Mobile homes are a one-time investment, but they can be a great source of cash flow for the right investor. In recent years, mobile home parks have become a popular investment. Much like a single-family home or multi-family property, a mobile home provides people with a place to live. People have to pay to live in a mobile home just like they do to live anywhere else. However, many real estate investors never seriously consider renting mobile homes as an investment. Read on to find out more.
How does investing in a mobile home work?
There are two main ways to invest in mobile homes:
- You can place the mobile home on land that belongs to you and rent it to a tenant.
- You can be the owner of a mobile home located in a mobile home park and invoice the tenant for the rent of the mobile home and the rent of the land.
What would be the ideal location for the rental mobile home?
If you own the land, there isn’t much difference from owning a single-family home, other than some of the maintenance and depreciation issues. You provide the tenant with a house, the tenant pays you the rent, you take care of the house, and hopefully you make money.
If the home is in a mobile home park that you do not own, land rent must be paid to the park owner. If you own the mobile home, you will likely be responsible for the rent on the land. Land rent is what mobile home owners pay for the land the home is parked on. Land rent generally includes water, sewer and use of the private road and common areas.
Rent for land is generally inexpensive compared to rent for a single-family house or apartment. The park owner does not have the capital invested in the structure and does not have the responsibility to maintain the home, so they do not have as many costs to cover.
Rules differ among mobile home parks as to how rentals are handled. Some communities do not allow any outside investors to own a mobile home rental in their park. Other communities want to approve occupants before they can sign a rental agreement with the mobile home tenant.
Before you make an investment in a mobile home, be sure to speak with the property manager about how rentals are managed.
Advantages of renting mobile homes as an investment
Low cost of entry
Higher potential return on investment. When the initial investment is low, the potential return on investment is high.
Costs less than construction
If you have vacant land, placing a mobile home can be a much cheaper option than building a house. However, you will need to check local ordinances to see if you are allowed to place a house on the land.
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