I’ve witnessed many real estate cycles over the 21 years I’ve been in real estate. The current real estate market is completely different from three years ago. As you may be experiencing, you have to work harder to find single family residences at wholesale prices. Your profit margins might be a bit tighter than they were too.
I travel throughout the United States and Canada, seeing many markets and trends. The current trend I am seeing is that major markets are experiencing price appreciation, low inventory levels, increased holding costs (taxes, insurance), and increasing rents for most site built homes. A trend that has occurred before, I believe is on its way again, is detached single family residences are becoming less affordable. When this happens, consumers look for alternative affordable housing options. These consumers will look to town homes, condos and even manufactured houses for more affordable housing options. So, if you are willing to make adjustments in your investment criteria to match this trend, you will be doing more deals and making more profit this year than last.
You might 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 jumped up so high that many people can’t afford to rent let alone buy. For instance, I’m in Houston, TX this week, where the rents range from $1,000 to $2,000 a month. I have seen this same trend in the markets where I have mobile homes in parks for sale. The people paying this kind of rent have started calling on our homes for sale. Why are they calling? We have manufactured homes in communities where the lot rent is $500 a month. If we rent the mobile home or manufactured home to them for $300 to $600 a month, they are paying less than the rents on an apartment in the same area with fewer square feet, bedrooms, and amenities. We have seen a growing trend in this direction. We get phone calls on a regular basis with people stating, “I would have never considered moving into a manufactured home before, but it is going to cost me less than my current apartment and I get more for my money”. We have become “THE” affordable housing option for these people.
But, there are not that many mobile homes out there… right? Wrong. Most people don’t realize that 10% of the housing units throughout the United States are manufactured homes. Do you see how many opportunities you’ve missed by not considering manufactured homes? Obviously, a place like Manhattan, NY is not going to have many opportunities, but you will find them in the outlying areas. In fact, I was just up in the Boston area. About 15 minutes out in Malden, MA, there were five mobile home parks in about a 10 mile radius of my hotel. The reality is that you will be surprised by how many mobile home parks are out there and the opportunities to profit from doing deals within them.
One way that I survived the frenzy during 2002 to 2006 was by focusing on the property types that other investors would not… a niche if you will. I would focus my attention on mobile homes on land, where the mobile home was noted on the tax records as an improvement, however the way the mobile home was set up on the land was not financeable via FHA. Therefore, the typical FHA buyer would not be able to get a loan on that property, so we would make the necessary repairs and put it on the market for sale. You will find that there are a lot of mobile homes on land that are considered real estate, but they are not FHA or VA financeable. It is another great way to locate property leads that most of your local competition will ignore. Less competition equals better and more deals for you this year. Ironically, they will be receiving the same calls as you for these leads, but they will not do anything with them or they will pass these onto you for free or a small fee.
If you are looking for an alternative investment strategy, consider mobile home investing. It’s a great way to have your dollars working for you with minimal risk. You can have more deals going at one time, due to the minimal cost associated with acquiring and repairing mobile homes. The small investment amount makes your cash on cash returns pretty amazing too. One huge bonus of mobile home investing, I was well prepared to run my first mobile home park when I finally took that leap in my real estate investing career.