Renting out mobile homes seems to be a niche profit amongst landlords. This is mainly because of the homes’ lack of durability and difficulty to finance. However, if done right, renting out a mobile home can actually be quite profitable.
What to Consider
When purchasing a new property there are a few details you should consider before signing your life away. In the case of mobile homes, you should pay close attention to some extra variables.
Most of the time, when you purchase a mobile home, you don’t get the land it’s on with it. You’re purchasing just that: the mobile home. These kinds of properties are usually located in privately-owned parks, meaning there will be lot fees that can diminish most of the monthly rent payment. Many mobile home parks also do not allow subleasing either.
However, it is possible to find mobile homes positioned on regular plots of land that you can purchase. This way, you can eliminate incurred lot fees and increase your profit. It also allows you to manage the property completely on your own, without having to consult with the management at a mobile home park.
This is not to say that you can’t find a good property in a mobile home park. Many parks actually offer great flexibility for subleasing and you’ll find you can reap the same rewards if you find the right property with low lot fees and a friendly management.
One of the elements of mobile homes that makes them desirable for lots of families is their affordability. In the United States, the average monthly rent payment for a mobile home is between $200 and $300. That’s a stark difference in price when you compare mobile homes to new single-family homes, which cost about $700 to $100 to rent monthly.
Even though all mobile homes are relatively cheap, you still want to make sure you find a good deal when making your investment. Remember that most mobile homes are going to be located in parks that incur lot fees. It’s better if you find a mobile home on land that you can also purchase so that the monthly rent payment won’t be eaten up by those fees. That being said, you can purchase a mobile home for about $50,000 to $100,000, depending on the size, and enjoy very low tenant vacancy rates with a good amount of rent profit. Keep in mind that the value of a mobile home depreciates over time, so you probably shouldn’t plan on selling it in the future (at least not for much profit, if any).
Another huge factor to consider in your mobile home search is the community and neighborhood it is in. Mobile homes are usually located in familial areas where kids play in the street, people walk their dogs, and neighbors share the latest gossip. In the United States, about 8% of families live in a mobile home, and with good reason. Mobile homes are great alternatives to low-rent apartments with high crime rates, lots of noise, lack of privacy, no outdoor space, or the inability to have a pet.
Pros and Cons
Now that you know the basic features of mobile homes to consider when purchasing one, it’s time to round up the overall pros and cons:
- Cheap, affordable housing
- Family-friendly environment
- Increased flexibility
- Low vacancy rates
- Possible lot fees that diminish rent payment profit
- Depreciation of property value over time
- Difficult to finance
- Weak foundations that may be hazardous in a natural disaster
Why Mobile Home Parks are a Good Investment
If you have a bit more disposable income, investing in a mobile home park can be a great business move. In fact, some of the top investors in the United States, like Warren Buffet and Sam Zell, actually recommend investing in mobile home parks. The profitability of these parks is linked to their affordability and today’s average consumer. If you strategically market your mobile home park and focus on providing affordable housing to the community, then you can make a lot of profit. Landlords don’t have much incentive to raise the rent since mobile home parks sell for capitalization rates of 7% to 10%. Most tenants are also unlikely to ever leave, meaning you’ll have a locked-in tenant base and a steady net income.
While owning a mobile home park may seem like a fool-proof rental business model, there is a way it can go wrong. In some places, lot fees can be raised in excess $500 a month, making rent increase to $1000 or more. In this price range, landlords will be open to more attractive housing options, like stick-built homes and luxury condominiums. As a result, they may abandon their mobile home park investment and consequently destroy the revenue model of the park. This is why providing affordable housing should be a landlord’s number one priority when renting out mobile homes in a park. You can secure a stable flow of income and become very successful if you focus on your goals and your tenants’ wellbeing and enjoyment.