Is a Mobile Home a Good Rental Investment?
Are you wondering if you should invest in a mobile home? Read this article first...
If you have been trying to come up with a way to successfully enter the real estate investment market, then chances are that renting out a property has been high on your radar. But have you considered thinking outside the box and looking into potentially renting out a mobile home? It may seem like an unconventional investment method, but it could be worth considering. Mobile homes are not only for the old or the poor – the stigma has changed. We will delve deeper and discuss whether a mobile home is a good rental investment.
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Is renting out a mobile home considered an investment?
You may be asking yourself whether what is a small house can be considered a rentable property. However, there are many people who live in mobile homes, and many of these people must pay rent. You also need to consider that there is more to a mobile home than the house itself. The land it resides on is also part of the real estate. So, there are two ways that you can make money from mobile homes. Source: Millionacres
- You own the mobile home and the land that it resides on, and the tenant lives there and pays you rent. This requires purchasing the home itself and the land. Many mobile homes will come as a package with a small parcel of land.
- The mobile home you own is located at a mobile home park, and you pay lot rent to the park owner, while receiving rent from the tenant. You will need to ensure that the rent charged covers the lot fee. Many people like the idea of renting in a mobile home park as there is a feeling of community, so it could help attract good tenants.
So, what is a mobile home exactly? It is best described by Nolo as being a prefabricated structure that is built in a factory and then moved to a site. You may have seen them being transported on the back of large trucks. They are essentially a smaller version of a traditional house, but they can be lifted and moved as a single whole structure. There are also different styles and sizes of mobile homes. But if it can be picked up and moved, then it is considered mobile.
Pros and cons of renting out mobile homes
Like any investment strategy, there will be pros and cons, and you will need to consider whether these best match your needs and circumstance. Source: Mashvisor
- Price. The nature of a mobile home is that they are smaller and mobile. They are most often mass-produced which brings the price down and made with more affordable materials. If you have a lower budget and already own land, then a mobile home can be a good budget investment. Not only will the purchase price of the home be low, but maintenance and repairs will be cheaper too, and easier to manage.
- Smaller does not mean lower quality. If you ensure y our mobile home is built according to the United States Department of Housing and Urban Development (HUD) code standards, they are very safe, and will be able to be placed in high-risk areas. This includes areas prone to hurricanes, storms, and other natural disasters.
- High demand and low turnover. It may surprise you how much demand there is for mobile homes. They are high quality and affordable, so are attractive to tenants. They also have a lower turnover than traditional homes as the types of tenants who opt for them tend to be long term renters.
- Less competition. So far, the market has been largely untapped. Mobile home investors are few and far between, so if you are offering a quality mobile home in a sought-after area, then you will have an advantage.
- Quick depreciation. Mobile homes naturally depreciate faster than traditional homes. This is a benefit when it comes to tax time, but if you are looking to resell, it will not be in your favor.
- Limited financing. If you already own land or are wanting to place a mobile home on a lot, then you will struggle to find financing. Many places require you to purchase the home and land as a package.
As can be seen, most of the pros and cons are financial, and you need to consider whether the impact will be positive or negative for you.
What are the biggest differences between renting out a mobile home and a traditional home?
The main difference between renting out a mobile home and renting out a traditional home will depend whether on the mobile home is located on land you own, or whether it is at a lot. Either way, the process as a whole of course is like renting out a traditional home. You will be the owner, and you will charge someone else rent to take possession of it for a period of time.
Due to the nature of a mobile home, they are smaller than the average traditional house, so of course, you will never get as much rent for one. But they are also cheaper to acquire, so your costs will be lower (mortgage and bank fees). You will still need an agent to manage the property and do periodic inspections to ensure that your tenants are looking after it. And like with any rental property, you will need to maintain it to an acceptable living condition.
Like any investment, mobile home renting will require management and prior planning. The nature of mobile home rentals will only work as a long-term investment strategy in some circumstances. Mobile homes can make a good investment; however, they may require a bit more work than a traditional home investment. From finding the cash for the initial investment to ensuring that you find a property manager who understands the intricacies of mobile home renting.
Charles is the founder of infoSpike.com. His real estate investing experience started in 2004 and he is currently focused on rental property projects. He enjoys learning about real estate investing, personal finance, and marketing. Read more about Charles here.