The typical returns on investment that I have seen manufactured homes produce are far greater than most investors see with typical site-built homes. The reason for this is really quite simple. Site-built homes are generally larger, therefore requiring more of an investment into fix them up, as well as more maintenance throughout the years. Also, the median price of a site-built home is three times that of a manufactured home; however, the average rental rate for a three bedroom manufactured home is only slightly less than that of a starter home in the same area! While many people prefer a site-built home, there are also many people who want or need to buy or rent a manufactured home.

You can still use many of the same strategies with manufactured homes that you use with site-built homes, making only slight changes in the paperwork. There are a few characteristics of manufactured homes (and their buyers) that make them even more exciting. First, as we mentioned previously, their low price is a serious advantage. Did you know that you can often buy and clean up a manufactured home (usually 15 years old or older, though not always) for $5,000 or under? One reason this is possible is that the purchase of a manufactured home usually does not include the purchase of any land; the land is typically what appreciates on any home, not the home itself. Without any land increasing the value, the manufactured home continues to decrease in value, and at a faster rate than a site-built home would, since they generally are not as well-built.

Additionally, you have quite an advantage when fixing up a manufactured home: its size. The typical manufactured home is a three-bedroom home, all crammed into 1,000-1,200 square feet of space. This is great news for an investor, since the small amounts of carpet, paint, and other home improvement products are less expensive to purchase, as is the labor associated with them.

These are the two primary reasons why I could buy a manufactured home for a couple thousand dollars, invest a couple more in cleaning it up, and then re-sell it. However, why would you want to re-sell a home that is now worth only $10-15,000? Wouldn’t it be a much better option to rent out the home?

There are a couple of issues that come up when renting out a manufactured home. The first is that many manufactured home communities across the country are no longer allowing landlords to buy homes and rent them, due to absentee landlords and problem tenants. Also, selling a manufactured home requires much less effort than renting it, considering the ongoing responsibilities of management. However, the issue of compound interest must be considered. Hopefully, you have worked through the numbers on the savings end of things to see how much you can earn if you invested in stocks or mutual funds, but you may not understand how the same principals would that apply to manufactured homes. I think that the easiest way to explain it is to work through an example which illustrates the ROI (return on investment).

Let’s say you find a home for sale for $1,700. Believe me, finding such a deal is not as hard as one might think. After your purchase the home, you have to re-paint it, re-carpet it, and do some general maintenance and clean-up to make it a clean, safe home. Spending $3,000 is not hard to do, but if you are carefully plan and stick to a budget, you will be surprised how easy it is to fix up a manufactured home for that price. Now that you have invested nearly $5,000 in the home, you will mark the home up to $12-16,000 and work to find a buyer. Occasionally, it is possible to find a buyer who may want to buy this type of home for a lower price in exchange for paying in cash. For example, let’s say that on this deal, you are approached by a cash buyer offering $10,000. This deal is appealing, since such a deal would offer a 100% ROI in a very small amount of time and with very little at risk. However, an even better arrangement would be to offer financing to a buyer for a slightly higher asking price, let’s say $14,000. In order to make this a more convenient offer for your buyer, you can offer to accept low monthly payments of $311.42 over 60 months, rather than requiring the $14,000 upfront. Now you have an owner in the home, rather than a tenant, meaning that he or she is solely responsible for caring for the home. Hopefully your buyers made a down payment that was close to the $5,000 you put into the home, but even without such a down payment, if you multiply their payments out ($311.42 X 60), you would see a total income of $18,685.20 for this one property! That is a gain of $13,685.20 (over the course of 5 years). Now you are at 273% ROI! That is a nice ROI.

Even though the yearly gain may be higher if you can sell all the manufactured homes you buy for cash a month or two after you buy them, this deal is a lot more common and gives you cash flow, which gives a peace of mind all its own. And since the homes are sold, the management is minimal. I hope you now see manufactured homes in a new light. Happy investing!