the baseboards, subfloor, carpet and more. These repairs may likely cost thousands of dollars that you may or may not have to reinvest back into this property.

Pro Tip: Always talk to your insurance carrier and make sure you clearly understand what your policy covers and does not cover. Aim to completely read your insurance policy before signing and moving forward.

Loan Approval

If purchasing a mobile home with the help of a bank or lender, please know that most lenders will require your manufactured home be covered with hazard insurance when a loan is made on a mobile home. The bank will want to be listed as an additionally insured party in case something happens to the home. The bank requires this insurance in the event the home is destroyed or damaged. In the event the home is destroyed or damaged beyond repair, the bank will be able to recoup the money they lent to you on the mobile home.

In conclusion, we do not have a crystal ball to foretell the future. When everything is going great, your tenants are typically happy; however, when problems develop, people may become upset and challenges may arise. Before offering to purchase any investment property, make sure to fully understand all the costs you and/or your residents will be committing, this includes yearly insurance premiums. If you are currently holding onto any properties without insurance, it may be time to reconsider adding insurance to some of these properties. Happy investing.

How do you have your mobile homes insured?

Leave your questions and comments below!