Should You Add Manufactured Homes To Your Portfolio?

popularity of manufactured (mobile) home Used to be on the rise Over the past several years, partly due to highly competitive traditional housing markets, an overall interest in smaller homes, and the search for more affordable housing. But what about adding this type of home to your real estate investment portfolio in a home or mobile home park setting?

Although I haven’t personally invested in manufactured homes yet, I’ve researched the pros and cons and talked to experts as I look to diversify my portfolio. This article will outline some of the interesting and informative information I came across.

A Brief Retrospective on Mobile Homes

Mobile homes have a long and varied history. Moving houses are nothing new, from the covered wagons that are iconic in my home state of Oregon to today’s tiny house and van life craze. 1974 federal mobile home construction and safety act formalized this type of housing in the United States. Around the same time frame, the terminology surrounding these homes changed, making “manufactured homes” preferable to the previous term “mobile homes”.

Over the years, the popularity of manufactured home living has ebbed and flowed. More recently, the economic crash and bursting housing bubble in the 2000s led people to affordable manufactured homes. Today, interest in these types of residences is driven less by necessity than by choice, providing a way to spend less on housing and more on leisure, travel and other lifestyle experiences.

investment in manufactured home

average cost The cost of a single family home in the United States is approximately $380,000. manufactured homes come in a low price pointWith double-wides approaching $150,000.

There is one caveat—and it’s a big one. Land is not included in the price of a newly constructed home, so the lot on which you place the new home must be purchased or leased. several mobile home park Offer a land leasing option, which means you pay a monthly fee to have your mobile home in the park. In this setting, you will be responsible for taking care of your space and home, and the park owner will take care of the infrastructure and maintenance of roads, common areas, facilities, and any utilities or services provided.

If you decide to buy land, make sure the area or neighborhood allows mobile homes. Other considerations include moving a home to a vacant lot, placement and any construction involved. Most dealers include basic delivery and installation in the total sales price, but if you buy a used mobile home and move it, you add thousands at your purchase price. Still, when it’s all said and done, your overall investment will come down significantly compared to a stick-built single-family home.

Manufactured home financing and insurance

It’s no secret that interest rates on mortgages are skyrocketing right now, a factor any non-cash investor should consider when calculating their return on investment. This can be even more difficult for mobile homes, as conventional home loans are generally not available. Most lenders do not consider these types of structures to be “real property.” However, a handful of mortgage lenders specialize in financing manufactured homes, so do your research if you’re considering a loan for this type of investment.

Insurance coverage for a manufactured home is generally comparable to traditional homeowners’ coverage, but with some caveats due to the unique nature of these types of homes, such as construction method and vulnerability to certain weather conditions. Premiums are slightly higher as compared to traditional home insurance. Again, do your research to find the best policy for your situation. For an added layer of coverage, make sure you always have renters insurance for your investment property.

It’s also important to note that manufactured homes typically appreciate at a different rate than traditional single-family homes, so they won’t increase in value as quickly over the lifetime of your investment. Keeping it well maintained, landscaped, attractive and up to date can help it retain more value over time.

renting out your manufactured home

Just as your investment in this type of property is slightly less expensive, the amount of rent for your tenants will also be less. However, it can diversify your rental offerings if you are already a real estate investor or a good first entry point for a new investor.

There are many groups of people who are interested in living in a low-cost, low-maintenance mobile home, including retirees, young families, empty nesters, and more. While demand varies by location, manufactured housing institute indicates that a total of 22 million Americans live in mobile homes, indicating that there is indeed a reliable demand for this more affordable housing option.

As with any other rental property, it will be essential to market your property, collect leads and properly screen applicants. Streamlining these processes helps you get a more rapid return on your investment, while also ensuring that your manufactured home is occupied by the most qualified tenants.

conclusion

Investing in real estate can help you earn an income and reach your goals with a steady stream of revenue. Manufactured or mobile homes may equate to a lower up-front investment and cost you less on a monthly basis (despite slightly higher initial mortgage and insurance rates) than the rental investment of a traditional single-family home.

They represent a solid way to diversify your real estate portfolio or enter real estate as a first-time investor, but it’s essential that you do your research and weigh the unique risks and opportunities associated with investing in manufactured homes. Understand.

Note by BiggerPockets: These are the views expressed by the author and do not necessarily represent the views of BigPockets.