What are the long-term investment risks and rewards of buying a mobile home in a park?
Are mobile homes worth buying? That’s what home-seekers (not flippers) want to know. Are mobile homes a good product, a good investment, a good alternative way to beat the affordable housing crisis? Do buyers get their money’s worth?
Notice: Beware of Misleading Cost Estimates From Uneducated Publishers
Some real estate sales web sites are showing falsely low costs. Their estimated periodic cost numbers are misleading. Clearly they have poor knowledge of how manufactured housing parks operate. They mistakenly treat manufactured homes in parks as they would regular site-built homes (AKA stick-built). But site-built homes don’t have monthly land rental fees like manufactured home parks.
In addition to normal homeownership costs (mortgage, maintenance, insurance and utilities) manufactured homes in parks have land rent costs that are usually a significant portion of the cost of living in the park (see “Average Space Rents” for example). These rental costs are also known as space rent or lot rent costs.
Unfortunately, some real estate sales organizations fail to mention space rent in addition to the other home ownership costs. Additionally, land rent costs may be hard for homeowners to predict into the future because some landlords may hike rents higher than homeowners expect. This can happen when the park is sold to a corporate park aggregator or when management changes.
Some publishers may list “HOA fees” along with the estimated mobile home park costs. The HOA fee they describe is often the land rental fee. Although misnamed, at least the additional cost is included in the information. But there may be both HOA fees and land rental costs required in some parks. Buyers should inquire about missing cost information and question the accuracy of publishers.
The mistaken real estate web sites fail to mention the trapped nature of the manufactured home owner in a privately-owned park along with other conditions. The homeowner’s most expensive and immovable asset is permanently attached to potentially ever-increasing and sometimes unpredictable rental costs.
To be a smart shopper, you should consider ALL the conditions before you buy. Publishers should cease and desist presenting misleading consumer information.
Things to Think About When Shopping for a Manufactured Home in a Park
Living in a typical for-profit mobile home park is much more complicated than newcomers, and even too many old-timers, may realize. Are customers getting a false sense of security and stability?
Reframe the question to: “How does paying for a home I own, but renting the land it sits upon, compare to other forms of shelter, over the longer-term?”
By asking the right question, we can get the good answers. One emerging trend is increased public awareness of the risks of renting land in a mobile home park. While initial costs may be lower than site-built homes, will they stay that way? A park may change management, greatly increase rent and cause home values to drop far below what was originally paid.
Some mobile home parks are quite attractive and affordable compared to nearby alternatives, but that is just the beginning. Mobile home buyers need to think about the middle and the end if they care about their savings and financial prosperity.
What may seem like a savings in the first few years may turn into a loss in the following years. Buyers should ask themselves: “What are the chances of that happening to me? Is it worth the risk? If I take the risk, how can I manage the loss if the investment turns against me?”
The lenders, real estate brokers and landlord’s employees all make a profit, but what did they fail to mention? Ask: “Are they telling me everything I should know?”
Top 12 Issues for Mobile Home Buyers in Parks
- Location: The future depends on where the mobile home sits
- The hidden costs of buying a mobile home
- Pros and cons, do’s and don’ts of buying a mobile home
- Short term, move-in, “get started” discounts and deals
- What are the risks?
- Never “walk away”
- Retiring in a mobile home
- Comparing mobile homes in parks to other forms of housing (comprehensive table included)
- What is different about the house?
- What is different about renting land?
- Your dependency on landlord goodwill
- Minor money-saving tricks and tips