While apartment buildings and single-family homes can be smart investment opportunities, investors should not overlook manufactured homes. This category of homes, which includes mobile homes, can be a profitable investment and one without the hassles or commitments that come with other types of real estate—as long as investors understand the key ways in which these investments differ.
An investment in manufactured homes doesn’t mean owning the home itself; rather, investors own the land on which these homes sit, typically a mobile home community (sometimes called a mobile home park). Tenants then pay the owner of the mobile home park rent for their lot, but it is the tenants who purchase the homes on those spaces, whether to live in or rent to others.
Few large investors or hedge funds have set their sights on mobile home investments, which means it’s easier for an investor without limited capital to break into this market. Per square foot, mobile home parks cost less than single-family homes or apartment buildings.
Furthermore, the cost of maintaining this property is often less than the operating cost of an apartment building: 30% versus 50%. While owners must deal with public roads and buildings, such as a clubhouse, they do not bear responsibility for other structures. Park owners do not have to perform maintenance on or clean units in between tenants unless they also purchase those individual manufactured homes. mobile home residents move less frequently than apartment dwellers, too, because of the costs associated with moving their mobile homes.
For investors who are interested in mobile home real estate, it’s important to understand the qualifications for the loan. The Commercial Real Estate Finance Company of America requires:
- Mobile home communities can sit at least 15 mobile homes
- Paved roads instead of gravel
- Most mobile homes are owned by tenants
- Homes should have “skirts” that hide hitches and hardware
- Manufactured homes must abide by HUD code
Additionally, the organization prefers mobile home parks with off-street parking, parks with fewer than 10 homes per acre, and communities that offer an amenity package.
Investors who do their homework can find owning a mobile home park quite profitable.