Flipping Mobile Homes
Updated: Feb 25, 2022
A lot of people haven’t heard of buying and selling mobile homes for a profit. It’s the hidden gem within the real estate market that produces impressive returns. The demand for mobile homes will always be high due to the affordability of the houses and the locations they are in.
Here at Mobile Home Matadors, we have been selling and buying mobile homes for years. Our team is fully versed in this niche market and has done some fantastic work. Mobile homes do not require an intense amount of capital to get started. A lot of the transactions are cashed-based and make the process extremely easy.
Why should you flip mobile homes?
The primary strategy for mobile homes is to purchase for as low as possible. Go in and make the necessary renovations to the manufactured home. Finally, sell the property for a net gain that benefits all parties. In some cases, you may want to purchase the land where the mobile is because it’s more lucrative. We’ll cover buying and selling land more in another post. With the real estate market being a seller’s market, this is a perfect time to buy and sell.
This leads to the second advantage of flipping mobile homes: it minimizes risk, as your investment is spread across many different mobile homes.
Third, demand for affordable housing remains high, meaning you have a good shot at finding a tenant for the mobile home if you decide against flipping and opt to rent it instead out.
Fourth, because mom and pop operators mostly dominate the mobile home sector, there are ample opportunities for finding a lucrative deal.
Fifth, investors will deal with less competition here than in other sectors, such as single-family rentals.
Some Challenges Flipping Mobile Homes
The primary issue with flipping mobile homes is the depreciating nature of the asset. Unlike traditional houses that can benefit from remodeling and upgrades, many manufactured homes, especially those over 25 years old, are not good remodel investments. Items like replacing/removing walls are generally not cost-effective to the overall price. So if the remodeling cost becomes too high, then it will reduce the return on investment. Mainly because the price of the mobile home typically doesn’t increase in value too much.
Getting loans to remodel a mobile home will be complicated. The Department of Housing and Urban Development, or HUD, requires manufactured homes to have “HUD tags” eligible under lending guidelines. As a result, The Federal Housing Administration, or FHA, won’t insure mortgages on manufactured homes built before 1976, and most other mortgage insurance firms follow the FHA policy.
A lot of mobile home investors have found returns on their investments by fixing minor cosmetic issues. Even though these fixes might not seem impactful, but a first impression leaves a lasting feeling. Find the key areas to improve can be the difference between a sale and capital just sitting there. Open floor plans are generally requested in mobile homes, so removing existing walls in structures is an everyday task.
As traditional forms of marketing, location is a huge part of successfully flipping a mobile home. A desirable location can create high demand, rental rates, and ultimate sales price if the mobile home isn’t in an ideal location with great supermarkets and schools. If not, people will pass on the mobile home for a more traditional home.
It can be challenging to determine whether a mobile home is a strong flip candidate; it’s necessary for investors to diligently study the market in which they are looking to buy, focusing on the positives and negatives of nearby units because property appraisers and real estate agents will ultimately determine the value of a mobile home by using relevant comparable sales.