Is a Trailer House a Good Investment?

A manufactured home is a distinctive residential property, constructed in a factory rather than on-site. These homes adhere to federal building codes established by the U.S. Department of Housing and Urban Development (HUD Code), effective June 15, 1976. This standardized process differentiates them from traditional site-built homes.

Understanding Trailer Homes as an Asset

Manufactured homes are designed with a permanent chassis to ensure their transportability. This design sets them apart from traditional stick-built homes, which are constructed piece-by-piece on their permanent site, and from modular homes, which are transported in sections and assembled on a permanent foundation.

A crucial distinction for manufactured homes is their classification as personal property or real property. When on leased land or not permanently affixed, a home is personal property, with ownership transferred via a title certificate. If permanently affixed to land owned by the homeowner, it can be reclassified as real property by eliminating the vehicle title. This reclassification impacts financing, tax implications, and potential value changes.

Factors Influencing Investment Performance

The value of manufactured homes depends on their classification. Personal property homes may depreciate, similar to vehicles, due to their movable nature. However, homes permanently affixed to owned land and titled as real property can appreciate at a rate similar to site-built homes, often tied to the increasing value of the underlying land.

Location significantly influences investment performance. For homes in a manufactured home community on leased land, the community’s quality, amenities, and management impact desirability and resale value. For homes on owned land, the land’s value, proximity to services, and overall market conditions are primary drivers of investment performance.

Ongoing costs are a consideration. If land is leased, monthly lot rent ranges from $100 to $1,200, averaging $400 to $593 nationally. This fee may include some utilities. Utility costs average around $430 per month, though older homes might incur higher expenses.

Annual insurance costs typically range from $700 to $1,500, varying by location, age, and coverage. Property taxes depend on the home’s classification; personal property is taxed like vehicles, while real property on owned land is subject to standard real estate taxes. Maintenance expenses are also important, with recommendations to set aside 1% to 3% of the home’s value annually for upkeep, such as $1,200 to $3,000 for a $100,000 home.

Market demand for manufactured homes is influenced by their affordability compared to site-built homes, which contributes to consistent demand and resale liquidity. Generating rental income is also possible, similar to other residential properties, requiring consideration of local rental markets and property management. This potential adds another dimension to the investment analysis.

Acquisition and Disposition Considerations

Financing for manufactured homes varies based on their classification. For personal property, often on leased land, chattel loans are common. These loans are secured by the home and typically have shorter terms and higher interest rates than traditional mortgages. They often require a minimum FICO score of 575 and a down payment as low as 5%.

When a manufactured home is permanently affixed to owned land and converted to real property, it may qualify for conventional, FHA, or VA loans. Qualification requires the home to be built after June 15, 1976, permanently attached to a foundation with wheels and axles removed, and its vehicle title eliminated. Conventional loans may require a minimum credit score of 620 and a down payment of at least 5%, often with mortgage insurance. FHA loans may offer lower down payments, potentially 3.5%, but require mortgage insurance.

Titling and ownership transfer depend on property classification. For personal property, transfer involves the home’s title certificate. For real property, the process involves recording a deed with the county after the home is permanently affixed to the land and its title converted. This conversion process often involves filing an affidavit of affixation and requires the homeowner to also own the land.

Acquisition costs include delivery and assembly (averaging $9,000), site preparation, and utility hookups ($6,500 to $30,000, depending on local infrastructure). Foundation costs range from $5,000 to $40,000, depending on type and complexity. Selling costs may include real estate agent fees and potential expenses if the home is relocated by the buyer.