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Generating passive income is the goal of real estate investors. This goal is achievable by diversifying their portfolio. It’s a no-secret recipe for success in such an investment endeavor, but one which makes the real estate market competitive for investors.
Many real estate investors now consider investing in mobile homes to grow their portfolio and generate stable revenue. But how good is investing in mobile homes for your money?
Read these advantages and disadvantages before investing your money in mobile homes.
Fundamentals of Investing in Mobile Houses
Investors can do either of two methods when investing in mobile houses. The first approach is to buy a unit or several units in a mobile home park and rent it out to tenants. To earn profits from this investment, you must charge a competitive rent price that makes sense to potential renters and your capital.
The second option is to purchase an entire mobile home park and rent it out to interested tenants. This option requires a large capital, but it can give you a high return on investment.
Advantages
Real estate investors can find many advantages in investing in mobile houses. Read this list of benefits if you want to put your money in this real estate investment.
Low-Cost Maintenance
Mobile houses are smaller in size compared to conventional rental properties. They also have simple electrical wiring and plumbing setup. These factors contribute to their affordable maintenance and repair costs.
If you’re an owner of an entire mobile home park, the tenants will shoulder the maintenance and repair costs of their respective units. In this case, your only responsibility is the maintenance of utility connections, roads, and common spaces. On the other hand, if you own a unit or two within the park, the maintenance and repair costs are still not that heavy on your budget.
Stable Demand
Many cities in the country have a steady demand for mobile homes. Tenants are now considering mobile houses because of affordability and convenience. Here are some statistics showing the reliable demand for mobile houses.
- 22 million people in the United States reside in mobile houses
- 90% of residents are satisfied living in their mobile homes
- 61% of these people plan to stay in their mobile houses for ten years or more
In Tennessee, Texas, and Alabama, mobile home parks are in-demand. You can also find other states that see the importance of the mobile home park concept.
Affordable Investment
In contrast to buying a single-family house, a mobile home is more affordable. If you choose to finance one unit, the cost may only be a few hundred dollars monthly.
Now, if you’re planning to own a mobile home park, the cost may be higher because you need to pay for the land and construction. You also need to cover expenses, such as property insurance and taxes. The cost may vary by location and size of your mobile home park. Still, it’s more affordable than owning a multi-family complex or several single-family houses.
Disadvantages
Like any other investment, there are also downsides in investing in mobile homes. Investors should know about these disadvantages before they invest their money.
Might Not Appreciate in Value
While mobile homes have excellent designs and are popular nowadays, there’s still a sense of negative stereotype about this type of property. For instance, not all cities designate a tract of land for manufactured homes due to strict zoning restrictions.
With this stigma on mobile homes, there’s a possibility that your investment might not appreciate in value over the years. In this case, mobile houses are different from single-family homes, which are likely to increase as time goes by. Investors should give their mobile homes first-rate infrastructure, common spaces, and landscaping to raise the market value.
Density Restriction
Let’s say a tract of land is zoned for a mobile home park, there might still be density restrictions that limit investors to a certain number of units to be built on that tract of land. If you’re going to invest, make sure you get your target return on investment before you buy the land.
Natural Calamities
Mobile houses are less sturdy compared to conventional homes. When natural calamities strike, mobile homes are vulnerable to damage or destruction. Hurricanes and earthquakes can wreck damage on mobile homes because they typically don’t stand on reliable foundations.
If you’re planning to invest in mobile homes, check if the place is at high risk of natural disasters.
Takeaway
Investing in mobile homes is a good way to add to your investment portfolio. However, like any other investment, there are pros and cons you have to weigh before putting your money into this kind of investment. Make sure that the return on investment you get is high.
If you want to start investing in mobile homes, work with a competent real estate agent and improve your credit to get decent financing for your investment.
