4 Reasons Mobile Home Investors Have a Natural Edge in Many Markets
As mobile home investors, we have a natural edge within most markets inside the United States. To be honest, this reality did not occur to me until I started to work with people across the country buying and selling manufactured homes. When compared to the single family home space, mobile home investing has some very logical and advantageous aspects of this niche.
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Below is a short list of some of the subtle and not-so-subtle ways mobile home investors have a natural edge in many markets.
4 Reasons Mobile Home Investors Have a Natural Edge
1. No Need for Conventional Financing
For most buyers, when a new/used home purchase is desired, a trip to the local bank or mortgage broker is in order. Most single family home buyers purchase their properties via the help of conventional lenders. Used manufactured home loans, both inside and outside of park, have stricter and tougher qualifications compared to single family homes. This is due to stricture underwriting on 1) the borrower, 2) the down payment, 3) the mobile home park the home is located inside of, and 4) the subject mobile home property's age, foundation, size, and condition. All or most of these criteria must be approved before a buyer-loan is created.
What this means to your business: Since many used mobile home buyers can’t or won’t go through banks to obtain conventional loans, this means less qualified buyers in the marketplace competing against you when buying.
2. Lack of Cash Buyers
In all areas of the country, there is some amount of cash buyers when it comes to purchasing a used mobile home deal in a park. However, as you may suspect, many mobile home buyers do not typically have thousands of dollars in savings to purchase a used mobile home outright for cash. In short, the majority of mobile home buyers cannot and/or will not be able to purchase a used mobile home for cash due to lack of savings.
Disclaimer: In scattered areas of the country (some major metro markets and coastal areas), there is a tremendous number of mobile home buyers with $10,000-$100,0000 cash in savings. These buyers are typically trying to live near an extremely popular city or beach location. By driving outside of these geographic “hot-spot” locations, you may likely find areas with a much lower demand from these cash buyers, lower lot rent, and more mobile homes on the market.
What this means to your business: Since many used mobile home buyers don’t have enough capital to purchase a used mobile home outright, this means fewer qualified buyers in the marketplace competing against you when buying.
3. Less Competition Due to Poor Perception
A poor perception means fewer investors in the marketplace. Many real estate investors stay away from this asset class, as the reputation is not pretty or flashy. Dealing with blue-collar works and affordable housing is not for everyone.
What this means to your business: Fewer investors means less competition for you when purchasing.
4. Motivated Sellers Due to a Time Crunch
Many mobile home owners live paycheck-to-paycheck. In fact, many single-family homeowners live paycheck to paycheck with little to no savings. These mobile home owners are one financial problem away from a late loan payment or lot-rent payment. Additionally, when a mobile home seller needs to sell, they may or may not have much time to accomplish this sale. A few reasons why a seller may not sell as quickly as they imagine are lack of conventional financing, lack of cash buyers, lack of investors nearby, a false idea of the home price they may sell for (causing to advertise a higher-than-realistic price), and a lack of advertising on the seller’s part.
What this means to your business: Motivated sellers wanting and needing help to understand their local market and how they may sell quickly.
In conclusion, mobile home investors do fit a very logical and realistic need in the marketplace. This may not always be the case if lending eases, mobile home buyers start really saving money regularly, or a "mobile home flipping" reality show floods the market with amateur mobile home investors overpaying for homes. With that said, we can only move forward in time, not backwards. Yesterday has passed, so make today and tomorrow great by taking action to help others locally.
Have you seen these advantages at work? Anything you’d add to this list?
Leave your comments below!