Mobile Home Flipping: How to Do It and If It’s Worth It
The housing market is experiencing rapid price growth with enticingly low interest rates. As a result, more and more investors are capitalizing on the opportunity to purchase homes, renovate them swiftly, and sell them at a profit.
However, despite the surge in home flips and investor optimism regarding returns, home flipping profits are on a declining trajectory—only at 32% in 2021 from 44% the previous year. The reasons for low yields are, but are not limited to, supply chain delays and low inventory. That means that house flipping will become challenging and less profitable.
Having said this, the question now is, should you diversify your home flipping investments with things like mobile homes to make more profit? Is it worth the risk?
Pros of Flipping Mobile Home
Investing in mobile homes is a risky but lucrative real estate venture. It’s popular among real estate investors because of the high demand for mobile homes among renters, and because it’s more affordable to buy mobile homes than single-family homes.
The affordability of mobile homes allows investors to buy low and sell high—an ideal situation for flippers looking to turn a quick profit.
Here are four other advantages of flipping mobile homes:
#1 Lower Upfront Capital
One of the most significant advantages of flipping mobile homes is the relatively lower upfront capital required than single-family homes. This can be particularly appealing for investors looking to minimize their financial risks or venture into real estate with a more modest budget.
The data from the Manufactured Housing Institute (released in August 2022) revealed that the average cost per square foot for mobile homes was just $72.21, significantly lower than a brick-and-mortar home, at $143.83. With the same budget, you can invest or save more with mobile homes. Or you can also buy multiple mobile homes at a time.
#2 High Demand
Mobile homes’ affordability is why they will always have a high demand among renters—presenting a golden opportunity for house flippers. As of 2023, mobile homes or manufactured homes represent 76% of all affordable unsubsidized US housing units, meaning that you’ll always find a tenant or buyer if you rent out your flipped home or put it up for sale.
Of course, you shouldn’t overprice your property just because it’s in high demand. Remember, mobile homes are so popular because they’re affordable, and your target market is more likely to be price-sensitive.
#3 Quick Flipping
Mobile homes are known for their relatively shorter renovation and flipping timeline. Unlike single-family homes, which often involve extensive remodeling, mobile homes require fewer repairs and upgrades. This means you can complete your projects and potentially sell them quicker, maximizing your profits.
#4 High ROI
Due to the lower upfront costs and faster-flipping timelines, mobile homes can offer a higher return on investment (ROI) than single-family homes. So, if you’re looking for a lucrative endeavor in the real estate sector, mobile homes can be a great way to boost your financial success in the flipping game.
Cons of Flipping Mobile Homes
As much as flipping mobile homes is enticing, it’s a unique market requiring different research and approaches than a normal stick-built home flipping. So, before delving into this venture, it’s essential to know the drawbacks of mobile home flipping. Only by understanding its downsides can you determine whether flipping mobile homes will be worth your time and money.
Here are three disadvantages of mobile home flipping:
#1 Depreciates Faster
While single-family homes tend to appreciate over time, mobile homes experience faster depreciation. This means you must carefully consider a mobile home’s resale value and potential profitability before investing money in it.
But there are ways you can appreciate the value of your mobile homes, like if they’re well taken care of and if they’re installed on land permanently. That’s why renovating mobile homes is important because it’s the key to selling a used mobile home at a profit.
#2 Limited Location
Just like any real estate investment, location plays a crucial role in the success of flipping mobile homes. Perhaps, the location of your mobile home is more critical than renovation. When your mobile home is situated in a desirable location, it creates high demand, high rent rates, and high sales prices.
So, what makes a location desirable? It’s when your home is near essential staples like grocery stores and public transportation. Failing to secure these staples will lead potential tenants and buyers to pass up on your property, regardless of its low price.
#3 Financing Challenges
Unlike single-family homes, mobile homes can be more challenging to finance. Many traditional lenders, like banks, view mobile homes as high-risk investments, making them more cautious about providing loans for mobile home flipping projects. As a result, you will have to explore alternative financing options, such as private lenders or partnerships, to fund your investments.
7 Steps on How to Work with Flipping Mobile Homes
1 Determine a location: You have two options for finding a location for your mobile homes—either on land or in a park. Whichever of the two you’ve chosen, remember that it’s vital to choose a location with a decent neighborhood, meaning low crime rates and access to essential businesses. Plus, you want to avoid areas already over-saturated with other mobile home flippers.
2 Know your end goal: Decide if you will rent out your flipped mobile home or sell it afterward.
3 Find motivated sellers: Motivated sellers will sell their properties below market value, which means you’ll be in a better bargaining position. That’s because they’re prioritizing unloading their responsibilities to the property more than earning a profit.
4 Evaluate the deal: Determine the value of your property by using the comp method. This method means comparing your property to other properties recently sold in the neighborhood. You can do this by hiring an appraiser or using websites like Realtor.com or Zillow to get ballpark figures and see if you’re getting the most out of a deal.
5 Negotiate and close: As an investor, the money you make largely depends on how well you negotiate. The key to negotiating better contracts is reframing the situation for the seller to convince them to sell the property at a lower price. Once you get a deal that’s ideal for you, then you can start closing the deal. Read our article on how to negotiate and close deals effectively.
6 Keep your flip on a budget: As a flipper, one of your primary objectives is to make your property appealing enough for buyers. But what you don’t want to do is overdo the renovations because that’ll only lead to lower profits. The rule of thumb is to spend no more than 70% of the after-repair value minus the costs of repairs on a property. Here’s a more detailed explanation of how you can maximize the profits of your flip projects.
7 Market the property for sale or rent: The key to making the most money from a flip project is finding a tenant or buyer quickly. You can market your mobile home faster in two ways: Partnering with an expert agent and pricing the property competitively. An experienced real estate agent helps you determine how to make your property more appealing to local buyers and know the perfect price for your mobile home.
Mobile Home Flipping: Navigating Profitability
In the ever-evolving world of real estate flipping, mobile homes present a unique opportunity for flippers seeking to diversify their portfolios. However, deciding to delve into mobile home flipping requires careful consideration of the pros and cons. While the lower upfront capital, high demand, quick flips, and potentially high ROI are appealing factors, the faster depreciation, location challenges, financing difficulties, and limited renovation options must not be overlooked.
Is mobile home flipping worth the investment? The answer lies in your investment goals and risk tolerance. If you’re looking for a venture with lower upfront costs, faster turnaround times, and potential profitability, mobile home flipping can be a viable option.