[Editor's Note: This is a guest post from Rachel Hernandez, the spouse of a physician and a real estate investor who has written a book on investing in manufactured housing entitled Adventures in Mobile Homes: How I Got Started in Mobile Home Investing and How You Can Too! We have no financial relationship, but like every link to a book on this website, if you buy anything from Amazon after clicking on the link this website receives a small commission. She titled this piece: Manufactured Housing: An Opportunity in Disguise. The more generic title is mine.]
When most people hear the word “mobile home” (i.e. trailer, manufactured home, etc.), vivid pictures of run-down, older trailers and rougher looking people come to mind. As depicted in the movies, manufactured housing has a long-term stigma associated with it. Like many people, I too believed in the stigma. It was not until I actually studied the industry and learned the business from the inside out that I discovered it was different than I had imagined. In reality, manufactured housing turned out to be an opportunity in disguise.
During medical school, my husband became interested in personal finance when he picked up the book Rich Dad, Poor Dad by Robert Kiyosaki. Inspired by the material, he shared it with me — it completely changed the way he perceived money. It soon dawned on him that real estate investing would be our path to creating a life of financial freedom. As the entrepreneur between us, I never pictured myself owning and operating a real estate business. I mean houses, seriously, how exciting is that?
To be honest, I had awful memories of real estate growing up. As a child, I remember riding in the car with my parents looking at different neighborhoods and houses with real estate agents. Time stood still. Searching for that perfect place to call home seemed to never end. House after house, neighborhood after neighborhood. Being that I came from a family of professionals, we moved every five to seven years. Each time, it would be to a nicer neighborhood and a bigger house. In essence, my parents were playing the game of keeping up with the Joneses.
Fast forward into residency.
After medical school, I was tasked with the job of building up our real estate business while my husband labored away in residency. As a result, I left the corporate world as a business-to-business sales executive to start working on our business. Initially, our plan was to build enough cash to eventually buy and hold properties for cash flow. At first, I started finding deals for other investors. During one of my earliest deals, I was paid a whole year’s salary. It was amazing! Though, there were many times when I questioned exactly what we were doing. Life was hard. We both put in many hours. Things were hectic. What they don’t tell you in medical school you learn along the way. I spent many days and nights away from my husband during residency. Life was not easy.
Building Our Portfolio
Over the years, we started building up a small portfolio of rental properties. At one point, my husband had looked into alternative real estate investments. Here he discovered the little niche of mobile home investing. When he first brought this up to me, I was appalled. Mobile homes? Are you kidding? No way. What kind of people will we be working with? What types of neighborhoods exist? Reluctantly, I decided to give it a try. Though, I let one bad experience stop me. So, we continued to focus on single-family homes.
5 Years Later
At this point, I was managing our portfolio of real estate properties. Life was still hectic. I simply did not enjoy the real estate business and had questioned the life we chose. Is this really what I want to be doing for the rest of my life? Managing rental properties with the headaches of paperwork, delayed closings, and evictions? At one point, we even hired property managers to take care of our properties. But even then, I had to manage the managers. To say the least, I found myself buried in the administrative side of the real estate business. Life was miserable.
Overseas and away for 4 years.
After residency, my husband was assigned overseas (as he received a HPSP scholarship) with the military. The first year was especially hard on us due to an unaccompanied tour to South Korea. The next three years were accompanied in Germany. Instead of living there with him, I continued to build up our real estate business while flying out every couple of months to visit. Though it was hard to be apart, we both wanted more out of life. We knew we had to work hard now to ensure a better future. Upon his departure, we liquidated our entire real estate portfolio and started over. This time around we revisited the niche of mobile home investing.
Life investing in mobile homes.
The second time around I had more experience for comparison. Due to our struggles with single-family homes, my perspective had changed. Sometimes we only see what we want to see, hear what we want to hear. Kind of like what you see in the movie 8 Mile. Consequently, we shut everything else out. This time I was listening. Mobile homes were not the asset class I thought them to be. Just like single-family homes, mobile homes are no different. There are different types of neighborhoods and classes of people who make up manufactured housing — not all communities are created equal.
Contrary to popular belief, neighborhoods are not limited to the small, run-down trailers we see in the movies. Sure, they still exist. Though, it only represents one segment of the population not the entire industry. There are other types and classes of people and neighborhoods — nicer ones where retirees and professionals lived. Traditionally, we think of them as an asset class reserved for the disadvantaged. Though, as I discovered, it is not always the case. There are many well-to-do people who choose to live in manufactured homes across the country and around the world. Just like single-family homes, there are lower-end, middle-of-the-road and higher-end neighborhoods. Each community will attract and cater to a certain demographic. While a significant portion on the higher-end specifically caters to the senior market and young professionals, there are others who cater to the middle-of-the-road and lower-end segment of the population — there is something for everyone.
Even more is the flexibility I saw with mobile homes. Mobile homes can be sold by themselves for just the home or as a package (just like traditional real estate) attached to a piece of land. Even more so, you always have the option of attaching or un-attaching mobile homes and vice versa. No longer are you limited to a location. Mobile homes can be moved. Sure, they can exist in a community. Though, you always have the option of moving a mobile home to a piece of land, another neighborhood or your own lot. Try doing that with a single-family home! Not a chance.
Aside from flexibility, mobile homes are very affordable especially for professionals. Compared to single-family homes, mobile homes are drastically reduced in price. Sure, they may not be built with exactly the same materials as single-family homes. Since manufactured homes are built in a factory, there are specific standards builders must adhere to in compliance with the Department of Housing and Urban Development (HUD) laws and requirements. With such high regulations, quality control is monitored very strictly. Essentially, manufactured housing allows professionals to get into a home whether it be as a personal residence or as an investment for a fraction of the price of single-family homes. As a result, expenses such as taxes and insurance are reduced. With the types of homes we buy, we purchase them with cash essentially wiping out the mortgage and make the cash flow on the spread. Imagine having a home paid off — free and clear. As a high income professional, it’s definitely a possibility.
Renting and Homeownership
Mobile homes can be an alternative option for either renting or buying. Whether it be for the short-term or the long-term, manufactured housing comes with advantages. Having a five-figure salary is dramatically different from a six-figure a year salary. If pained with having to sell a mobile home, it is less of a financial burden than having a single-family home with an extremely large mortgage looming over your head. In my experience, I've seen military families and parents of college students buy them hoping for a long-term situation. What turns out is sometimes they move away and end up selling or renting them out. Younger couples also tend to buy mobile homes eventually moving on. Older couples buy them as a way to scale down and reduce expenses. Then there are those who have lived in mobile homes all their lives constantly upgrading. Despite the situation, there is a large array of manufactured home consumers. Some have even become accidental landlords renting them out or keeping them for vacation rentals. As in all real estate, the neighborhood is key. Being in a particular neighborhood will attract a certain type of demographic.
For professionals with high incomes, mobile homes can be an asset class where one can acquire a lot of properties for a fraction of the price. Though just like real estate, there is management involved. After over a decade of experience in real estate investing, I've learned it’s all about the neighborhood. Finding the right neighborhood that works with your personality is one of the keys to success. Had we continued to follow some of the advice of other investors in the early years to buy less expensive homes in not so nice neighborhoods (which did happen), we may not be where we are today.
Apart from acquiring property, there is also an opportunity to invest in and purchase mobile home notes [i.e. you can be an equity or a debt investor-ed.] In this case, you will work with another investor with experience. Either they sell you their notes or you can lend them a small amount of money for their deals. Either way, it does involve due diligence but when you find the right person to work with who has the experience and you can trust them it can be extremely profitable.
Note: A word on investing. We do not merely invest in mobile homes. Like this blog, we too believe in the mantra of “Don’t put all your eggs in one basket.” As a precaution we have built up a portfolio with retirement accounts (i.e. Roth IRA, TSP, 401k, etc). With any business there is volatility. So, we want to prepare ourselves for the unexpected.
Is manufactured housing the right vehicle for you?
The purpose of this article is not to convince you to buy or invest in mobile homes. Mobile homes are not for everyone — it is simply another option. It is written here to make you aware alternatives exist. Traditionally, mobile homes have been associated with a certain class of people. Though, what I’ve learned is that there are generations upon generations of families who have all grown up and lived in mobile homes. Not just lower-end neighborhoods but nicer communities. Communities they are proud to live in. Neighborhoods made up of seniors and young professionals. Today, mobile homes are not restricted to only one income class.
In the end, I am glad we revisited the niche of mobile homes. To tell you the truth, it is an asset class overlooked by many. Due to the negative stigma associated, many professionals look down on it. It was only through experience did I begin to see what others did not: I saw an opportunity in disguise. After over a decade of investing in real estate, I can honestly say mobile homes is the path that helped us get to where we are now. We have the time to do the things we want to do, not have to do. My husband does not have to work full-time. Nowadays, he works three days a week from home as a consultant. The rest of the time is dedicated to mobile home investing and spending time with family. Clearly, this was not the path we imagined. Though, it was the dream of living a better lifestyle. And, that’s what counts the most.
Readers- What do you think? Have you lived in a mobile home? Have you invested in mobile homes? How did it treat you? Would you consider this investment? Comment below!