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Real Estate Investing : Investment Property Last Updated: May 14th, 2012 - 22:24:01

Four Major Types of Real Estate You Should Consider To Invest III - Manufactured Homes

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Manufactured homes are another interesting form of housing. First, let me explain the terms. Manufactured homes consist of three different kinds of housing. The most common being mobile homes.

Mobile homes are sections of homes that range anywhere from ten to fourteen feet wide which are constructed in a factory. Axles with wheels are put underneath the floor of the section of the home and then a truck literally pulls the section to the site where the home will be. More than one section are often put together creating a home that can be anywhere from twenty to twenty-eight feet wide, in the form of what is known as a double-wide. There are even triple-wides, which can produce a home that is as wide as forty-two feet. The length of these units can range anywhere from twenty-eight to sixty plus feet long. You can see that you could produce a home that is sixty feet long by approximately forty feet wide, giving you a significantly sized house of almost 2,500 square feet.

The misnomer here is that these homes are generally called mobile. They are only mobile in their delivery from factory to their permanent site where they are then bolted down with steel straps to concrete anchors in the ground. The wheels are removed. Often other on-site amenities such as walkways,landscaping, driveways, site-built garages, or carports are added on. It's important to remember that these homes (and I'm not talking about RV trailers) are not mobile once they are in place. This has great significance in terms of what we will discuss later on leasing.

The second type of manufactured homes are called modular homes. These are often very similar to manufactured homes in that they are homes built in sections of various sizes. But, instead of having axles and wheels put underneath the floors and being pulled to the site, they are placed on the back of a flatbed truck and driven to the site.

The third type of manufactured home is the pre-fab home, in which sections of homes are built in a factory, then put on the back of a truck and driven to the site. These pre-fabricated sections of the home are then bolted and assembled on site. I will limit my discussion to mobile homes, as this form of housing is, by far, the most popular of the three.

Manufactured homes have been quite popular in certain sections of the country or in certain pockets throughout the country. Invariably, again, whenever I am doing a seminar I ask the audience to tell me why they think manufactured homes are so popular. Hands usually shoot up with the answer, "because they are cheap." I always find it interesting that the word used is never "inexpensive," but "cheap." There is a definite perception on the part of the public that manufactured housing is not substantial construction. There is a negative connotation to its quality and its value. The general perception of manufactured housing is probably more correct than not, however, I hasten to add that manufactured homes can be a wise and good purchase for the needs you have in mind. It all depends.

If you haven't been in a manufactured or mobile home, or haven't been in one in the last ten years, you might be surprised. They can be quite comfortable and attractive. Many of them have vaulted ceilings. Many of them now come with drywall  instead of the photo-finish wallpaper for which they are famous. You can push on the walls and they won't bend in like they used to, indicating a cardboard-like construction. They don't have little RV-type toilets anymore, and some can have quite large and expansive garden bath configurations off the master bedroom.

In short, they can be quite nice. In terms of construction, manufactured homes are built according to federal codes which are dictated by HUD. There is a certain advantage to a mobile home in that it is engineered to twist and shake as it is driven down the road from the factory to its final destination. In many respects, a manufactured home  could be one of the safest units you could be in if you were in an earthquake zone because they take to shaking so well.

Mobile homes are generally viewed as being the most unsafe type of housing in the event of high winds such as hurricanes. This is often true, but it usually has more to do with the configuration of the carport and/or garage attached to the unit and how well the unit was bolted down to the ground. One of the notorious problems with manufactured homes in high winds is that the winds come up underneath the carport roof that is attached to the mobile home and lift the roof up, peeling the rest  of the roof off of the house. Another common problem with manufactured homes in high winds is that they are not sufficiently bolted into the ground. Many areas now have building codes which require sufficient tying down into reinforced concrete in the ground which should hold the home snug to the ground in high winds.

But having said all that, I will agree that manufactured homes are probably the least substantial form of construction and generally the least attractive form of housing out of all the choices. Manufactured homes are inexpensive. However, I challenge that the reason for their popularity over the years is solely due to price. If such were the case, then condominiums in conventional locations would have proved to do much better throughout many out-of-state resort areas than they have.

What the developers of manufactured homes realized a long time ago was that since they didn't have a product that was anything exciting to write home about, they would provide something else they knew the buyers in these developments wanted, and that was lifestyle. So, many of the developments started to, and still do, provide community amenities which makes the purchase of a manufactured home attractive.

They build a clubhouse where you can go for activities such as playing cards, or going to a Super Bowl party, or having a dance. They build a large pool, not just a little pool like the one next to a high rise condominium. Maybe they put in four tennis courts instead of one. 

They may even have a recreation staff making sure there are always lots of activities and events. This is often the key to a manufactured home development's success. Having had the experience of working in both manufactured  home sales and in subdivisions with site built homes, I have found that there seems to be something magical about manufactured home developments that create a more friendly, a more democratic and a more exciting lifestyle than seems to develop in country club or subdivision settings where the housing is more substantial.

Other than the fact that its not the most attractive product in the world, what is the major down side to manufactured housing? Usually 

when I ask this question at seminars I get the right answer. And you know what it is. It's that these homes will not appreciate. As a matter of fact, in most cases, they will depreci ate in value. I emphasize this point because you will have sales people and developers try to convince you that the homes in their development do appreciate. Though there may be the odd exception, and you might point to particular times of accelerated inflation in which homes actually did appreciate, over the course of time, they will not appreciate and they will, in fact, depreciate. Make no mistake of that.

So therefore, you should consider purchasing a manufac tured home much as you do fancy car (after all they often cost about the same) and that is with the expectation of depreciating value. If you purchase a manufactured home, say, for fifty or sixty thousand dollars and plan on selling it fifteen years later for ten to twenty thousand dollars, then you can only be pleasantly surprised in the end if it so happens that you can sell the home for more than what you planned on.

Another issue with manufactured homes is that, as with condominiums, you are paying a monthly maintenance fee. In addition, if you are purchasing the land underneath your manu factured home, then you are also in a homeowners association.

Another issue that needs to be addressed in the purchase of manufactured homes is pass- through cost. This is an issue that I will elaborate on in the chapter about Leasing Versus Buying. Suffice it to say, if you purchase a manufactured home in which y ou are leasing the land underneath, or even if you are purchasing the lot but the developer maintains ownership of the common area such as roads, clubhouse, et cetera, then be advised on this issue because there are hidden costs. The developer will not share these with you, but they are buried in language in the lease or maintenance agreement. It is important that you u nderstand what these issues mean to you in terms of your monthly and annual budget and housing costs.


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