I have seen many real estate cycles in my 21 years in real estate. Today’s real estate market is completely different from what it was three years ago. As you may be experiencing, you have to try harder to find single-family residences at wholesale prices. Your profit margins may also be a little tighter than they used to be.
I travel the United States and Canada and see many markets and trends. The current trend I’m seeing is that major markets are experiencing price appreciation, low inventory levels, higher maintenance costs (taxes, insurance), and higher rents for most site-built homes. A trend that has happened before, I think is on the way again, is that detached single-family residences are becoming less affordable. When this happens, consumers look for alternative affordable housing options. These consumers will look to townhomes, condominiums, and even manufactured homes for more affordable housing options. So if you’re willing to adjust your investment criteria to match this trend, you’ll do more business and earn more profit this year than last.
You may be saying, “I get the whole condo and townhome thing, but mobile homes… REALLY?” Well let me help you see why. There are many markets where I have found that rents have gone up so much that many people cannot afford to rent let alone buy. For example, this week I’m in Houston, TX, where rents are between $1,000 and $2,000 a month. I have seen this same trend in markets where I have mobile homes in parks for sale. People who pay this type of rent have started asking for our houses for sale. Why are they calling? We have manufactured homes in communities where the lot rent is $500 a month. If we rent them the mobile home or manufactured home for $300 to $600 per month, they are paying less than rents for an apartment in the same area with less square footage, rooms, and amenities. We have seen a growing trend in this direction. We regularly get phone calls from people saying, “I would never have considered moving to a manufactured home before, but it will cost me less than my current apartment and I’ll get more for my money.” We have become “THE” affordable housing option for these individuals.
But, there aren’t that many mobile homes out there… are there? Mistaken. Most people don’t realize that 10% of the housing units in the United States are manufactured homes. See how many opportunities you’ve missed by not considering manufactured homes? Obviously, a place like Manhattan, NY, is not going to have a lot of opportunities, but you will find them in the outlying areas. In fact, I was in the Boston area. About 15 minutes away in Malden, MA, there were five mobile home parks within a radius of about 10 miles from my hotel. The reality is, you’ll be surprised at the number of mobile home parks out there and the opportunities to profit by making deals within them.
One way I survived the frenzy during 2002 to 2006 was by focusing on the types of property that other investors wouldn’t do…niche, if you will. I would focus my attention on mobilehomes on land, where the mobilehome was noted on tax records as an improvement, however, the way the mobilehome was installed on the land was not financeable through FHA. Therefore, the typical FHA buyer would not be able to obtain a loan on that property, so we would make the necessary repairs and put it up for sale on the market. You will find that there are many mobile homes on land that is considered real estate, but is not FHA or VA financeable. It’s another great way to locate potential clients for properties that most of the local competition will ignore. Less competition equals better and more deals for you this year. Ironically, they will receive the same calls as you do for these leads, but will either do nothing with them or pass them on to you for free or for a small fee.
If you are looking for an alternative investment strategy, consider investing in mobile homes. It’s a great way to put your money to work for you with minimal risk. You can have more offers at the same time, due to the minimal cost associated with purchasing and repairing mobile homes. The small amount of investment makes your cash amazing as well. One big advantage of investing in mobile homes is that I was well prepared to manage my first mobile home park when I finally took that leap in my career as a real estate investor.