Building Cash Flow Through Mobile Home Investing

by | Oct 24, 2018

Do you want to learn how to build cash flow through mobile home investing? 

Learn that the mobile housing market is a huge profit source for your real estate investing portfolio. 

Learn how mobile homes are not legally real estate but legally considered vehicles. 

Learn how to take the steps to work around financing for these mobile homes. 

In this article, you’ll discover how to build cash flow through mobile home investing. 

Building Cash Flow Through Mobile Home Investing

 

What is Mobile Home Investing?

Mobile home investing is a real estate investing niche that focuses on building a real estate investment portfolio through mobile homes, mobile home parks, or trailer parks 

Introduction 

Investing in real estate is not a get-rich-quick scheme. It is a get-rich-slowly and steadily programs. It can only be done with hard work, commitment, and knowledge (education). Attitude and determination are the two most important qualifications required to be successful investing in real estate. It can be done! It has been done! 

One way to gain wealth in real estate is by building cash flow through mobile home investing. The first thing you must do in understanding the mobile home investing niche is to terminate any preconceived notions about “trailer parks,” “mobile homes,” etc. The truth is that not everyone who lives in trailer parks is poor. Although, it may not fit your standing of living. These mobile homes are found in cities, in rural areas, in good and distressed neighborhoods. They are usually located close to shopping malls and schools. There are many seniors who are retired and live in them, (i.e. in the south). Many have them as second homes and many younger families and individuals live in them. Further, mobile homes make up 6.4% of the US housing sector and it is estimated that there are 20 million mobile homes. Also, according to the U.S. Census, Manufactured Housing Institute, 57% of mobile households are employed full-time and 23% are retired.  

The term “manufactured home” and “mobile home” are often interchangeable. “Manufactured home” are mobile housing units built after June 15, 1976, and “mobile home” are mobile housing units built before June 15, 1976. At first, mobiles were considered as minimal quality housing. Since 1976 manufactured homes are now regulated by the Department of Housing and Urban Development under the Manufactured Home Construction and Safety Code.  As a direct result of these regulations the standards in the codes now make mobile homes more safe and durable housing, thus, the quality of mobiles has increased significantly. In fact, mobiles can now be firmly planted on real estate or plot that is a concrete slab.  

Moreover, mobile homes generally are found in mobile parks, that is, we usually see them grouped together. Many situations allow the mobile park owner to rent lots to the mobile home owner. These mobile parks may have recreation facilities, laundromat, storage units, etc. There are incentives for mobile park owners to encourage a clean and nicer ground to live in. The nicer the mobile park the higher rents for the lot. 

However, as a real estate investor looking into the mobile home investing niche. The first step is to study and learn to know your local market. Do you even have a mobile home investing market? There are mobile home parks located in cities but the larger the city the least likely you will find mobile homes. Generally, they are in rural and suburban neighborhoods. The next step is to start networking with mobile home park owners, talking with the managers of those mobile parks, visiting mobile parks. The key is to study your local market and understanding the rents, prices, lot rents, etc.  

How to Evaluate A Mobile Home 

Evaluating a mobile is determined by several factors. These factors depend on the physical condition of the mobile home. It is critical that you inspect all appliances and fixtures e.g. stove, washer, dryer, refrigerator, carport, garage, flooring, ceiling, carpet, drapes, windows, deck, and anything else that may need to be inspected. It is also important to inspect the axles and wheels and verify the condition that it is in (in case the mobile home will need to be moved).  

Once you get a good look at the mobile home and understand its physical condition. There are two ways to determine the value of the mobile home. One way is to hire a mobile home appraiser, however, with the National Automobile Dealers Association (NADA) and their Manufactured, Mobile and Modular Home Online Value Report you can get the value of the mobile home for a small fee. Their questioner to determine the value goes into detail about the physical condition of the mobile home. So a personal visit and inspection are still required.  

Buying Mobile Home Foreclosures 

One difference between mobile homes and real estate is that mobile homes are not considered (legally) real estate. Mobile homes fall into the same criteria as an automobile. Everything you do regarding your mobile home is dealt with similarly to owning a vehicle. Therefore, when lenders foreclose on a mobile home the process is similar to when a lender repossess an automobile.  

The most important difference between a real estate foreclosure and a mobile home repossession is what happens after the lender takes back the property. In a real estate foreclosure, the property is sold at auction to the highest bidder. The lender will try to get its money back and all the other funds will go to any junior liens, (e.g. second mortgage) if any is left over. On a positive note, if there are not enough funds to pay off the original owner’s debt, the debt gets wiped clean. In other words, the original owner who lost the property due to foreclosure will not owe any money to debtors. 

On the other hand, if the lender is unable to sell the mobile home for the remaining balance on the loan, the original borrower must pay the remaining balance. The original owner becomes responsible for any amount that can’t be gained during a sell. 

For instance, Jack an owner of a traditional home can’t keep up with his loan payments and the lender forecloses on the property. Jack has a first mortgage balance of $200,000 and a second mortgage balance on it for $3,000. The lender auctions the house at the county courthouse steps for $205,000. The first mortgage is paid in full of $200,000 and the second is paid down to $25,000. Jack the original owner now walks away owing nothing more even though the balance of the second mortgage was not paid in full.  

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Now Sally, who owns a mobile home. She has trouble keeping up with her payments and she too finds out that the lender is now repossessing on the property. She has a balance on her loan for $20,000. The lender sells the mobile home at auction for $17,000. After the auction, Sally still owes the lender $3,000.  

Understanding the difference between a mobile home and traditional real estate you can understand the importance of why many mobile homeowners are willing to work and deal with an investor who needs help with their problem. Finding these properties before it gets repossessed may be challenging, however, they usually have a “For Sale” sign. Also, when talking to potential sellers they may have language of distress, e.g. non-verbal or verbal communication.  

Fixing-Up a Mobile Home 

Mobile homes are made to be move, that is hauled around and not meant to be in one location. They are designed to withstand the pressure, stress, and vibration that is caused by the hauling of the mobile home. It is essential that when organizing your repairs and renovation projects that you take into consideration in not to affect the structural purpose of the mobile home. 

Repairing or renovating mobile homes is not the same as your traditional solid-build home on solid ground. The windows, doors, appliances, or fixtures are different and usually can’t simply be purchased at your local hardware store. For most, the parts must be purchased from a mobile parts supplier.  

Furthermore, on new models or units, the manufacturer should be able to provide the mobile home plans, if needed. The older models may be more difficult to find the correct part, so it may be necessary to improvise. However, it is best to stay away from mobile homes that are in great need for costly renovations. It is recommended to stick with the small improvements or just the cosmetic fix-ups, e.g. carpet, paint.  

Reasons Owners Sell Mobile Homes 

The truth is owners sell their mobile homes for the same reasons a solid-site home is sold. The mobile home may be sold by another investor. The owner may need to sell for relocation purposes, e.g. job offer, family matters, or personal situations. They may have inherited the mobile home and are seeking to liquidate the mobile home or get it out of their hair. A senior citizen may not be able to live on their own anymore and they’re looking to sell. Regardless, of the reasons, there are sellers from all ages who are eager and ready to sell.  

Mobile Home Acquisition and Financing 

Acquiring mobile homes is different than acquiring real estate. Mobile homes are not real estate; they are vehicles and are treated as such; at least legally. Documentations (title) for mobile homes are similar to that of a truck, car, motorcycle, boat, etc. It is considered personal property and it is tax as such, as well.  

Financing on mobile homes is generally harder to obtain, i.e. for used units. Be aware that if approved for financing, most likely the borrower will need to pay higher interest rates and larger down payments. But don’t let financing discourage you. There are other options to acquire mobile homes. Practically, all other real estate investing strategies are open doors. That is, lease options can still be used, wholesale, or seller finance. In fact, sellers of mobile homes understand the difficulty of obtaining financing for a mobile home and are willing to work with the buyer. Depending on the seller’s motivation a sale-leaseback, that is when the buyer purchases the mobile home from the seller and after the acquisition, the seller now rents from the buyer. Be clear and understand the seller before leasing with them. They may be more financially distressed than you may originally think and it may turn into an eviction campaign. Further, you can acquire mobile homes quickly with your friend credit card. Just be careful and be certain that you plan for a quick flip on the mobile home. 

Moreover, if a mobile home owner decides to permanently attach it to a piece of real estate and have it count as real property, the owner will need to get the title entirely eliminated at their state Department of Motor Vehicle (DMV). The state takes the information on the mobile home and the mobile home becomes real property. If the mobile home will ever need to be moved again, a title will be needed before a hauling permit is approved. When eliminating title from the mobile home the real property improves and financing is easier to obtain.  

Conclusion 

Mobile homes can be another lucrative way to invest in real estate. Although, not technically real property but a home, nevertheless. There are millions of mobile homes and millions of people who live in these homes. As a mobile home investor, there are a few things to know when you pick mobile home investing as your niche. But all can be obtainable with hard work

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Real Estate Building Cash Flow Through Mobile Home Investing