This is a guide for real estate investors who want to start flipping mobile homes for a less risky, unique alternative. As smaller homes gain popularity, many investors are interested in successfully investing in mobile homes. Everything you need to know to start investing and flipping mobile homes is below.
What is the Difference Between a Mobile Home and a Manufactured Home?
Before flipping a mobile home, knowing the slight distinction between mobile and manufactured homes is essential. The main difference between a mobile home and a manufactured home is when the home was built. Mobile homes are built before June 15, 1976, whereas anything built after that date is considered a manufactured home.
The construction and design of mobile and manufactured homes are also different. Manufactured homes are usually built with a higher-quality material and according to the national HUD code. Before 1976, mobile homes were in extremely high demand because of their affordability and versatility. People liked the idea of a moveable house, which would allow them the freedom to travel to places where they could have job opportunities. Because the mobile homes were produced quickly, there wasn’t much oversight of the construction materials or building standards.
Early mobile homes looked a lot like modern campers or trailers. The house was moveable but could still be set on a wooden block or concrete foundation. The foundation also matters in whether a home might be considered mobile or manufactured. Manufactured homes are more likely to be placed on permanent foundations. Manufactured homes also typically come in one of three sizes: single, double, or triple, with square footage ranging from 1000 square feet to over 2000.
Although there are differences between mobile and manufactured homes, they are similar in many ways. Both are factory-built, prefabricated structures. Both types of homes allow easy mobility and flexibility. More importantly, both can offer great success for flippers.
Where to Find Mobile or Manufactured Homes for Sale
Most people look for mobile homes on the MLS with their real estate agents. For those searching Treasure Coast homes for sale, we have advanced searches that are updated every 5 minutes. However, there are other avenues real estate investors can take to find a mobile home to flip. One way that mobile home flippers can find cheap mobile homes is through the foreclosure process. Buying a foreclosed home at auction is a great way to secure a good price.
Foreclosure auctions are always open to the public and initiated by the lender. It’s relatively easy to search for auctions either in person or online. Online auction sites are common and easy to find through web searches. In-person auctions usually occur face-to-face at a courthouse or another public location. It should be noted that buying a mobile home through a foreclosure option can come with some risk. The buyer must determine if the property has back taxes or liens, which could contribute to the home's overall price.
Another way to find a mobile or manufactured home is through direct marketing. Mail marketing or even approaching mobile homeowners directly is a great way to find homes not currently on the market. Another smart marketing technique is networking with mobile park managers and mobile home dealers. Additionally, real estate investors should network with agents who may know of a potential deal.
Consider the Comps
Before buying a mobile or trailer home to flip, you’ll want to check the numbers to ensure you’re making a profitable decision. Comping will help you determine whether or not a mobile home is worth the investment. You’ll need to look at similar mobile home properties sold within the last year to ensure you're getting a deal.
When considering the comps, only look at mobile homes, as other types of properties will cause a miscalculation in profitability. Properties that aren't in gated communities in Florida, for example, will have a different valuation than the exact same home type in a non-HOA area.
When flipping trailer homes, the 70% rule is a great place to start. The 70% rule advises real estate investors to pay no more than 70% of a property’s after-repair value minus the cost of the repairs needed for a profitable flip. Below are a few things that mobile home flippers should consider when calculating the 70% rule:
- Financing Costs
- Repair Costs
- Inspections Costs
- Closing Costs
- Carrying Costs
- Property Taxes
- Renovation and staging costs
- Realtor Fees
It’s always better to overestimate costs to help maximize profitability. The 70% rule doesn’t guarantee a profit, but it does make profitability much more likely.
The Pros and Cons of Flipping Mobile Homes
Real estate investors should consider various pros and cons before flipping mobile homes. Although there are significant advantages to mobile home flipping, there are also cons. As with any real estate investment, weighing the pros and cons is wise.
Pro - Mobile Homes Require Less Financing
One of the pros of flipping manufactured homes and mobile homes is that the property can be bought for significantly less than a single-family home. It’s possible to secure a mobile home substantially cheaper than other pieces of property. This makes mobile home flipping a more financially attainable investment strategy. Additionally, investors face less risk because mobile homes are significantly less expensive to flip. The lower upfront capital needed to flip a mobile home can make it more appealing for investors who don’t want the stress and greater financial risk exposure of flipping a brick-and-mortar home.
Pro - Mobile Homes are in High Demand
Another potential pro to flipping a mobile home is the high demand from renters and buyers. In nearly all cities in South Florida, both renters and buyers are always on the lookout for affordable properties. Those looking for a more affordable life or people hoping to eliminate debt are starting to realize how attractive mobile homes and trailer homes are for financial freedom. Decades ago, mobile homes had a stigma attached to them, but that’s no longer the case. Mobile homes have become a popular option because of their affordability and flexibility.
Pro - Mobile Homes Require Less Renovation
Renovation can be a long, slow journey. Mobile home flipping greatly speeds up the journey and requires less time and patience than brick-and-mortar home flipping. Brick-and-mortar homes often need extensive remodeling, and during the renovation process, it’s not uncommon for flippers to find things they didn’t expect. Those surprises prolong the timelines, but mobile homes typically have shorter timelines. It requires significantly less remodeling and fewer repairs and upgrades to fix and flip mobile homes. The shorter timeline allows mobile home flippers to maximize their profit by quickly getting the home to the market.
Pro - Mobile Homes Have Less Competition
Another potential pro for flipping mobile homes is that there’s generally less competition. Many people have learned how lucrative home flipping can be, and the single-family home market is filled with flippers. This is less true of the mobile home market, a hidden gem with less competition.
Especially in Florida, there are affordable retirement communities with mobile homes that don't have the limelight of other niches. Prospective investors can get involved in these neighborhoods without having too many other hands in the pot.
Although mobile homes have many pros working in their favor, there are also a few negative cons that a flipper should think about before flipping mobile homes. Below are a few cons to consider.
Con - Finding a Mobile Home in a Good Location is Challenging
Location, location, location is a real estate rule that can’t be overlooked. Location matters and an investor's success can depend on the home's location. Putting a mobile home in a highly desirable location can be challenging. However, the flipper can increase their odds of success by securing a mobile home near grocery stores, shopping, transportation, medical facilities, and other amenities. Additionally, mobile homes in established communities such as 55+ communities can work in favor of the flipper.
Con - Mobile Homes Appreciate Slower
Many people believe that manufactured homes and mobile homes depreciate over time. However, experts have found that mobile homes hold value and can appreciate in value. Appreciation is especially true when the home is in a good location near schools, employment, shopping, and other amenities.
While mobile homes typically aren't in the richest neighborhoods, they can have resort-style amenities and great locations that boost property prices. If an investor keeps up with maintenance on the mobile home, it should and will appreciate. However, one con is that mobile homes do not appreciate as quickly as brick-and-mortar homes. The slower appreciation rate translates to a lower return on investment over time.
Con - Mobile Homes are More Difficult to Finance
Many lenders are cautious about providing loans for mobile homes. Getting a traditional lender to finance a mobile home can be challenging. Most lenders prefer to finance homes that are on permanent foundations. However, there are programs available that flippers can use to get around financial challenges; for example, flippers can consider using an FHA-approved lender under the Title I program. The Title I program was designed for borrowers who want to purchase or refinance a mobile home. Another potential con for mobile homes is that the interest rate tends to be higher. When financing is available, investors should expect a higher interest rate, which can reduce profits.
Flipping a Mobile Home for a Rental Investment
When people think of flipping a home, they usually think about purchasing the property, fixing it up, and selling it for a quick profit. However, it’s also possible for flippers to create a profitable stream of revenue by renting their mobile home investment. Depending on the mobile home flip's before-and-after results, investors may decide to use a rental strategy. Investors can choose to rent in standard fashion or offer a rent-to-own option.
Renting a mobile home can work very well when the home is on a private lot. Those who are familiar with tiny home communities in Florida will recognize this rule of thumb. Similarly, the rules can be slightly different when the mobile home is located in a park. Some mobile home parks allow rentals, while others forbid them. Real estate investors should consider whether renting is a possible option before investing.
Renting a mobile home long-term can be far more profitable than simply purchasing a home and flipping and selling the property immediately after renovation. When deciding to rent a house, it’s also essential that the investor considers whether they are comfortable being a landlord. If not, there’s always the option of using a rental management company to handle the property. However, management companies require a fee, which is another financial consideration.
Renting a mobile home can be a sound and profitable choice. Mobile homes require less taxes, which increases profit. Additionally, it’s far less expensive to maintain a mobile or manufactured home because it usually needs fewer updates and repairs over time compared to traditional brick-and-mortar properties. Renting a mobile home can provide a good return on investment.
Inspection Tips for Flipping Mobile Homes
A good inspection is well worth the time and money. A proper inspection can eliminate costly surprises during renovation. Below are a few things to consider during renovation and inspection.
Check for Water Damage
Many older homes have water damage, mold, and rot that can cause deterioration in mobile homes. Water damage over an extended period can be expensive to repair. Additionally, if the house is overgrown with mold, it can create an unhealthy atmosphere that needs mold remediation or demolition. Inspecting for water damage before flipping can save time and money.
Check the Roof of the Mobile Home
A falling roof can be detrimental to a mobile or manufactured home. Flippers should check the roof and ceiling tiles for water damage or hire a handyman to help fix and flip mobile homes. When checking the roof, looking for soft spots that may have water damage is essential. Some mobile homes have metal roofs, which are more prone to leaks. For metal roofs, a roof sealant can solve water leak issues.
Check Toilet Fittings and Sink
It’s important that the toilets touch the floor; otherwise, leaks can occur and make their way into a home’s subfloor. Small leaks around the joint are common, causing the floor to rot. Additionally, checking under the sinks for leaks can prevent rot and mold damage from spreading.
Check for Termites
Termites can cause damage that goes unnoticed for years. They are sneaky pests who can live inside the walls undetected. Checking for termites and eliminating them through proper pest control can stop damage to the mobile home.
Is Flipping Mobile Homes Profitable?
Mobile and manufactured homes can be an excellent investment. They are becoming more desirable as people look for more affordable housing options. As house prices continue to rise, trailer homes and mobile homes have become an attractive way to own property within budget.
Over the last few years, mobile home parks have seen a significant increase in interest from renters and buyers. Real estate investors can take advantage of rising demand and secure great profits by flipping mobile homes. When done correctly, mobile home flipping can be a gold mine.
