Mobile Homes As Investments: One Man’s Trash Is An Investor’s Treasure
April 7th 2008
From time immemorial, trailer and mobile homes have gotten a bad rap. As a New Jersey native, I am well acquainted with the disparaging remarks, many of which inquired into my own residential pedigree. And no, I grew up in a 7-room brick house on an individual lot, which my parents owned for almost two decades. Perhaps those rejoinders had the effect of subconsciously alienating me from the concept of a mobile home as a good investment. Years ago, when I worked on Wall Street, a co-worker, a bank vice president no less, vociferously stated that when he retired he intended to buy a mobile home. I thought he was kidding. Now, I realize, the joke was on me.
Given the dismal state of the U.S. economy, many individuals who suffered in the wake of the sub-prime crisis with ruined credit and the loss of their primary residence, are unwilling to even consider the back-step of living in an apartment. At the same time, though, they recognize that they no longer have the capacity or resources to buy another property. For these individuals, rental of a mobile home is a practical alternative to apartment dwelling.
Some considerations need to be addressed, when determining the viability of buying a trailer or mobile home property for investment purposes.
- There is a clear distinction between a mobile home and the land it sits upon. Ideally, an investor should purchase both; you will have considerably less value if you only own the mobile home and not the land, and significantly more control, by owning both.
- Just as with regular property, size matters; the bigger the better, both in terms of the mobile home itself and the plot of land on which it sits. Doublewide properties tend to appreciate faster than their singlewide counterpart.
- Supply and demand; by focusing on properties for middle and lower income markets, you’ll have a steady stream of people in need of affordable housing. Affordable housing tends to be a scarce resource in any economy, good or bad.
- Within a mobile home park, the individual owners pay park fees which may include taxes, insurance and electricity for common areas, advertising for vacancies and maintenance for the road through the park. These vary from park to park, and may be fixed or variable.
- Reduced maintenance costs; the home and property are proportionately smaller, requiring proportionately less maintenance and cash outlay. In many instances, even a minimally skilled investor can handle routine maintenance.
- Positive cash flow; all things considered (i.e. lower mortgage payments, lower carrying costs, deprecation, etc.) your rental income should more than cover your expenses.
- Obsolescence is obsolete; if and when the mobile home itself become outdated or is beyond repair, it can often be upgraded or replaced, quickly and relatively inexpensively. Just make sure you can make back your interest and a tidy profit before the mobile home becomes obsolete.
- Variety; an investor is not limited to a trailer that looks as though it was just unlatched from an 18 wheeler. Many have attics, basements, decks, sheds, pantries and multiple bedrooms and baths, just to name a few amenities.
- Consider the rules and regulations of the park that your property lies within. Do you have enough control of your own property, or will they be controlling you? The purpose of rules and regulations is to keep out the negative element; an apparent abundance of “park laws” is not necessarily a bad thing.
- Affordable housing will always be in demand. Baby boomers and senior citizens alike are demanding alternative housing, for a variety of reasons, including the inherent lower cash outlay and reduced maintenance requirements afforded with buying a mobile home. This bodes well for the mobile home investor as either a good source of steady rental income or an ideal flipping property.
While the information presupposes the purchase of an individual mobile home property or two, don’t hesitate to consider an investment in an entire mobile home park. Warren Buffet, who knows a thing or two about investing, no doubt saw the vast potential when his company, Berkshire Hathaway, acquired Clayton Homes, a nation-wide manufacturer of mobile homes. He’s not the richest man in the world for nothing.
Barb Zigah is a freelance writer covering real estate and business topics.
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