Mobile Home Investing
By Steve Gillman
There are some distinct advantages to mobile home investing
as opposed to investing in regular houses. There are also a number
of different ways to make money with investments in mobile homes.
This particular page will look at how to buy mobiles on land
as rentals and for faster equity building.
To start with, there is a myth that mobile homes depreciate
in value unlike regular houses. Well, all homes have seen depreciation
in recent years (this is being written in 2011), so I suppose
the myth now is that it is worse with mobiles, and people suspect
they go down in value even during good times. There is an element
of truth to this, because they generally do lose value in a park,
or on a lot that is rented. When they come with real estate,
however, they tend to do what the larger housing market does,
which means they rise in value as real estate prices in general
The first home I owned was a mobile. I bought it for $19,500
and sold it for $45,000 after fourteen years, an rate of appreciation
that was greater than that for the "stick built" houses
in the area. in value in the twelve years I lived in it. Even
as it deteriorated (don't all homes), the value of the land kept
going up. At some point I also rented it for decent cash flow.
When you get past the usual prejudices and look at the numbers,
mobile home investing makes sense. Where we live in Colorado,
for example, a three bedroom house rents for $900/month, and
costs about $125,000. Meanwhile you can buy a mobile home on
land for about $45,000 and collect $550/month in rent. Your cash-on-cash
return on investment is clearly higher with mobiles. In fact,
with the same money for a down payment, you might buy two rental
properties if you get mobiles, rather than one regular rental
Despite better cash flow from mobiles, many investors prefer
houses. In part this is because they anticipate more problems
with mobile homes (there may be some truth to that), and they
also think they build equity faster with regular houses. But
is this really true? Let's look at a hypothetical example.
Let's suppose investor A buys a rental house for $125,00,
with $25,000 down. A $100,000 mortgage loan amortized over 30
years at 6% interest, means he'll have a payment of $599.60.
$500 of the first payment will go towards interest, $99.60 towards
principal. In other words, he built equity of $99.60 so far.
We're going to ignore appreciation for the moment--but I'll return
to that issue soon.
Now let's suppose that investor B finds two nice mobile homes
for sale, one for $40,000, with a down payment of $10,000 and
the other for $45,000, with a $15,000 down payment. He borrows
$30,000 for each, at 8% interest, amortized over 10 years--note
that higher interest and shorter loans are common with "factory
built home mortgage loans." Even with higher interest and
a shorter term, the payment will be only $363.99 for each, and
the first month, $200 will go toward interest, and the other
$163.99 goes towards principal, or about $328 for the two. This
investor built more than three times as much equity in the first
It is true that the picture changes over time, and there is
more equity to build through loan-pay-down with a bigger loan
on the house. But for many years you can expect to build equity
faster with the mobile homes. Meanwhile you get better cash flow
as well. If the mobile homes on land appreciate more slowly than
the "regular" house, the faster loan pay-down likely
more than covers this.
You can re-invest that extra cash flow into more mobile homes
to make this an even more effective strategy. In addition, because
you build equity faster, you can refinance sooner, as another
way to put together down payments for additional investments.
Mobile Home Investing - Other Considerations
In the example given you have paid off the mobiles in ten
years if you don't refinance. At this point your cash flow jumps
dramatically (by $369 per month--the amount of the payment you
no longer make).
The typical mobile home is cheap to maintain or repair. I
once had a furnace die in rental I owned, and I replaced it for
$1,200, much less than a furnace for a larger house would have
been. You can have the roof tarred for $200 instead of $5,000
to re-shingle a traditional roof that is getting old. Door, windows,
plumbing -- they're all cheaper as well. In general then, the
unpleasant surprises that come with being a landlord are not
as expensive with mobiles.
Regular expenses, like property taxes and insurance, are cheaper
as well. This makes for a margin of safety when your rentals
are vacant, since your costs will not eat up your bank account
Disadvantages? The truth is that renters who have to rent
for less--meaning your tenants versus regular home renters--probably
pay late more often. Repairs, as cheap as they are, seem to be
necessary more often in my experience.
How Much Can You Make?
What you make will vary according to rental rates and prices
of homes in your area, and many other factors. I can tell you
that when I lived in a small town in northern Michigan, the two
investors who owned most of the mobile home rentals always had
cash flow, and built millions in equity over the years, while
other investors, following their prejudices, struggled to make
money with their "nice" rental houses. It is also worth
considering that when real estate prices drop, the low end of
the market never falls as hard as the higher-priced homes, giving
you some protection from market slumps if you need to sell.
Ways to Make More | Related Opportunities
I used to rent three bedrooms and a shed (as a bedroom) in
a mobile home I owned, including all utilities as part of the
weekly rent. This is more time intensive to manage, but it netted
a lot more cash flow as well.
Qualifications / Requirements
You'll need money for a down payment, decent credit, and mobile
homes that can be insured. Check out the latter as part of any
offer before you are committed, because some older homes may
not be insurable.
Start looking at the mobile homes on land in your area to
see if the prices allow for decent cash flow. Call landlords
who rent mobile homes to see what the going rental rates are.
Check local lenders rates for investment loan terms on mobile
- Articles and a forum about mobile home investing.
- Real estate forms which you can download and print for free.
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