Understanding Mobile Home Investments
Let’s try to put Mobile Homes into perspective: Individual homes on leased land are about as illiquid as condos, however when it comes to short-term cash-flow rental yields, there's absolutely no comparison with any other form of residential property. Even among non-residential real estate possibilities, I think that only mini-storage units and city parking lots are even in their ball park.
Compared to single family houses, Mobile Homes themselves produce much higher cash flows as rentals, but at the cost of considerably more management effort. An exception would be homes in “over 50 parks such as I started out operating.
When it comes to appreciation, except during periods of run away prices such as we saw in the first 5 years of this century, Mobile Homes on individual lots can outstrip houses because of the growing scarcity of properly zoned land and the rising costs of building houses.
As housing price “affordability” issues lock both retirees and first-time home buyers out of the conventional housing markets, home seekers will be forced to turn to manufactured housing. This will cause prices of homes situated on attractive lots in desirable locations to appreciate rapidly.
Here’s an extreme example of this: Recently a custom 3500 square foot mobile home in Santa Barbara sold for $2.98 million. The buyer stated that a home of comparable size and location would have cost $7 million. The rate of gain is partially a function of the home but more dependent on the quality of lifestyle provided by the mobile home community or individual lot environment.
In well located metropolitan areas rental mobile home spaces are extremely profitable across the country. It's possible for Mobile Home parks to provide a haven of high quality secure living amidst what might otherwise be considered a blighted neighborhood. This controlled environment creates high market appeal.
It's not uncommon to find lot rents exceeding $500 per month just for the right to put a home in a good park. A few years ago in one such park located on San Diego's Mission Bay, park rents ran as high as $1000 per month for about a 6th acre.
