Often overlooked in favor of traditional housing, mobile homes are quietly emerging as a compelling asset class in real estate investments. These dwellings, once associated primarily with retirees or those seeking an alternative lifestyle, are now attracting a new generation of real estate investors. But what makes mobile homes an intriguing prospect? Are they genuinely a sound investment, or do they come with unique risks and challenges?
Here’s what you should be aware of to navigate this niche market successfully.
What is a mobile home?
A mobile home, or manufactured home, is a type of prefabricated housing built in a factory and then transported to a designated site for installation. These homes are constructed on a steel chassis, which allows them to be transported easily to different locations, often by being towed on their own wheels. In 2020, approximately 22 million Americans lived in manufactured or mobile homes, and 54% of mobile homeowners have lived in their current home for more than 10 years, according to data from the Manufactured Housing Institute.
Mobile homes come in various sizes and layouts, ranging from single-wide, narrower, and more compact units to double-wide or even triple-wide units that offer more space and comfort. They are designed to provide affordable housing solutions and are typically more budget-friendly than traditional site-built homes.
While mobile homes are often placed in mobile home communities or parks, they can also be situated on private land, depending on local zoning regulations. These homes have evolved significantly over the years, with modern versions offering many amenities and energy-efficient features.
Types of mobile homes
Mobile homes come in several types, each offering different sizes, designs, and features to cater to various housing needs. Here are the primary types of mobile homes:
- Single-wide homes: Single-wide mobile homes are relatively narrow and are typically 18 feet wide and 90 feet long at most. They are an economical choice as single family homes and are ideal for individuals or small families with limited space requirements.
- Double-wide homes: Double-wide mobile homes are essentially two single-wide units joined together, offering more interior space. They are a popular choice for families and can provide a comparable living space to traditional site-built homes.
- Triple-wide homes: Triple-wide homes consist of three single-wide sections combined to create an even larger living space. These are spacious and may include features like multiple bedrooms, bathrooms, and additional living areas.
- Park models: Park models are smaller, compact mobile homes designed for seasonal or temporary use. They are often placed in RV parks or resort communities and can be moved, but are not as mobile as other types of manufactured housing.
- Manufactured homes: The term “manufactured home” is often used interchangeably with mobile home. These homes are built in a factory and transported to the site, but they adhere to stricter construction and safety standards established by the U.S. Department of Housing and Urban Development (HUD).
- Modular homes: While not technically mobile homes, modular homes are also built in a factory but are constructed in multiple sections, or modules, that are then transported to the site and assembled. They are often indistinguishable from traditional site-built homes and can be customized extensively.
- Tiny homes: Tiny homes, while not exclusively mobile, are compact and mobile residences that are often mounted on trailers. They are designed for minimalist living and mobility.
How much do mobile homes cost?
Mobile home prices vary widely based on factors such as size, age, location, and type. Generally, single-wide homes are the most affordable size, but pricing can depend on several factors.
According to the U.S. Census Bureau, the average price of a new mobile home in April 2023 was $125,000. Keep in mind, however, that actual prices depend on factors like location, condition, additional features, and the current housing market. Additionally, consider installation, land costs, and utility connections when budgeting for a mobile home.
Should you invest in a mobile home?
Are mobile homes a good investment? While investing in mobile homes can offer several advantages, it also comes with some challenges to consider.
Advantages of investing in a mobile home
Here are some advantages of investing in a mobile home:
- Affordability: Mobile homes are generally low-cost and more affordable than traditional houses, making them an attractive option for budget-conscious investors.
- Quick returns: Mobile homes often have a lower cost upfront, leading to a faster return on investment (ROI) than traditional real estate.
- Lower maintenance costs: Mobile homes typically have less square footage and fewer maintenance demands, reducing ongoing repair and maintenance expenses.
- Cash flow: Thanks to their affordability, mobile homes can generate positive cash flow quickly, as rental income may exceed expenses.
- Location flexibility: Mobile homes can be placed in various settings, including mobile home parks, rural areas, or urban lots, providing flexibility in choosing investment locations.
- Regulatory simplicity: Regulations governing mobile homes are often simpler and less stringent than those for traditional real estate, reducing red tape for investors.
- Stable demand: The demand for affordable housing options remains steady, offering stability in the mobile home market.
Challenges of investing in a mobile home
Investing in mobile homes can also have some downsides. These include:
- Depreciation: Mobile homes can depreciate in value over time, limiting long-term appreciation potential.
- Location dependency: The value of a mobile home is heavily influenced by its location. Investing in the wrong area or mobile home park can lead to poor returns.
- Park regulations: Mobile homes in parks are subject to park rules and regulations, which can change over time and affect your investment. Park owners may also raise fees or sell the park.
- Resale challenges: Selling a mobile home can be more challenging than selling traditional real estate due to a smaller pool of potential home buyers and financing option constraints.
- Financing difficulties: Mobile homes may not qualify for traditional financing from mortgage lenders, limiting the pool of potential buyers and making it harder to sell. Loans for mobile homes tend to have higher interest rates.
- Limited investment options: Mobile home investments are more niche and may not fit every investor’s portfolio or strategy.
- Zoning and regulatory changes: Local zoning and regulations can change, affecting where you can place or operate mobile homes.
- Vulnerability to natural disasters: Approximately 20 million Americans live in mobile homes, and nearly three million of these homes are located in areas at high risk of flooding. Further, mobile homes lack the structural stability of traditional permanent foundation-based houses, making them highly vulnerable to destruction in natural disasters like earthquakes, tornadoes, and hurricanes. This is crucial to consider before venturing into mobile home investments, especially in mobile home parks.
Mobile home investment strategies
Whether you’re interested in flipping, renting, or managing mobile home parks, consider the following to help you make sound investment decisions.
Mobile home rentals
The “buy and hold” strategy in mobile home investing involves acquiring and leasing a home to renters. This approach is geared towards securing a steady stream of rental income over an extended period while potentially benefiting from the rental property’s long-term appreciation. One of its primary advantages lies in its predictable rental income, offering investors a reliable source of passive income and cash flow. However, it comes with responsibilities related to property management, including tenant selection, maintenance, and addressing tenant concerns. Vacancies and tenant turnover can also impact profitability, and like any real estate investment, market fluctuations may affect rental income and investment property values.
Flipping
Flipping mobile homes is an active investment strategy involving the purchase of distressed or undervalued mobile homes, making necessary renovations or improvements, and then selling them at a higher price for a profit. The primary goal is to achieve quick returns through the resale of these homes. This strategy offers the potential for substantial profits when executed successfully. Investors have the opportunity to enhance the condition and value of mobile homes, and the active, hands-on nature of this approach can be appealing. However, it demands renovation skills or the hiring of contractors, and identifying undervalued properties through market research can be time-consuming. Flippers also face the risk of real estate market fluctuations impacting resale value.
Investing in mobile home parks
Investing in mobile home parks entails purchasing or partnering in the ownership of a mobile home park where individual mobile homeowners lease lots. Investors generate income primarily from lot rents and potentially from offering amenities or services within the park. This strategy provides the advantage of multiple income streams from lot rents while reducing the maintenance responsibilities associated with individual homes. Economies of scale can be realized in managing an entire park. However, investors must handle property management for common areas and navigate economic and market factors influencing park occupancy rates. Additionally, regulatory considerations specific to mobile home parks need to be addressed, making thorough due diligence essential for success in this investment approach.
Invest in real estate with Arrived
Real estate is widely considered a reliable and effective way to build wealth, and, despite popular belief, it doesn’t have to be complicated or expensive to get started.
Arrived is an innovative solution that offers an alternative to traditional home ownership, allowing you to tap into the long-term appreciation and wealth-building potential of real estate investing. Arrived enables you to invest in a diversified portfolio of residential properties across different markets, without the challenges and financial commitment of purchasing and maintaining a single property.
The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. The views reflected in the commentary are subject to change at any time without notice. View Arrived’s disclaimers.
