We will look into the what mobile homes are and how you can invest in mobile homes in order to add value to your investment portfolio. Moreover, we would cover the different and amazing ways in which you can earn money from investing in mobile homes. Read and learn as we discuss about mobile homes and how to invest in mobile homes.
Just as before buying a stock, we do some research about the company and see if investing in the company will be fruitful or not. Similarly, before we learn how to invest in mobile homes, let us learn some facts about the mobile homes and learn about what they are, how they are made and how do they work.
What are Mobile Homes?
Initially known as the “trailers”, these mobile homes are a convenient method of living remotely. Most of the mobile homes that are present now are manufactured according to the standards that are laid down by the U.S. Department of Housing and Urban Development in the year of 1974. These mobile homes are manufactured to be a housing unit on top of a chassis that allows for relocation and movement of the unit thus making it a mobile home.
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These homes can be used as a permanent house or a lease unit for an investor or owner. Since they are mobile and can move anywhere, these houses are mostly accommodated at a “mobile home park” or “manufactured home communities”. These communities are large residential area where mobile home owners can setup their home and live as a community. Most often, the “mobile home park” is leased through rent by the lessor to the lessee.
Now, that we know what the mobile homes are, let us go through some quick points covering why you should invest in the mobile homes and how they can be a great source of investment.
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Benefit of Investing in Mobile Homes
This section gives you the insight on some of the major points on why people start to invest in mobile homes. From being flexible, having low overall taxes and low maintenance cost these factors are crucial while deciding whether to join the market and to invest in mobile homes.
- Low Competition –
There is low competition for investment in the mobile homes as most of the investment in the real estate happens on houses and living units. Less competition means competitive pricing will be a bit vague and significant profit can be made.
- Demand –
It is estimated that more than 15 million Americans are living in these manufactured mobile homes and the number is ever increasing. As the living unit provides mobility and relocation, more people are will to live in a mobile household.
- Low Maintenance Cost –
A mobile transportation housing unit has relatively low maintenance cost or renovation costs. Most of the units nowadays are manufactured according to the standards that are set up by the HUD. What this does is that it ensures that the manufactured housing units are following a standard of development and are of excellent quality. These homes are generally built in tested controller environments that produce safe and quality material.
We all know that renovations can put a hole in the wallet but, If the quality of a mobile home is better, then supposedly there will be fewer renovations and fewer investments or expenses will be involved in the maintenance of the mobile home.
- Lower Taxes –
Property Taxes are taxes that have to be paid to the government for the property owned. In the United States, the property tax is amounted to the value of the property and the value of the housing unit together. In some cases, where you are leasing a property from a lessor, you only have to pay the taxes on the housing unit and not on the property on which you have parked your mobile home. You do cut back on some taxes, although, this situation is dependent on the state and laws surrounding property tax in that state.
- Lower initial investment –
The initial investment on a mobile home is 10 to 30 % less than what it takes for a built in house. This saves money from the pocket of investor that they can use to invest into other commodities.
- Flexibility –
There is huge flexibility to the investor while they invest in mobile homes. Flexibility in terms of affordability, the mobile homes are more affordable than built houses and do provide a lower initial investment as explained in the last point. It provides more space for less money than a built house. It also gives you the flexibility to have your mobile home on your property or on a leased property.
We just covered the points that make the mobile homes a very good asset to invest in. Now, let us see the ways in which you can start to invest in mobile homes.
Invest in Mobile Homes
Let us move forward to learn how to invest in mobile homes and see the different approaches an investor or a person can take in order to invest in mobile homes.
- Educate Yourself
First thing first, you need to know about the market for investing in mobile homes. You are reading this article and you have already started the first step. Look into videos and articles telling how to invest in mobile homes. Learn about investors that have invested in the mobile home market.
For example, Sam Zell, a businessman and philanthropist, have invested in mobile home parks and is the largest owner of these mobile home parks in the entire country. Just from owning them.
- Only own the Mobile Home Unit and Not the Estate
As you start to invest in mobile homes, you can simply own a unit or a single mobile home. Not owning the estate or mobile home park on which you are parked allows you to save up on property tax and moreover, the only money that you would have to pay is the rent to the lessor.
Additionally, since you own the housing unit, you can also rent the owned mobile home and create a money flow while you reside elsewhere.
- Own everything, the Parks and the Home.
This option can be taken if you have a hefty sum of money ready to be invested. You can lease the owned mobile homes on rent to people and since you own the estate or land also you would be able to easily cover up for property taxes and you can create a money flow from this method. However, this method does provide a bit of uncertainty on the return on investments. As initially, you would have to research the market and find the proper location and then comes the investments on the mobile homes. Finally, you need to make sure that there are people willing to live in your mobile park. Moreover, as you are the owner of both the land and the mobile homes, you would have to take care of the renovation and maintenance of your property.
- Own just the Mobile Home Park
Investing in the mobile homes park will allow you to cut back on the maintenance of the tenants. This type of investment creates a passive income flow as you will be taking care of just the taxes and legalities. With time, the value of your mobile home park will increase and you can create an additional flow of money by simply raising the rent on your mobile home park.
- Development Deals
In this method to invest in mobile homes, you basically acquire land or estate that is in a distressed situation, meaning that it houses a broken home or an old, inhabitable mobile home. The idea in this type of investment is that you can destroy the home or repair the mobile home and then put it back on the market to be either sold or put it on lease to acquire rent from your lessee.
Flipping a property is basically buying the property for selling. The investors invest in repairing and then sell the property. There is no holding of property in this form of investment that is flipping. However, flipping a property for making a mobile home park is a possible investment method. This can be an entry point for any real estate investor to start to invest in mobile home and mobile home parks.
The method involves repairing the property, leasing it as a mobile home park, and then collecting rent as a passive income flow. This proves to be another method to invest in mobile homes.
Points to Ponder
Although the investing in a mobile home is a significant investment a person can make, there are some essential points an investor or a person owning a mobile home should keep in mind. Let us look at some of the points that people should keep in mind.
- A person that is going to invest in mobile home and is owning just a mobile home should know that the value of a mobile home, unlike real estate, generally decreases over time. As it is a manufactured unit that is being used as a housing unit, the market value decreases due to the fact that first, it is being currently used and second, it gets wear and tear and is considered old after some years.
- Not owning the land on which your mobile home is situated is an issue as you would be paying rent to the landlord and moreover, the landlord may increase the rent which might affect your finances.
And as you are staying on a property on rent, you would have to comply to the rules of the mobile home park.
- Following the first point, once the mobile home is used and is considered old then the value of the unit has already decreased and moreover, reselling the vehicle becomes difficult. This results in a low or almost no return on investment on the mobile home.
- As the mobile homes are temporary mobile units and lack any permanent foundation like building and built houses, it lacks durability in the midst of any natural disaster. There has been an alarming number of natural disasters caused due to climate change.
Trends in Mobile Homes
Now, let us look at the different trends that are developing in the mobile home industry. These trends shape how the investment will look in this industry in the coming years and also shape the market.
- Increase in demands – There has been a significant increase in demand for mobile homes and at the same time for mobile home parks. This proves to be a good place to invest in mobile homes, both for investors and people looking for mobile homes. This trend further develops the increase in supply and demand and makes the business profitable to investors who want to invest in mobile homes.
- Manufactured homes – Investors and manufacturing companies are coming together to provide manufactured, quality-controlled mobile homes to the people and other investors. There are several organizations setting up huge mobile parking parks and providing built mobile homes and mobile homes on rent.
- Community Development – These mobile home parks work as a hotspot for community development. People living in and around the mobile homes park work together to bring out the culture and the community of the place and cultivate a good community progression.
In this article, we covered how to invest in mobile homes as an investor or just a normal person looking for a mobile home. We gave an introduction about the mobile homes and then provided the 6 methods that can be used to invest in mobile homes. We then provided some points of caution especially for people acquiring mobile home units for living or for investing. Finally, we looked into some trends that are involved with the investing in mobile homes.