16 Jan Park Owned Homes
Another revenue stream mobile home parks offer are park owned homes. The investor owns not only the land but also some or all of the mobile homes in the park.
In this instance, the tenant is paying one amount which covers both the rental of the mobile home and the rental of the lot the home occupies. It compares with renting a single family home or an apartment in a multi-family structure.
But wait. Everybody knows that mobile homes depreciate and never go up in value. Apparently ‘everybody” is wrong! In the right situation and state mobile homes can and do appreciate.
So now that your fears of depreciating assets have been laid to rest by the article above, you should seriously consider park owned homes. Especially if you own the mobile home park! If you don’t own the mobile home park it is still possible to do this, but only with the consent of the park owner.
There are tax advantages to owning a mobile home versus a site built home. Join Illinois REIA and get our special report on the tax advantages of mobile homes versus site built homes. Go to www.ilreia.com to sign up.
Park owned homes have different leases than resident owned homes. The lease for a park owned home is “almost” identical to that of a site built single family home.
Depending upon the state in which you do business; the lease for a resident owned home may require certain language covering the resident’s rights. This is the case in the State of Illinois.
What is a Mobile Home
Call them house trailers, mobile homes, manufactured homes or wobbly boxes they mean almost the same thing from state to state. Today however it is more politically correct to refer to them as manufactured homes. It doesn’t matter if they are single wide, double wide or have a tip out unit. They all start out life with a trailer tongues and road wheels.
Manufactures homes are assembled either inside of a building or outside in a builders yard. The most common method of assembly is usually built indoors and away from the elements of rain, snow, etc and the manufacturing processes is much more efficient to that of site built homes.
The mobile home manufacturing process uses jigs, presses and guides. This makes the mobile home fit the desired specs more precisely and in less time than a stick built home. It also eliminates the need for specialized carpenters and allows assembly by factory workers.
Mobile Home manufacturers are also able to purchase their materials in bulk. Bulk purchasing of materials and less job waste are the reasons it may cost between 50 to 70 percent less per square foot to build a manufactured home compared to a typical site built home.
The closest site built homes ever came to this level of efficiency started after WWII and lasted until the mid 1960s. In Southwest Illinois the majority of these site built homes were manufactured by “National Homes”.
Many of the features of site built homes can now be found in recent model manufactured homes. Thankfully they have done away with the cheap and easy to crack and chip garden tubs of the 80s.
The affordability of manufactured homes can be very attractive to those looking for ownership but not able to afford a site built home of similar size and amenities.
The typical cost of a site built home after deducting the cost for land is around $90 and up per square foot.
The typical cost of a new manufactured home is around $32 per square foot for a single-wide and around $40 per square foot for a double-wide home.
When looking at the cost of mobile homes versus single family homes consider the cost per square foot for late model repo homes. Depending on your location and the supply of repos in that area you can often buy nice 16’ x 80’ homes in the 10-15k range. Consider the cost per square foot for a 16’ x 80’ that is 5 years old. It can probably be purchased for an amount between $14,000.00 and $20,000.00. That means the actual cost would fall somewhere between $11.00 and $16.00 per square foot!
In the 90s there was a mortgage broker on every block. In fact everybody and their brother was a mortgage broker, including my cousin Paul. However, in the last few years it has become increasingly difficult to obtain home loans for under $50,000 or so. This was caused by an increase in regulations and limiting the fees (some exorbitant) charged by mortgage brokers. That industry has all but dried up and gone away.
Since manufactured homes frequently cost less than $50,000 it has become harder and harder for someone looking to buy new or used manufactured homes to obtain financing. In the last 20 years many of the larger manufactured home lending companies have gone the way of the Dodo. This in turn resulted in a problem for manufactured housing dealers, as well as those individuals looking to sell their homes.
We can debate whether or not the lending market is or ever will turn around. Yes, new lenders have started showing up here and there, unfortunately they are barely scratching the surface.
The lending market will eventually stabilize and regain momentum over the next few years. Until then we will be searching out lending partners for our members and updating this blog article.