Do you own a mobile home that you don’t reside in, but you’re not sure what to do with it? Would you like to buy a mobile home but not quite ready to move in yourself? Or do you just want to make an investment?
Well, learn how to rent out your mobile home and find the solution to your problems!
While it might not be the first option that comes to mind when you look to make an investment, renting out a mobile home is an excellent opportunity to make some extra income. Nothing comes free or easy, and there are plenty of traps waiting for the uninformed owner. We are here to point them out to you and to help you avoid them.
In this article, we’ll cover some of these critical aspects:
- The pro’s and cons of renting out a mobile home
- Costs you will need to be aware of as mobile home owner
- The rights you have as the mobile home owner as well as your tenant’s rights.
Why you should learn how to rent out your mobile home
Presently 20% of the U.S. population earns around or under $20,000 per year, that’s almost 60 million people! The U.S. government suggests that the average person should spend around 33% of their income on housing. That’s only $500 per month!
Where can you find a decent place to stay for that much? A mobile home!
Yes, you can find a low-cost apartment. But these are usually located in crime-ridden neighborhoods, have limited living space, face 24-hour noise and lack a sense of community. A mobile home (usually) solves all these problems without breaking the bank.
It’s easy to see why someone would choose this lifestyle (complete with a family-sized home and its own yard) over those cramped spaces provided by cheap apartments. Consequently, it should be relatively easy to keep your home leased out as long as the rent is fair and the home is in good condition.
You can read all about why there exists a market for these homes here.
Before You Rent Out Your Mobile Home: Pros and Cons
It isn’t all sunshine and roses if you are a homeowner who wants to rent out your mobile home. Make sure you consider these advantages and disadvantages before you get started:
This one is obvious, why else would you rent out your property? It is most likely that your mobile home will be located inside a mobile home park. If it is, then you are paying lot rent to the park. Your home’s rental should cover the rent and leave you with money to spare. Choosing to rent out your home at a price that covers your lot rent, means your home will be “stored” for you for free until the day you might move back in.
Because of the lower rent and a gap in income demographics, mobile homes have become popular options to rent for lower income families. It should not be too hard to keep your home occupied consistently.
Not all tenants destroy homes. If you have a responsible and decent tenant, it might be better for your home’s longevity and maintenance than leaving it standing empty. This is because all homes come under strain from the elements whether you live there or not.
A responsible tenant will most likely pick up on any faults quickly. Depending on their willingness and your contract they will fix it themselves or report the problem to you. Maintenance procedures should be laid out in the contract, especially if you consider the winter months when water can freeze inside pipes under the home. Having a tenant run water, check the thermostat and call the landlord should there be an issue can save future damage.
Moving a mobile home is expensive
It costs around $4000 to transport a mobile home from one location to another. That’s a lot of money! So if you need to move with your family for work or some other reason for a few years and you’re thinking of returning, why spend all that money on relocating your house? Not quite ready to completely let go of your mobile home? Rent it out and return to your home when you are able.
Almost without exception, mobile homes depreciate in market value over time, while traditional homes tend to appreciate. Subsequently, if you rent out your mobile home with the plan to eventually sell, you might find that you’ve lost capital.
Of course, if your tenants damaged the home, the situation only gets worse. However, if you plan on living in the home, depreciation doesn’t affect you too much.
Manufactured homes depreciate around 3%-5%. Even that could be higher for the first few years after buying, just like a car. For the most part, the depreciation or (rarely) appreciation value of a mobile home can be complicated to calculate. It hinges on a variety of factors:
- The piece of land it is on
- Whether it’s permanently affixed or not
- Inflation, initial price, and current market conditions.
Tenants and “renter’s mentality”
Unfortunately, having tenants can carry a stigma. “Renter’s mentality” refers to the perception that most renters do not care about:
- the condition of the home, and treat it with negligence at best
- do not make paying rent on time a priority
- do not follow all the rules and guidelines agreed upon
Many owners have been left fuming and frustrated by their tenants, especially since the law of your state may make it difficult to evict tenants that don’t cooperate with you.
The situation can become extra complicated when your home is in a park with its set of rules. You can get in trouble for the actions of your tenants, and you will be responsible for them keeping to your own and the park’s rules. It is, therefore, one of the most necessary steps to properly “size up” your potential tenants.
How to rent out your mobile home and avoid the pitfalls
1. Know the costs
Of course, as with any investment or business opportunity, it is wise first to do some math. You need to figure out if an investment makes financial sense, and then whether the extra effort is worth whatever profit you make.
Please keep in mind that this is not professional financial advice. We are only trying to explain the situation through some basic examples. It is recommended you hire an accountant, or have an accountant help you, to come up with a sound financial strategy.
Here are the factors you need to keep in mind when trying to calculate what you stand to gain or lose renting out your mobile home:
- Down payments: You maybe still have one on your mobile home. It might be a bit too much to expect your rent to cover a down payment too, but it will lessen its effect on your pocket. Remember it’s lower prices that draw tenants to mobile homes in the first place.
- Lot rent: If your home is in a mobile home park, you are paying lot rent on a monthly basis. Lot rent depends on the location as well as the park itself, but should not be as much as what you can ask for rent. Also find out if this includes any levies, if it does not you might want to consider asking your tenants to pay the taxes since they are staying there and receiving the benefits.
- Depreciation: As we already covered mobile homes depreciate. If you are looking to sell your mobile home, you should calculate the net profit or loss you can incur. Here is a basic example:
Initial price of home: $200,000
Depreciation: 4% per year
Resale value after 5 years: $163,074
(Remember that depreciation depends on many factors and can change on a year to year basis. You should also compensate for any potential damage to the property.)
Let’s put this all together
So we already calculated the value of your home after depreciation takes its toll. Now it’s time to add the rest:
Rent per month: $600 (x 5 years = $36,000)
Lot rent: $350 (x 5 years = $21,000)
Total profit from rent: $15,000
You can then add this to your resale value, which leaves you with $178,000. In the end, the result is equal to a $22,000 loss, not very promising if you’d wanted to sell right away, which is why it’s important to do the math first. Of course, these values are for argument’s sake only and should not be taken as a real world scenario.
2. Know your park rules
Any decent park worth living in will have its rules and guidelines to make sure it is a peaceful and livable place to cohabit. You will first need to make sure that the park allows homeowners to rent out their mobile homes before you can proceed.
Additionally, you’ll need to make sure to properly inform your tenants of the park rules as well as your own. Unruly tenants may result in your eviction (a $4000 move at least).
As another example, if your mobile home park demands each mobile home owner to beautify and maintain their space and you live far away, you will need to find tenants willing to take care of the yard. Be sure to include this in the rental agreement. The same goes for noise, pets, etc.
3. Know your tenants
We cannot stress the importance of this enough. Make sure that you get to know your tenants before they move in. If you feel it is necessary, you should also do a credit and financial background check. People aren’t always as they appear. It might sound like spying, but you can find out about their lifestyle on social networks.
Leasing out to a close friend or family member is not always a solution. Naturally, it will have its pitfalls when personal feelings may make it hard to enforce behavior and payments. When renting out to a stranger or someone you know, make sure they understand the rules of the contract beforehand.
4. Insure your property
Cover all your bases in case of disaster or human error and get homeowners insurance. We strongly recommend that you request or insist that your tenants also apply for renters insurance.
Here is an example of what renters insurance is and what it covers. If your tenants are liable for any damage to property or are victims of theft, it will reduce the chances of having to pay for unexpected expenses.
5. Know your rights and draft a lease agreement
Finally, you should educate yourself about your rights as a homeowner and those of your tenants. You’ll need this information when writing a contract and in dealing with your tenants after the move in. Remember to consult a lawyer who can help you create a watertight contract that will stand up in court (if needed).
There are many online articles and blogs where you can read about the rights of landlords and tenants. You should take note that there are some unique aspects when your home is in a mobile home park. You have a separate agreement with the park owners and your contract with your tenants cannot overrule or contradict it.
There are some things not set in law that your lease agreement should cover, for example:
- Rent – when it is due and what it covers.
- Service charges – e.g. electricity, gas, water. Whether these are included in the rent and how much they’ll cost.
- Repairs – who is responsible for carrying out repairs or paying for the costs.
- Ending the tenancy – how long notice needs to be given and whether it is possible to leave before the end of their contract.
- Alterations – Whether the tenants are allowed to make certain alterations (paint, wall mountings).
- Other rules – concerning guests, pets, etc.
Here is a link to the MHLTA (Manufactured/Mobile Home Landlord-Tenant Act). It mostly covers the rights from the tenants perspective, but it is easy to infer your do’s and don’t’s as a landlord.
Here are some of the reasons you are legally allowed to evict a tenant:
- Not paying rent/paying too little – You still need to request the unpaid rent from your tenant and give them some time to pay you back.
- Breaking part of the lease – Naturally, the rules in your agreement should be reasonable.
- Not complying with – Manufactured Home Owners and Community Owners Act or the Landlord Tenant Code.
- Hold-over – Staying after the lease agreement has ended without an agreement.
These are not valid reasons to evict a tenant:
- Complaints about the home (the renter is allowed to bring any issues to your attention).
- Discrimination (whether based on race, religion, sex, marital status, national origin, disability, age, or occupation).
- Children (unless they exceed your occupancy agreement).
Now all you need to do is find some tenants!
There are thousands of sites online where you can advertise your property to rent out. MHVillage is just one example. Also, ask your local classifieds about placing an ad.
If you are looking at more short-term rentals (this can be especially lucrative if your home is a favorite holiday destination), consider options like Airbnb. Airbnb is a very popular app that lets you rent out your home for short periods at a time, and it reaches a huge audience.
Remember to clean up your mobile home and yard. Listings with pictures receive much more attention, and first impressions are everything! Be honest about your mobile home’s condition and the area in which it is located. Ask your tenants over and get to know them a little before making anything official!
Voila! You are on your way to earn an extra income and keep hold of your mobile home!