If you’ve been itching to become a homeowner but can’t afford the hefty price of a regular home, mobile or manufactured homes could be just what you need.
Mobile homes have come a long way since the 1970s — both structurally and aesthetically.
Newer models are built up to HUD Code and look nothing like the campers you see on “Trailer Park Boys.” They’re spacious, highly customizable, and look pretty much like a traditional home.
That being said, there are some considerations to keep in mind before buying one, like the cost of the land where it’s going to be, long-term value, and financing options.
Are mobile or manufactured homes a good investment?
Mobile homes are considered affordable housing, but that doesn’t mean they’re dirt cheap. You still have to invest several thousand dollars to buy one, so it’s only natural to ask yourself whether this alternative housing will be worth the investment long-term.
Shaun Heng, a former investment banking analyst with expertise in commercial real estate and equity, says that the answer to this question will depend on what you’re looking to get out of your mobile home.
“If your main focus is a place to live, then a mobile home can be a great solution.”
But if you want to purchase a mobile home mainly to build wealth, you may be better off buying a traditional house instead.
Well, according to Heng:
“Buying a mobile home is kind of like buying a car. Its value will immediately begin to depreciate, and after only a couple of years, it could be worth significantly less than you bought it for.”
He also points out that selling mobile homes can become a headache, so this is something to keep in mind before buying.
Read more: The truth? Your house is not an investment
How mobile homes differ from ‘traditional’ homes: a cost comparison
|Mobile home||“Traditional” home|
|Purchase price (on average)||$81,900||$331,533|
|Utilities||$250 per month||$400 per month|
|Homeowners insurance||$300 to $1,000 per year||$1,200 per year|
|Property tax||Depends on the city and state, and whether you own the land or not. If renting a lot in a park, taxes are included as part of your rent.||$2,000 per year|
|Maintenance||$1,448 per year (following the $1 per sq ft maintenance rule)||$3,018 per year|
|Cost of land||$2,000 to over $10,000 (purchasing)
$200 – $2,000 / month (if renting a lot in a park)
|Included in purchase price|
|Transporting it to its final location||$2,500 to $10,000, depending on the distance and size (this can be bundled into your loan)||N/A|
Many newer homes are environmentally friendly, meaning they come with fewer costs
Remember the HUD Code I mentioned earlier? It was revised in 1990 to make mobile homes more energy-efficient and resistant to natural disasters, like hurricanes.
New models feature:
- On-demand water heaters.
- Energy-efficient windows.
- Higher levels of insulation all around — including underneath the home and around electrical outlets.
- Water-saving plumbing fixtures and faucets.
Some models even feature energy-efficient lighting and are ENERGY STAR-certified, meaning they generate fewer greenhouse gas emissions than most properties.
So, they’re not only good for your wallet (as you’ll spend less on utilities) but also are beneficial to the environment compared to many traditional homes.
How much does a mobile home cost?
The most significant appeal of choosing a mobile home instead of a stick-built or site-built home (aka “regular” home) as your residence is their price point.
According to Zillow, a typical home in the U.S. costs over $330k — a number that keeps climbing annually and makes my heart drop every time I think about it.
On the other hand, mobile homes sell for $81,900, on average, as per the Manufactured Housing Institute’s latest data. But some models can cost as little as $50,000, so you’d be able to buy your own place for less than a third of what you’d pay for a regular home.
Besides that, mobile homes are cheaper to maintain than traditional homes due to their size, plus you’ll save money on property taxes.
Read more: Why you should pay attention to property taxes when you buy a home
How do you move a mobile home? (And how much does that cost?)
Let’s say you get a job that requires you to relocate to another city or state, and you have a regular house or apartment.
If that happens, you have two options: rent your place or sell it while dealing with the stress of finding a rental or buying another place at your new location. But, if you have a mobile home, you can always take it with you.
It will cost you, and it won’t be as easy as you’d think. You’ll need to hire a professional company to make the move.
Brad Shechtman, managing partner at American Mobile Home Communities, says that, depending on the distance and size of your mobile home, you could expect to pay anywhere from $4,000 to $8,000 to move it. Still, that’s a cheaper investment than starting from scratch if you need to move long-term.
Is mobile home financing harder to get?
Mobile homes are affordable, but most of us don’t have $80k lying around to purchase out of pocket, which means you’ll have to look into financing options.
With a traditional home, you can always apply for a trusty mortgage to help finance your purchase. But with a mobile home, getting a mortgage can be tricky.
Let me explain.
Since mobile homes are, well… movable, they are not considered real estate. Instead, they are regarded as personal property, just like a car or an RV.
Mortgages are loans for real estate, aka for properties that are attached to land. So, for a lender to issue the loan, your mobile home must be placed on a permanent foundation, and you must own the land where your mobile home will sit.
Most mortgage lenders will issue a loan for CrossMod mobile homes, which are higher-quality models placed on a permanent foundation, are energy-efficient, and have drywall interiors, among other features that make them comparable to a traditional home.
These models are still under the $200,000 mark but are more expensive than your conventional mobile home.
The benefit, however, is that you may qualify for a lower down payment, as these are typically eligible for conventional loans backed by Fannie Mae and Freddie Mac, FHA, and VA loans.
What if you don’t own the land or don’t want a CrossMod home?
Good question. If that’s the case, you can always apply for a “chattel mortgage.”
A chattel loan is designed explicitly for movable property and is the most common financing option among mobile homeowners.
The catch, however, is that “chattel loans have shorter terms than traditional loans, and they do have higher interest rates,” says Ravi Parikh, CEO of RoverPass, a company that connects users to campgrounds.
Chattel loans usually have repayment terms of up to 20 years, instead of the usual 30 you’d get with a traditional mortgage, and interest rates can range between 7% to 10%.
So, your monthly payments will be higher than with a mortgage, but Parikh also notes that this means you’ll be able to pay off the loan faster, plus you’ll also be able to deduct the interest paid on your taxes the same way you would with a mortgage.
You can also take out a personal loan to finance your mobile home. However, these carry even higher interest rates than chattel loans and their interest isn’t tax-deductible, so these should be your last resort.
You’ll need to secure land
One of the biggest challenges of buying a mobile home is finding where to put it.
There are two ways you can go about it: you can either purchase a plot of land or rent one.
The latter is the most cost-effective and straightforward option, as you won’t have to spend money developing the land or pay property taxes — in most cases. But that doesn’t necessarily mean it’s super cheap either.
Shechtman, from American Mobile Home Communities, says that although some mobile home parks may charge a fee as low as $200 a month, these low-cost options are usually limited to remote areas. If you want to be near an urban area, you can expect to pay a couple of thousand or more, which ultimately increases the costs of homeownership.
Likewise, purchasing land in an urban area is much more expensive than in a remote location, plus you’ll have to deal with community zoning laws, which can potentially cause significant headaches.
If the land isn’t developed, meaning that if the space isn’t adequately divided or prepared to have your utilities hooked up, you can expect to pay $10,000 or more, between fees and permits to get everything up and running for your new home, in addition to the cost of the land.
Do mobile homes depreciate differently?
Unlike traditional houses, which usually gain value over time, mobile homes rarely appreciate. On the contrary, they tend to lose value over time. Parikh, from RoverPass, says.
“Generally, mobile homes depreciate at about 3% to 3.5% per year, which is slightly lower than the average home depreciation rate at 3.636% per year. However, keep in mind that only the value of buildings can be depreciated, not the land itself.”
They depreciate faster than a site-built home because mobile homes are considered personal property — not real estate. This means that it starts losing value as soon as it leaves the factory, so you’ll rarely recoup your investment or make a profit when you sell.
All that being said, they can still serve as an asset, especially with proper care and maintenance.
Melanie Musson, a finance expert at MobileHomeInsuranceQuotes.org, says that even though mobile homes don’t appreciate the same way as stick-built homes, they are still a step forward from renting, financially speaking.
“When you rent a home, you own none of the home’s value. With a mobile home, even though it depreciates, you still own the value that it does have.”
In other words, you can still make some money off of it if you decide to move on, either by selling it or renting it.
Modern mobile or manufactured homes are affordable, versatile, safe, and aesthetically pleasing, so they’re an excellent option for a starter or a forever home.
But whether they’re the right move for you will depend on your intended purpose.
If you’re searching for affordable housing, then look no further. But if you’re looking to build wealth long-term, it may be best to save up a little longer and go for a regular home instead.