As a real estate investor, renting mobile homes may not cross your mind. But buying and renting mobile homes can be a good investment for a number of reasons.
Not only do mobile home rentals require a much lower financial entry point; they offer quicker returns than other investments.
They are also likely to give you a good ROI compared to other rental properties.
In this article, we’ll break down everything you need to know about renting mobile homes for a profit.
Why Rent Out Mobile Homes?
Renting out mobile homes is like renting out other types of residential property. You will receive a steady rental income stream that can offset the cost of ownership.
Savvy mobile home owners may pay less in taxes by taking advantage of tax reduction strategies like maximizing their deductions.
Mobile home rental has a high ROI compared to investing in other forms of real estate.
Renting out mobile homes can also diversify your rental portfolio, too.
Advantages of Renting Mobile Homes
You are likely to face less competition since mobile homes are always in demand.
Renting out mobile homes has the advantage of lower renovation costs when they need updates or repairs.
You will enjoy the tax advantages of residential investment property ownership without a huge financial commitment.
Renters in your mobile home during cold winter months can minimize cold weather damage. A tenant who runs the water and checks the thermostat can help you avoid repair issues like frozen pipes and report heating problems.
Disadvantages of Renting Mobile Homes
While renting mobile homes can be a good investment, there are some downsides.
The value of a mobile home might drop to half the amount you paid for it in just three years, and rental for the lot it sits on can get expensive.
Some people object to the appearance of a mobile home and have questions about its durability.
If you find it difficult to get a mortgage for your mobile home, you may have to take out a personal loan which is likely to have a shorter term and higher interest rate than a conventional mortgage.
Types of Mobile Home Rentals
When you are thinking of renting mobile homes, you may decide not to purchase the land.
In that case you pay rent to the mobile home park owner who takes care of utilities and other expenses.
That can free up more cash for you.
You might decide to buy the mobile home park and all the homes on it. You will then collect rent for both the mobile homes and the land to increase your cashflow.
Keep in mind that you will be responsible for maintaining and repairing the homes and the park.
If you own the mobile home park but not the homes, you will collect rent on the lots and you will not be responsible for repairing the mobile homes.
Renting Mobile Homes Example
Next, we’ll take a look at a few examples of renting mobile homes — and the profit that can come from it.
Example 1: A 16% ROI
John bought a mobile home in a park for $10,000 and invested $8,000 to bring it to a good condition for rent.
The monthly rent value was $900, or $10,800 annually.
John paid $600 per month to the park for rent.
After considering tax ($175) and insurance ($400), his annual ROI was 16.8%.
Example 2: A Fixer-Upper with a 67% ROI
Sara found a “fixer upper” mobile home for $52,000 in an area where homes in good condition sold for $150,000.
She invested $46,000 to renovate the mobile home.
The mobile home rented for $1,450 monthly, or $17,400 yearly, for an annual return of 17.75%.
She sold it for $164,000 for a profit of $66,000, a 67% ROI.
How To Get Started Renting Mobile Homes: 5 Steps
Next, we’ll take a look at a 5 step process to getting started renting mobile homes.
#1: Get a title for the mobile home are purchasing.
For this, you will need:
- the VIN number
- the brand
- the year
- HUD plate of the mobile home
Check with your local DMV for specific guidelines in your area.
#2: Clean up your mobile home, both inside and outside.
For this step, you may want to hire a professional cleaning service for a deep clean.
#3: Advertise your mobile home for rent.
You can use online and print local newspapers, Craigslist, Facebook Market place and other options.
#4: Price your rental right by researching how much similar mobile homes go for.
Be sure to include mobile home park rent if you are renting the lot.
#5: Draw up a rental application.
Ask about the prospective renter’s:
- place of employment
- renting history
- the number of occupants
Get a security deposit and spell out rental due dates and late penalties.
You can download a rental template here.
The Bottom Line: Renting Mobile Homes
Renting mobile homes is a good way for beginning real estate investors to get started, and a great strategy for experienced investors who want to diversify their portfolio.
You will need far less money compared to other real estate investments, especially if you purchase the mobile home and not the land.
You should not encounter problems finding a good renter. Just make sure to find out about the potential renter’s place of employment, income and previous track record with renting.
Once you find a good renter, you can enjoy a good return on your mobile home investment.