Are Manufactured Homes Good Investments?

THE LONG ANSWER

Now, for those of you that have more time to read, here is a more thorough and complete answer to the question.  Are mobile homes or manufactured homes good investments?  This question can't exactly be answered with a simple yes or no because there are too many variables involved in the term "investment."  The first things to consider are what the home will be used for, how long it will be lived in before it is sold and what the purchase price of the home is.  Second of all, the actual brand of home that you are buying makes a big difference on the value as well.  Lastly, the location where the home will be located makes a huge impact on the home's overall value.  Now I will dive into some different scenarios and explain how all of these things will affect the total overall investment value in a mobile home or manufactured home.

GO BY THE BOOK

I meet people all the time that are looking at buying a mobile home and are only going to live in it for a few years until they can build a site-built home.  Most generally, these people are looking for repossessed double wides, repossessed singlewides, or new singlewides because of their lower price ranges.  Typically, these buyers are not buying them to be good investments.  Despite having lower prices, you can still be upside down on them from day one if you pay too much for the home.  Here is the best way to determine if you are paying too much.  Every manufactured home has a "Book Value" just like a car (when it is not attached to property).  NADA guides are the industry standard for determining the value of a mobile/manufactured home.  If you do not have access to one of these books, then you can ask the dealer that has the home for sell to provide you with a Book Value or you can get one from a local Banker.  You have to be careful though when getting a value from a Banker because they will only give you the "Base Book Value", which is not accurate.  A Base Book Value is only for the frame of a home, so it doesn't include values for things like, flooring, siding, roofing, appliances, Heat and A/C unit, textured walls, plumbing, etc...  Most of the time when an accurate NADA appraisal has been done, about $10,000 or more can be added to the Base Book Value to get the true Retail Value of the home.  Everything that is needed to get a proper value is located in the NADA guide... if someone knows how to accurately use it.  So after you get the proper value, then you can compare it to what the home is being priced for.  If the home that is for sale is quite a bit less than what the total NADA value is then you can safely buy the home knowing that you have positive equity in it, meaning that you can potentially live in the home for several years and then re-sell it for the same or even slightly more money than what you initially paid for it.  Most dealers out there, however, will have their homes priced at the maximum loan values or sometimes even more than what they are worth... hoping that someone with cash will come in and pay their unrealistic price.  You have to watch out for this because it happens all of the time!

GOOD INVESTMENTS = HOMEWORK

Now back to the subject at hand... Mobile and Manufactured homes DO depreciate according to the NADA guide IF  the home is bought and moved or not sold as Land/Home.  The reason why they "depreciate" is because the only real way to appraise a home that is not permanently set or that will have the land included in the loan is with the NADA, and it does not account for comparisons or locations like a standard appraisal does (I discuss these type of appraisals later on in this blog).  No matter if you are looking at a new or used home... if you pay too much money for it up front then you will come out upside down at the end when you get ready to sell it, which is not a good investment.  DO NOT  let a salesman talk you into buying the first thing you like!  Do your homework and compare prices, quality, service, and warranty just to make sure you are getting the best deal available.  If you know the Year, Make and Model of a home and what options it has then you can get an accurate NADA value.

SOME ARE BETTER THAN OTHERS

Earlier I mentioned that the Brand of home (Make and Model) makes a difference on a mobile home's overall value.  Certain brands have traditionally had higher Book Values than others.  A good example of this is comparing a Palm Harbor to a Redman.  Palm Harbors generally always have high book values whereas Redmans generally are pretty low.  So, basically, these two homes should NEVER be the same price for the same size of home!  There should normally be at least $10,000 or more difference in price between the two.  If you happen to find a Palm Harbor and a Redman that are the same size and are the same price then either the Redman is WAY too high or the Palm Harbor is super cheap so again you have to do your homework.  Aside from the Book Value differences, some homes are more well known brands than others, which in turn can help you sell them easier.  I will use Palm Harbor again as an example because of their name recognition.  A Palm Harbor would be easier to sell to someone than let's say a Legacy.  The reason being is that people have heard of Palm Harbor  and know that they are well built homes compared to a Legacy, which they may or may not have ever heard of before and are built to a lower standard.  This is just something else to consider when purchasing a home that you intend to resell.  If you are wanting to purchase a manufactured home to be used as a rental home or purchase several manufactured homes to start a Mobile Home Park then there are more things to consider other than what I have already mentioned.  In short, mobile homes are good investments in both of those areas but I will discuss that in a different article.

GOOD INVESTMENTS = LOCATION

The last thing that I mentioned at the beginning of this article is that the location makes a difference on whether a manufactured home is a good investment.  As far as the NADA guides go, manufactured homes are valued at different prices depending on what region of the country they are located in, but not really enough to have a significant impact overall.  Where you will see the biggest impact is when a home is bought and placed on a piece of land and then they are sold together as one property.  The reason it makes such a difference is because of several things.  First of all, when you sell a Home and Land together then an actual appraiser is used instead of the NADA guide.  9.9 times out of 10 you will get a higher valuation out of the home itself as compared to the NADA.  Appraisers will often allow $45 to $50 per square foot for the home alone plus whatever value the land has.  The manufactured home, being already setup on the land with utilities, makes the land worth more as well.  If you own land in a highly desirable area or an area close to expensive homes and you place a mobile home on it,  the overall value with the home setting on it will be higher simply because of other people's desire to own it when you sell.  Here is a perfect example of what I'm talking about.  Our business is located in Kingston, OK which is really close to Lake Texoma.  There are a lot of resorts and marinas in our area where people buy manufactured homes and place them there for weekend getaway or seasonal homes.  A lot of the homes at these resorts have been there for 30 plus years and are in pretty rough shape.  The other factor here is that most of the time the land in which these homes are parked on is owned by the U.S. Army Corps of Engineers meaning that monthly lot rent is due just to keep the homes on these locations.  Here is the good part though...  Even though people own the 30+ year old home that is maybe worth $2,000 tops and they don't own the land but only have the right to lease it, they are selling these older homes and ability to lease those spots (from the Corps) for upwards of $50,000!!!  Then, the people that purchase from them buy a brand new singlewide home and basically give the 30+ year old home away to make room for the new one.  By the time the new buyers are finished, they will have close to $100,000 in a new singlewide home that is setting on one lot that they do not own and have to pay a monthly lot rent on!  That is what DEMAND can do for you!  Now this sounds like a made up scenario but I have sold many homes to these lake areas and seen this very thing happen over and over.  There is an old saying in the Real Estate world that names the top 3 things in what determines the value of a home... Location, Location Location!  If you buy a mobile home at the right price and you put in on the right location then it is worth what a ready, willing and able buyer is ready to pay for it!

So, to sum things up, the ability to determine whether or not a Manufactured Home is a good investment or not is completely in the hands of the person buying it!  DO YOUR HOMEWORK

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