What Is a Manufactured Home?
Also known as a mobile home, a manufactured home is an investment property that is made up of one or several prefabricated parts. The parts are transported to a site, assembled together, and then connected to sanitary, water, and power systems. The structure may be placed on blocks attached to a permanent foundation.
Many people are now realizing that manufactured homes are some of the best alternative real estate investments available out there.
So, is buying a manufactured home a good idea? To answer this, let’s first look at the major pros and cons of this type of investment property:
- Low cost – One of the main benefits of investing in manufactured homes is their relative affordability. Usually, these houses cost much less compared to traditional homes of the same size and style. Real estate investors can choose to build larger homes since the cost per square footage is low. Manufactured homes are a great option especially for first-time investors who have a limited budget.
- High quality – Usually, the quality of manufactured homes is as good as or even better than traditionally-built homes. These homes are built in a factory setting under very intense control according to the HUD code. They must meet the standards for structural construction, design, energy efficiency, fire safety, and transportation from factory to site. Manufactured homes sold in the U.S. come with a red seal which shows that all the stringent requirements have been met.
- Fast installation – While traditional homes can take six months or more to build, manufactured homes can take three months or less. Since the home has pre-made sections, the final installation moves very rapidly.
- Eco–friendly and energy-efficient – Manufactured homes are energy-efficient due to the upgraded insulation both under the building and in the walls. Energy efficiency is also achieved through on-demand water heaters and energy-efficient windows. Bathrooms and kitchens usually come with water-saving faucets and fixtures, as well as energy-saving appliances.
- Acoustics – Since manufactured homes are made of several parts that are insulated individually, sound transference between the rooms is minimized. As a result, these homes are usually quieter compared to traditional homes.
- Low-risk construction – Construction sites of traditional homes face problems such as delivery delays, theft, and damage. Misuse of materials and construction waste is minimized with manufactured housing.
If you want to start looking for a manufactured home now, you can do so on Mashvisor.
- Cost and availability of suitable land – In many urban and suburban areas, land is scarce and very expensive. In other places, the local laws only allow site-built construction on land. As a result, this makes investing in manufactured homes difficult.
- Tough lender requirements – Mortgage lenders usually offer loans to buyers of ‘real property’- land and the permanent structures built on it. Manufactured homes are only considered for a mortgage if the axles are removed, and the structure is placed on a concrete foundation or a basement.
- Long-term value – In some areas, the appreciation rates of manufactured homes are significantly lower than that of traditional homes. This is due to the long-time stigma of mobile homes.
- Limited design – Since the parts of a manufactured home are pre-made before installation, there is very little variety. From the outside, all these homes appear the same. Any add-ons must be approved by the local authority.
Factors to Consider When Purchasing a Manufactured Home
If you feel that the pros outweigh the cons and wish to move forward with buying a manufactured home, there are still a few things to consider:
Buying New or Used Manufactured Homes
- Buying new – Purchasing new manufactured homes allows you to choose the exact layout and size you want. In addition, you can choose all the features you need such as fireplaces, walk-in closets, and custom cabinets. You can also customize the rental property and its exterior with features such as awnings, decks, steps, and siding colors and materials.
- Buying used – The main advantage of purchasing used manufactured homes is affordability. However, be sure to inspect the building to ensure it is in good condition. Check the doors and windows for cracks, gaps, and insulation. Test the strength of the flooring and check the insulation for moisture. See if the anchoring system is still intact and sturdy.
The Costs of Purchasing a Manufactured Home
With the cost of new homes ranging from $15,000 to over $100,000, purchasing a manufactured home is a major investment. When thinking of how to buy a manufactured home, other costs you need to keep in mind are property tax, insurance, the cost of transporting the home, land costs, and other associated bills such as sewer, water, utilities, and routine maintenance.
The good news is that property financing is readily available for manufactured homes. Just like a traditional home purchase, the investor’s debt to income ratio, tax records, down payment, employment records, and creditworthiness must satisfy lender requirements. Buyers of such real estate properties can access manufactured home loans such as FHA, VA, and conventional mortgages.
Where to Locate the Home
After buying a new manufactured home, a real estate investor will need to consider where to place it. If you don’t already own a piece of land, you will have to buy or lease land. A manufactured home located on a strategic site will appreciate in value and generate a good return on investment. You can use tools such as Mashvisor to identify the best locations to place your rental property. However, be sure to find out if the local zoning laws allow manufactured homes on the site.
Are manufactured homes a good investment? If done properly, buying a manufactured home can be a great investment decision. However, before you sign on the dotted line, take the time to consider all the pros and cons of that decision.
A Final Tip: Investors can find a wide range of manufactured homes using Mashvisor’s property finder. Tools such as the investment property calculator can be used to calculate metrics such as cap rate, cash on cash return, and cash flow. This will help establish if a manufactured home is a good investment.