The Basics of Affordable Housing

Before you can begin to invest in mobile homes, you must first understand your customer. For those families with household incomes under $20,000 per year - using the government's own ratio of housing cost to income of 33% - their housing budget is around $500 per month. At the same time, the average cost of an apartment in the U.S. in 2010 was around $1,030 per month. The point is that this market segment is extremely thankful to find something that they can afford, and is not very discriminating on the quality of the product. They are looking for basic shelter - literally a roof over their head, a solid floor, running water and sewer, and heat in the winter. These customers are not expecting fine carpets, hardwood floors, upscale cabinetry. As a result, a successful investor in mobile homes will not focus on providing more than the basics. That is not to say that the home should not be clean and attractive. But the American obsession with upscale bathrooms and kitchens has no place in affordable housing.

And before you think that this customer is different than you and me, look around you. If you earn $10 per hour or less, you are in this segment. And that is a giant pool of jobs in America today. Almost everyone who works at the grocery store, McDonald's - everywhere you go - earns in this range. And as America's economy continues to decline, this number grows.

Why Mobile Homes Are The Answer to Affordable Housing

Mobile homes are the lowest cost form of detached housing to build. It costs less than $30 per square foot to build a mobile home, as opposed to around $100 for a stick-built home. And used homes often sell in the area of $10 to $15 per square foot. HUD has controlled the construction standards of mobile homes since the 1970s, with the goal of keeping costs at a minimum. If there's been a way to shave costs, it's been done.

The other key is the quality of life that a mobile home can provide the resident as compared to other inexpensive housing options. Unlike an apartment, the customer has nobody banging on their walls or ceiling. They have a yard. They can have a pet. Basically, mobile homes allow residents to have self-respect, and a "neighborhood" feel that supports a healthy lifestyle.

Why Mobile Homes Are Easy To Renovate

Mobile homes have some unusual attributes that other forms of housing do not share. One is that they have no permanent foundation. A mobile home's foundation is nothing more than a steel chassis, to which the wooden floor is attached. There are so slabs and no piers - nothing expensive to settle or crack. Leveling a mobile home costs in the hundreds compared to a stick-built home's thousands. All utilities run in a common "trough" as opposed to the myriad of wires and pipes in a stick-built home. This makes it easy to locate and repair the water, sewer and electric pipes and lines.

One of the most unusual components of a mobile home is the fact that none of the walls are load-bearing. A mobile home is structurally similar to a shoe box - the walls and roof are the only components needed to make it stand up. This gives you much more freedom in renovations, as virtually all internal walls are simply cosmetic.

An Unbelievable Amount of Demand

If the U.S. is in a recession, you would never know it if you run an ad for a mobile home for sale or rent. Even in a small market, you should receive 30 to 50 calls a week in response to your ad. At a mobile home park in Pueblo, Colorado recently, the number of calls exceeded 150 in one week. Why all the calls? Because there is a huge, unsatisfied demand for affordable housing. But that's not the whole story. The other cause of the giant demand is the poor quality of traditional apartment offerings. Have you seen an affordable housing apartment complex recently? Anyone who thinks that mobile home parks are unattractive has not visited apartments. The true crime center of most cities today are the lower-income apartment developments, with drug dealers standing out in front and prostitutes, gangs and drug addicts living inside. This is a horrible environment for any family or individual to live in, and many buyers and renters of mobile homes are fleeing from these terrible situations. In fact, most cities now view aging apartment complexes as their #1 problem - not trailer parks.

Healthy Numbers

Mobile homes are an attractive investment due to very attractive numbers. Essentially, it is easy to sell a mobile home for much more than you paid for it. A mobile home that you buy and renovate for $8,000 can be sold for $15,000 and a home that costs $12,000 can be sold for $30,000. You can buy them relatively cheaply because most people do not want to invest in this asset type. At the same time, there is a huge supply/demand gap, so you can price them high without much competition. The important fundamental - and the one that needs to be your guide in every decision you make - is to stick with the business model of affordable housing. You have to construct the monthly payment , including mobile home park lot rent, to not exceed around $500 per month. This is what the customer can afford. If you place the consumer in a position of having a bigger monthly obligation than they can afford - as was just demonstrated in the sub-prime mortgage meltdown - you will end up in endless defaults. This serves no one, as you are constantly having to clean and re-sell the home and your customers are denied the affordable housing, and long term benefit, that they are searching for.

Conclusion

Affordable housing is going to be one of the key investment sectors in real estate in the coming years. Get in now, on the ground floor. You can obtain spectacular returns and -- equally important -- provide nice housing to hard-working Americans who need it badly. This is a giant market, and one that you will be hearing a lot more about in the future.

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Dave is one of the leading Mobile Housing Industry experts. He has purchased over 100 mobile home communities, and through MobileHomeParkStore.com and Mobile Homes for Sale websites, has helped thousands of people buy and sell mobile home parks and homes. Dave also maintains Mobile Home Park Directory.

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