As with many forms of used real estate investing, there is no cookie-cutter way a used mobile home investment should look. There are opportunities that look similar on the surface, but sizes, repairs, motivations, time, location, and resale price/terms may all vary from deal to deal. With that said, the below article gives a breakdown of some of the various mobile home investment criteria to see which are most important for you as an active mobile home investor.
What Does an Ideal Mobile Home Investment Look Like?
1. The Home
Size: The size of the mobile home certainly matters. In many areas around the country, a double wide mobile home will be more desirable than a single wide. Additionally, the more bedrooms a mobile home has, typically the better. These bedrooms should be a decent size to fit a bed, dresser, and nightstand. With that said, for the right price/terms, a smaller mobile home investment may be a substantially profitable deal.
Age: The age of the mobile home certainly matters when purchasing the home and when reselling. Many banks/lenders have underwriting requirements that will not lend on a mobile home older than 10, 15, or 20+ years. Most buyers would prefer a newer home compared to an older model mobile home. Older mobile homes can oftentimes be narrower, be built with cheaper materials, and contain older floor plans with closed off kitchens versus big open “great rooms” that feel more modern for buyers.
Condition: Condition and price go hand in hand. Typically, the better condition a mobile home is, the more expensive the home may typically be. Most end-buyers looking to purchase a used mobile home want to move in immediately and start living. This means your final product mobile home should be completely functional and ideally clean when you go to resell. When you purchase a used mobile home, it may need minor or major repairs. If you are just starting your investing career, it may be wise to invest in mobile homes that need less than $3,000 in repairs and pass on major rehabs for the moment.
Related: How to Overcome 4 Common Newbie Errors When Mobile Home Investing
Price: Typically the lower you can purchase a mobile home for, the better. The more you can sell it for, typically the better.
2. The Location
Park or Not: If you buy or sell a mobile home attached to private land, you will also typically pay for the land the mobile home sits upon. Purchasing the land will likely increase the purchase or resale value of your property significantly. Depending on your market and available capital, it is important to know what type of mobile home properties you will be starting to invest within.
Aim to help sellers of both/either mobile homes inside pre-existing communities or located on private land. Both types of sellers may be motivated to make a deal.
Size of the Park: In general, this makes very little difference when buying or reselling. All parks can be owned and operated very differently. There are some large parks that are helpful and nice, and there are other large parks that are greedy and selfish. There are also small mobile home communities that are friendly and cozy, while some small communities are dangerous and undesirable. Therefore, the size of the park that you will be purchasing and reselling a mobile home within typically doesn’t matter. Do make sure the park is friendly with who you are and how you plan on investing within their community walls.
Locale: Locations certainly do matter while investing. You will ideally be investing in a growing town, not a town that is experiencing a mass exodus of people. If you sell the home for all cash, you will want to make sure your mobile home is located in a very desirable area. However, if you sell via owner financing or rent the mobile home, you will find that potential residents will not mind commuting an extra 30 minutes or more to live in one of your properties.
Aim to confirm the land the mobile home sits on is dry and solid. Look underneath the mobile home to see how secure the foundation is and whether the mobile home is sinking into the ground at all. Also look for low-lying areas where water can accumulate during rainy seasons. It may be wise to avoid mobile homes in these specific spots.
Park Grade: Let us hypothetically grade a neighborhood or community with a one-through-five star rating—one star being the worst mobile home communities and five stars being the cleanest. I know from first-hand experience there are opportunities and value to be created in all five grades of communities. There are also advantages and disadvantages when working with a cleaner park versus a more run-down community. A five-star (beautiful park) will typically have higher monthly lot rent and a stricter application process compared to a one-star (ugly park). With that said, the “grade” of the park does not matter as much as the acquisition price/terms. If you purchase a mobile home safely and correctly, in most parks or areas, it should be profitable with a well-planned exit strategy.
If you are planning to resell a mobile home for “all-cash,” it may be wise to be within a nicer park versus an uglier park.
Restrictions: Some mobile home parks or privately owned mobile home co-op communities will have restrictions as to who may buy and resell mobile homes within their community. Some common restrictions are age-related and/or pet-related. When looking to purchase a mobile home inside a pre-existing community, aim to work with communities that have minimal restrictions. You ideally want to be able to rent or sell your investment property to as many potential buyers as possible. With that said, please keep in mind that when homes are purchased correctly, there may absolutely be value to create in more restrictive types of communities.
Price: Typically, the lower the price, the better when you’re purchasing. Additionally, if you can structure a deal with the seller to pay them their equity in monthly payments, this may be mutual beneficial, allowing you to bring less cash to the closing table.
3. The Sale
Cash/Bank Financing: Local and nationwide lenders all have various criteria with regard to who they will lend money to and what mobile homes they will lend money for. If you are looking to sell a mobile home, it may be wise to reach out to local credit unions, banks, and nationwide lenders to find out if your particular mobile home is financeable and for what rates/down payments.
In many markets, selling a mobile home to a cash buyer may prove difficult. You may be competing to sell your mobile home for all cash with every other mobile home seller trying to sell their homes for all cash to a finite amount of qualified buyers with available cash.
Seller Financing: Properly and safely seller financing your mobile home to a qualified end user will typically give you the highest resale price you can comfortably charge. When seller financing, you will have to wait many months or years to collect the entire price of the property. When selling via owner financing, you typically open yourself up to more potential buyers, any of whom must be properly screened and qualified before moving into your property.
Renting: Many of us understand renting already. While renting, you can continue to own the property and wait to resell it later. This may be beneficial when you are also holding the land the mobile home sits on. You may capture appreciation from the land as the value rises. Keep in mind that many mobile home parks will not allow you to rent, sublease, or sublet a mobile home in their community.
This article skims the surface of some of the different criteria and qualities different mobile homes possess. In reality, there are many more differences and criteria to understand before safely and logically investing in used mobile homes regularly.
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