Financing mobile homes as an investment

8 Replies

Hey folks!

In my home area, there is sizable number of affordable mobile (manufactured) homes on foundation (post 1977). As an investor, these properties seem out of reach due to the lack of traditional financing. I have not heard of any lender that provides mortgages (or lower interest loans) on manufactured homes as investments. Any suggestions? Thanks.

If you're looking to invest in a rent/lease MHC just be sure you clear your intentions with the Manager/Owner before you move forward. Many if not most MHP owners will not allow  sub leasing. So  unless you're going to be the primary resident it may not be the best investment option for you.

However, if you're looking at MH's in resident owned MHC's i.e. condo conversions, sub divisions, planned unit developments (PUD's) or on a private lot or parcel then you just need to contact the HOA and find out what their sub letting policies are. Many HOA's do not allow sub leasing and definitely not vacation type rentals. So be very careful going down that road as well.

However, of the two scenarios above and as a North San Diego Coastal RE investor who invests heavily in stick built (site built), rent/lease and resident owned MHP's I can tell you from first had experienced that it is a very viable investment if you're in the path of progress. 

Unfortunately there aren't too many MHC's in that path but instead in blighted and/or undesirable geographical and socio/economic areas where you don't get the demographics that make it an overwhelming investment opportunity but moreover a better choice for low income affordable housing.

Now to answer your question about financing. There are some financing opportunities for MH's that were built after June 15, 1976 but they are few and far between compared to available financing for resident owned HUD Manufactured Homes (built after June 15, 1976). You can find low interest long term conventional financing if you are the primary resident or if you're purchasing a 2nd (vacation) home on resident owned land.

However, its a little tougher for investors to find many conventional lenders willing to loan on MH's unless you're willing to put a lot of skin in the game as the saying goes. All that stated once again I'm not painting the entire MH industry with a broad brush. I'm just talking about my particular farm. But you will no doubt find a lot of very good answers from some very well informed and seasoned PRO's on this site. Good luck!

Older MHs are the kiss of death as collateral for any lender, besides, they can be bought cheaply and if you own the park, you may be safe, but only if you really keep them up. These often just turn into the slumlord business, at that point if you're in a regulated municipal area, they will eventually put you out of business unless you really keep the place up. Blighted areas don't work well from a governmental point of view. 

It's really not a viable market, IMO, shoot for nicer homes, while that may be slower to grow it will be steady and real estate is a long term game. If something really can't be financed, I'd avoid it......usually. :)

Thanks John! The individual MHs I am interested in are on their own lots, some in HOAs, some not. I wonder if I could get something like a 6% mortgage with 40% down. Anyone have ideas?

Originally posted by @Jeff Macdonald :

Thanks John! The individual MHs I am interested in are on their own lots, some in HOAs, some not. I wonder if I could get something like a 6% mortgage with 40% down. Anyone have ideas?

 First of all, you are far from the first person to ask questions like this.

Second, those homes on rented lots or land - they are chattel products and the lending is chattel lending, not mortgage lending.

Third, even those homes that have the land as part of the deal are unlikely to have financing available even to owner occupants unless the home is newer and in very good shape, let alone to a speculator.

Part of the problem stems from the amount to finance vs the allowable interest rates. Loans under 20K cannot generate enough interest to offset the cost of origination and service of the loan without special advance contributions by the seller directly to the lender. Another part of your problem is you want to speculate with a lender's money and no lenders I know, and I know most of them want any part of this even with larger loans.

If I am misunderstanding and you are actually looking for a lender to make loans directly to those who want to buy the home from you, the situation is somewhat different, but still very difficult if the dollar amounts to loan are under 50K for chattel and under 100K for land/home or mortgage loans, especially in California where lender regulations are very difficult.

Yeah, lol. Seems odd to me that a lender would prefer to loan on a old stick-built home in a bad neighborhood, vs a new mobile on a foundation (on its own land).  Both could have the same loan amount. There a LOTS of newer manufactured homes in nice neighborhoods out here.

Originally posted by @Jeff Macdonald :

Yeah, lol. Seems odd to me that a lender would prefer to loan on a old stick-built home in a bad neighborhood, vs a new mobile on a foundation (on its own land).  Both could have the same loan amount. There a LOTS of newer manufactured homes in nice neighborhoods out here.

 It has a great deal to do with the source of funds and the resultant cost of funds from which the loans are made.

Originally posted by @Ken Rishel :

Part of the problem stems from the amount to finance vs the allowable interest rates. Loans under 20K cannot generate enough interest to offset the cost of origination and service of the loan without special advance contributions by the seller directly to the lender. Another part of your problem is you want to speculate with a lender's money and no lenders I know, and I know most of them want any part of this even with larger loans.

If I am misunderstanding and you are actually looking for a lender to make loans directly to those who want to buy the home from you, the situation is somewhat different, but still very difficult if the dollar amounts to loan are under 50K for chattel and under 100K for land/home or mortgage loans, especially in California where lender regulations are very difficult.

 Two family members experienced L O N G delays getting buyer financing in Calif.  YEP,  difficult resale for sure.

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