Manufactured Housing: Gain Capital In a High Inflation Market

Small blue gray mobile home with a front and side porch with white railing

Drawing on multiple data sources, a recent report by the National Low Income Housing Coalition (NLIHC) suggests that low-income earners in America currently face a shortage of approximately 7 million affordable and available build-to-rent properties.

Meaning, for every ten households of meager means, there are less than four affordable homes nationwide. Keep reading to see how you, as a seasoned investor, can be part of the solution to resolve the ongoing housing crisis.

Are Capital Manufactured Homes a Good Investment?

Years of underbuilding, especially in states with robust economies, have created a huge housing deficit which is further worsened as young people enter the homeownership markets. It may seem like a hopeless crisis, but the housing shortage presents an opportunity for investors to innovate for progress.

You can protect your investment portfolio in a high inflation market by investing in manufactured homes. Historically, commercial real estate (CRE) owned and operated them to generate revenue as an effective hedge against inflation.

Done right, capital manufactured homes can help create affordable housing alternatives while providing seasoned investors with a more efficient way to establish a diversified real estate portfolio.

What Is the Difference Between Modular and Prefab?

Modular and prefab homes often refer to the same thing. Nonetheless, they’re a great alternative to traditional design-and-build dwellings because they are cost-effective and easy to assemble.

With a modular or prefab home, also known as factory-built or system-built, several components of the customized structure are produced off-site in a factory. The finished product is transported to the location to be assembled on a permanent foundation.

Modular and prefab home designs vary. Apart from being faster to construct than 100% site-built homes, they’re also considered a form of green building. This makes them a viable investment opportunity.

Modular homes exterior designs of modern architecture

What Is the Most Affordable Type of House to Build?

The average cost of building a home in the U.S. is approximately $287,466. Factors including your location, materials, cost of living, land, taxes, and more can impact costs while increasing new construction building expenses. With that in mind, the cheapest house you can build without breaking the bank is a less than 400 square feet tiny home for about $97,500.

With a 20 feet by 8 feet (160 square feet), or 40 feet by 8 feet (320 square feet) shipping container, you can build a tiny home in no time. It can also be prefabricated off-site and assembled on-site, thus making it a form of modular build that makes housing affordability possible.

What Is the Difference Between Factory-Built Housing and Manufactured Housing?

They are both off-site builds. The construction of factory-build or modular housing is done inside a building facility and then transported on-site for a permanent assembly.

Manufactured homes, sometimes called mobile homes, are not placed on permanent foundations and, therefore, can be moved from one location to another. Manufactured homes are built to the national HUD code, while modular homes, like traditional site-built homes, are constructed according to applicable state and local building codes.

Do Manufactured Homes Appreciate?

When manufactured home communities first came to light in the early 1900s, they had a bad reputation because of their association with poverty-stricken families. This, in turn, led to zoning ordinances and a significant drop in property value, more so than in traditional homes.

When seeking viable avenues for diversifying real estate portfolios, manufactured homes present a reasonable investment opportunity as they deliver a far better bang for the buck.

For example, a new construction costs around $150 per square foot, which translates to $300,000 for a 2,000-square-foot home. According to manufactured housing data from Homes Direct, in 2019, you could construct single-wide manufactured homes for under $64,000 and below $120,000 for double-wide models.

Modular home appreciation and tenant turnover are a course of concern among real estate investors. Investing in numerous factory-built houses allows you to set appropriate rent rates in line with current market conditions, consequently mitigating long-term vacancies or a drop in tenancy rates.

Manufactured homes have the lowest cost-per-unit of any real estate asset class and boast high cap rates on average. Subsequently, low manufactured home values per-unit pricing, high cap rates, and low maintenance costs make investing in affordable manufactured housing a gain magnet for investors.

Mobile home park

Manufactured housing investments are saving taxpayer dollars since they serve the most needy communities, as the largest source of unsubsidized affordable homes. With the growing demand for manufactured housing, this niche can be a money-making opportunity.

Pros and Cons of Investing In Modular Home Development

As you think about investing in modular or newer models of high-performance manufactured housing trends, here are the pros and cons, particularly from a financial perspective.

Rising sales, low costs, and the freedom to own a home with amenities similar to a site-built home are major selling points to hopeful homeowners. Consider the following points to help you make an informed decision on modular home development as a potential asset.

Pros of investing in modular homes

  • No construction delays or concerns with occupancy
  • Modular or manufactured homes have a lower cost-per-unit than any real estate asset class
  • Newer modular homes are functional, water-efficient, and resilient to the outside elements
  • High-performance manufactured homes use energy-efficient appliances, thereby significantly decreasing operating costs

Cons of investing in modular homes

  • You need to factor in manufactured homes prices associated with building manufactured houses, including but not limited to land, land rates/ taxes, customization, and modification costs
  • Potential resale challenge even for a high-end build, which may lower resale value compared to a traditional home of a similar build
  • While the bulk of the build is assembled off-site, the cost of pouring a new foundation may be costly
  • Modular homes or prefabricated houses have fewer financing options or other lending assistance for home buyers

Are you a seasoned investor looking at investing in affordable housing in a high inflation market? Consider capital manufactured homes, whose future outlook in addressing the national shortage of reasonably-priced homes looks promising.

Contact us, the Broadmark Realty Capital team, to determine your financing options.

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