Investing in manufactures homes?

Question

Hello!

I have recently begun looking into buying my first investment property. I have found several, recently renovated, manufactured homes that could potentially have a 1.5% rent to price ratio. Is there any reason to not invest in manufactured homes? Any downsides that I am not aware of? I learned that you may own the home but not necessarily the land its on... should that deter my decision? Is there anything else that I should know about?

Michael J. · Answer

First off, props for taking the initiative and looking into the real estate game. It's a space where serious moves can be made if you play your cards right. Now, onto manufactured homes...

• Ownership of Land: You hit the nail on the head with this one. A lot of times, with manufactured homes, you own the structure, but you're leasing the land it sits on. This can introduce some risks. You might face rent hikes on the land or other restrictions that could dent your ROI. If the land lease expires, and isn't renewed, you could end up with a home and nowhere to put it. Big factor to consider!
• Depreciation: Unlike traditional homes, manufactured homes can depreciate in value over time, kind of like how cars do. That might eat into your long-term gains.
• Financing and Insurance: It can be a little more challenging to get traditional financing for manufactured homes. Lenders see them as higher risk than stick-built homes. Insurance might also be pricier.
• Quality and Longevity: Don't be fooled by the "recently renovated" tag. Check the build quality. Some of these homes might not age as well as traditional homes. That might mean more maintenance costs in the future.
• Resell Potential: The market for reselling manufactured homes isn't as vibrant as for traditional homes. Just something to think about for your exit strategy.

Look, the 1.5% rent to price ratio is enticing, and I won't lie, there's money to be made here if you're smart about it. But you've gotta weigh the short-term gains against potential long-term pitfalls. Get clear on your goals, do your due diligence, and crunch those numbers.

Stay sharp, play smart, and keep hunting for those opportunities! Remember, it's all about spotting gaps in the market and making them work for you.

Rachel H. · Answer

@Bryce Lifferth If you plan to buy in mobile home parks, then yes you may not own the land where the mobile home sits. This will depend on the community and what you can buy there and not buy there (i.e. lots only, homes only, etc).

Like any area of real estate investing, it's best to get to know the niche and become an expert at it. Those I know who've been the most successful real estate investors have learned a niche and studied it.

If you decide to pursue the niche and decide to buy in mobile home parks, then you'll have to work with the park manager and/or the owner to make sure you can do deals in the park. This is more of an art than an exact science which takes some time to build up these types of relationships.

Though, once you get the OK to work in these types of communities by the park manager and/or the owner then it's just a matter of finding and doing deals in the park. Due to the nature of the business, this is a major hurdle for some investors which creates less competition for those who are in it.

Hope that helps!

Robert E Bogino · Answer

Mobile homes as rentals is just like anything else.  Sounds like you are talking about in park models so some things to consider are lot rents, garbage, utilities, and park amenities.  These all affect how much you can charge for actual rent.  Most people in this model sell them on owner financing/lease options.  If you have a mobile home rental on land it is very similar to SFRs.  That is what I do.  Mobile homes tend to rent for a little less than a comp SFR and wear and tear is a little higher so run your numbers according.