Many people will choose to purchase a mobile home over a traditional starter home for different reasons such as travel and cost. The most common reason is the lower cost to purchase which tends to be 1/2 of the cost of a single family home but can be much higher. This opens an opportunity for the house flipper as these mobile homes can be purchased at a lower price and flipped to build capital. This can be a full time business or a stepping stone to move to single family homes by starting small.
The work is similar as you will need to inspect and estimate the repairs, calculate the After Repair Value (ARV) and identify any inspection or certification requirements before purchasing the property.
Flipping a mobile home can be just as risky as flipping a single family house and the methods and information is not as readily available. There are damages to portions of the mobile home that may be too costly to repair such as structural issues or serious water damage. Just like a house the mobile or manufactured home will need to be inspected well to recognize the issues and estimate costs accurately.
What is The Difference Between a Mobile Home or Manufactured Home?
The difference between using the term ‘mobile homes’ and ‘manufactured homes’ is the date manufactured. In 1976 HUD created standards for manufacturing mobile homes so anything created after that date and according to HUD standards is called a manufactured home. For the purposes of this article we will refer to both as mobile home.
Flip a Mobile Home Inside a Park or on Private Land?
A mobile home on private land is not handled the same as in a park. In this case you might own the land and rent the mobile home just like a park does. The land and mobile homes are really separate investment considerations. If you own the land you can do some minor landscaping and either sell or rent mobile homes to be placed on that land to generate cash flow. There may be city restrictions regarding any leases and renting mobile homes on your own land. There are more types like double wide and pre-fab but we will stick with just mobile home.
With a plan to flip mobile homes your really looking at the mobile homes in a park that already have a manager and park attendants employed. We are interested in the purchase and sale or rent of these mobile homes. The park offers play areas for children, safety, maybe a pool, clean landscaping and maintenance for utilities.
Some parks will have additional benefits or restrictions that tend to be over the top. There are parks that have pet restrictions, cosmetic (think NO pink flamingos), no waterbeds and limited usage of power equipment after 6pm. As an investor you should understand the rules and be able to explain any limitations to perspective buyers.
How to Do Mobile Home Market Analysis?
My first look into the mobile home market I was thinking I would just do the same thing for a mobile home as we do for a single family home. Unfortunately I found that the info to put together a comparative market analysis (CMA) for mobile homes is not readily available online like Zillow.com or Realty.com. The online applications list a manufactured adn mobile home as a search filter but not much seems to come up.
I found the following websites that seem to be dedicated to mobile home listings but they had very little info or listings at all.
- https://www.mhvillage.com (use mobile filter)
- https://www.mobilehome.net
- https://www.mhbay.com
- https://www.homes.com
After doing some research I found a few sites and videos that explain the difference between a CMA for a house and a mobile home. My understanding is, in order to compare like for like mobile homes they need to be in the same park. You cannot compare them with homes in other parks the same way we can with houses. Also, there does not seem to be an easy digital method to do a CMA so you will need to develop a relationship with the park manager so he can advise you on similar mobile home values.
Why Do Banks Avoid Lending for Mobile Homes?
I was not able to find many online references where larger banks were interested in lending for a used mobile home as they do for a single family house. Fortunately there are some lenders that specialize in mobile home loans on the internet. These resources would be useful when discussing financing with a buyer. For the purposes of fixing and flipping you might need to bring your own cash and credit to complete the job.
Regarding financing, the lack of loans available for mobile homes means there is an opportunity to become the bank. When you have a potential buyer that cannot secure a loan you could offer a rent to own situation where they put down 10-20% of the home value to secure the rights to buy. Then there is an additional amount added to the monthly rent to pay off the remaining balance.
EXAMPLE MOBILE HOME LOAN:
Assuming you buy a mobile home to flip and you pay $5,000 for it with another $2500 to fix it. The park management prices out the mobile home to $25,000 and you are able to find someone interested with a down payment. Unfortunately they cannot find someone to provide a loan for the balance so you offer to do a rent to own.
Selling Price: $25,000
Park Fee: $400 per month
Down Payment: $5,000
Remaining Balance: $20,000
The buyer agrees to pay a down payment of $5,000 and a monthly payment of $900 to cover the park rent and the loan. $500 will go to you and the remaining $400 to the park. It will take about 15 months for you to recoup the initial investment and then the rest of the 25 months is your profit delivered as cash flow. Unfortunately this is a long process before seeing profits from the sale and many investors are not willing to wait.
Why Mobile Homes Instead of Houses?
When I first ran into this option of flipping mobile homes it was with the idea that I can start small and by flipping mobile homes for a few thousand. This would provide a method to build capital for a larger house flip later on or at least money for tools and resources I will need to perform some of the work on my first house flips.
After researching this option of flipping mobile homes I have to ponder whether it is an investment worth my time. This is a very personal choice so I can only speak to what I am thinking, considering I am currently saving, and learning, to preform my first flip of a single family home.
Conclusion
The research aspect of flipping mobile homes is very weak as you will need to collect and store information yourself. Collecting this info will require creating relationships with the surrounding mobile home managers. In my research not all of these park managers are interested in even allowing investors to operate in their park. This means the access to flippable resources is limited to getting someone to allow access.
I have seen plenty of testimonials and youtube videos about making money in mobile parks so I do think that it can be a viable investment path. Personally I think this is a great option for someone who already lives in a mobile home park and can negotiate with the management to allow them to purchase, fix and flip some of the homes in their park. It could be a great way to get started on investing in property.