Investing in mobile homes is one of the hottest trends in the market. They offer an attractive alternative to traditional real estate opportunities.
There might be many people who will try to discourage you from starting this type of venture. But if you are careful about how you approach the investment, the payoffs can be worth it. One way of improving your prospects is to build a stable relationship with the owners and management of mobile home parks.
It will help you to avoid trouble and make the most of your business.
In this article, we are going to give a breakdown of being a mobile home investor and building relations with a mobile home park.
People are often still baffled by the idea of investing in manufactured houses. Not everyone accepts it as viable as traditional real estate like built houses, office parks and so on.
One of the main reasons why people are uncomfortable is because of the possible temporary nature of mobile homes. Because they can be moved, investors are concerned that this will make it difficult to manage. But this doesn’t have to be a problem.
They may also be concerned that because they are a lower cost housing option, they won’t be profitable. Instead, many investors have found that this has its own advantages such as making it easier to find tenants.
There are several investment options available in the mobile home market. But for now, we are going to focus on three opportunities.
One is buying units from parks, manufacturers or other suppliers and renting them out to tenants. You can buy the lot as well as the house or rent it from the park and pay back some of your returns to them.
The second one is to buy shares in mobile home parks or portfolios. This is a less hands-on approach.
Another option is to buy mobile homes in parks, renovate them, and then sell them later on. If you are careful about how you approach this, you might make a bit of profit from this approach. But it will probably be less lucrative than with conventionally built homes.
All of these options require building trust with the owners and management of the parks.
Benefits for a mobile home investor:
The pros could well outweigh the possible cons for you. This list outlines some of the benefits of investing in mobile home parks:
- The U.S is currently experiencing an affordable housing crisis. The demand for low priced rental units is at a new high. Mobile homes are ideal for helping to fulfill these needs. They are relatively inexpensive to buy, construct and therefore to lease.
- Manufactured houses are becoming more and more popular for retirees. Many people in this age group are looking for affordable living options. One benefit of retired tenants is that they are typically more stable and are looking for longer-term housing.
- Young couples are also increasingly looking at mobile homes for starter homes. They typically want an affordable and smaller house.
- The above points all mean that manufactured houses are a growing market. It is predicted that the global CAGR from 2017 to 2021 is an incredible 8%.
- The initial investment and acquisition costs for manufactured homes are much lower than that of site-built homes. So it can be much more manageable to get financing and get started.
- Despite people’s fears, mobile homes actually seem to have a low turnover. In many areas, it is far lower than that of apartments and conventionally built houses.
So if you are ready to venture into new territory, it is possible that you can kick off a successful business opportunity.
Let’s move onto the different steps you can take and aspects to consider that can help you make a profit by building relationships with mobile home investors. These actions can help you to avoid pitfalls.
Learn about mobile homes
Before you get started, it is essential that you get to know mobile homes. It will help you to make better decisions about acquiring new assets. This knowledge is also crucial for effective communication with the owners of mobile home parks.
Get to grips with the basic terminology for manufactured homes and the different types of homes.
One vital thing to understand are the categories of homes. They are:
- Single-wides: These are houses that are no more than 18 feet wide and 90 feet long.
- Double wides: On average double-wides are less than 40 feet wide and less than 90 feet long.
- Triple wides: These homes usually have the most square feet. They are made up of three sections that are joined together.
The costs typically rise the larger the house. You need to be aware that the categories attract different types of tenants. Couples or single individuals will probably opt for single-wides. On the other hand, families will usually prefer triple-wides.
If you are looking for more information, there are excellent podcasts on mobile homes and investing in them. Don’t overlook forums as well. They can be brilliant resources.
Many people have found it helpful to find a mentor. There are always experts who will be willing to share their experiences with you. They might be able to give you plenty of insider information on the market and steer you through potential challenges.
In 1976 the Housing and Urban Development released the Federal National Manufactured Housing Construction and Safety Standards Act of 1974. It gives regulations on the design and construction of mobile homes to make sure that they are safe to live in.
If the buildings aren’t up to code, securing financing will be more difficult than usual. On top of this, many potential tenants would also prefer houses that are compliant. It will help to reassure them that the mobile home is safe for them and their family.
Therefore, if you are buying units from the park or investing in standing ones you need to find out whether they are up to code.
Know that there are mobile home parks that won’t allow you to park homes that are not compliant.
Finding a park
Unfortunately, not all parks will be open to investors and specifically not to investor-owned homes.
So first off, you need to find a park that you will be allowed to invest in. Secondly, you should decide what you are looking for in a property.
Nowadays, many parks will be listed on the internet and might even have their own websites for you to look at. A realtor that specializes in mobile homes will be able to help you find suitable sites.
Once you have found a park that looks promising, you should go visit it before making any decisions. Take a walk or ride around the entire property. Set enough time aside to make sure that you can see everything.
Before you go, write a list of things to look for, like:
- Do the look and feel of the park suit you?
- Are there any security measures in place?
- What amenities are in place?
- Does it live up to your expectations?
- How well has the property been maintained?
Take a notebook with you so that you can make notes on the features of the park.
It can be a brilliant idea to take a friend, mentor, or business partner along that can help you keep an eye open.
If you are buying existing manufactured homes from the park, you should have them inspected by a licensed professional. You don’t want to get stuck with a house that needs unexpected repairs.
All of these aspects are key to making the right decision for you.
Meeting the owner
While you are learning about potential parks, arrange to meet the owners and managers. This is a great time to get to know them and to learn more about the way they run the park.
First impressions aren’t everything, but they do count. Try to establish an open and civil relationship with them from the beginning. Gaining their trust can help you get the ball rolling and can play a massive part in creating a productive partnership.
A meeting will also give you the opportunity to get a feel for the reliability and trustworthiness of the owners.
By now you should have a better idea of what you are looking for. For example: how much you want to invest, how many assets you wish to acquire, and what your preferred timeline will be. This way you will be able to ask all the right questions and also answer any questions that they could have.
Getting along perfectly isn’t necessarily essential. But mutual respect will keep the relationship professional. It can play a crucial part in whether your business will flourish or not. And it will make the process much more manageable.
Research the area
At first, you might just want to choose any park near you. But that might not be the best choice. Location is a crucial factor.
There are several things that you will need to look into. You will want to look at the local climate and any potential environmental issues in the area.
It is vital that you find out about the market in that neighborhood. Is it growing or not? What are the average rates in the area?
Another point is to consider the amenities in the area, like schools and shops.
As with most relationships, good communication can make or break the venture.
It is crucial that the different parties know who to contact for what and how. For example, everyone should know who is responsible for maintenance and to whom any concerns should be addressed.
A pro tip is to use written communication for any critical discussions with the owners. Keep a record of these conversations. You might need proof of them later on or want to check up on what was said. Especially if there is a third party like a tenant involved.
Regardless of how you decide to invest money in a mobile home park, you will need to set up a legal contract. Among other things, it has to specify what the responsibilities of the different parties are, how payments will be made, and what the conditions for the sale or lease are.
Contracts become even more complicated with a third party like a tenant involved.
It is better to hire a professional to draw up the contracts for you and to assist you in any negotiations. Their legal advice might prove invaluable in making sure you are protected and that everything is in order.
Once you have decided on which approach you want to take and have found suitable parks and homes it is time to get your finances sorted. It is recommended to have a general budget from the beginning so that you know what you can realistically spend.
Running out of money or not being able to pay your bills can negatively impact your business relationships. It can damage trust and if you run up debt, that can impact your profit margins.
Finding financing for any unconventional venture can be tricky. That is why it is crucial to have all your documents and information in order. Luckily, you typically need smaller loans for manufactured homes.
Remember that before you even start considering investing you should try to get your personal finances in order.
A stickler for the rules
Once you have built the base of a relationship with mobile home parks, it needs to be maintained. A vital part of this is to stick to all the provisions in your legal agreement with them.
This will probably include closely following all of the park’s rules. Owners and management of these properties usually provide a list of what can and cannot be done in the park. It manages various aspects such as pets, upkeep, parking, and use of common areas.
Make sure that your tenants are informed about all the regulations and don’t transgress as well.
Breaking the rules is a surefire way of sparking conflict with owners and management. Something you want to avoid unless necessary. You need to know your total monthly income and expenses. Make sure that you will be able to afford the investment. You will be in a much safer position if you have some savings as well.
Don’t let your fears stop you from dipping your toes into these investment opportunities. Thorough research and clear communication can make the process much more manageable. With the help of our guides, you can be one step closer to becoming a mobile home investor.
If you are serious about looking for business opportunities, take a look at What You Need To Know About Starting A Mobile Home Park Business. For even more tips read 8 Successful Tips For Making Money With Mobile Homes.