Affordable housing is always in demand. The cost to purchase and/or rent homes, apartments, and condos today is high. This makes mobile home living appealing to people in low-income brackets. But there are also many affluent retirees who enjoy mobile homes as a second-home getaway in their golden years. Savvy investors realize the opportunity that these needs and desires present and invest in mobile homes to meet the growing demand for mobile housing.
You can invest in these assets on your own or in a real estate IRA. If you invest with your IRA, you gain the potential to earn tax-sheltered income for your golden years.
Whether you invest personally, with your IRA, or with a partner—there are several different ways you can use these assets to your advantage. Depending on how you decide to invest, the capital needed for mobile home assets is relatively low compared to the capital needed to acquire single or multifamily homes.
How to Invest in Mobile Homes
Below are three ways to invest that have different aspects and obligations attached to them. All include an attractive perk—those who live in mobile homes tend to stay put longer than apartment dwellers do. If that holds true for you, you’ll encounter less worry about finding new tenants and dealing with the loss of income until a vacancy is filled.
1. Purchase a mobile home in a park
Buying a mobile home in a park does not include purchase of the land it sits on. Mobile homeowners lease the property instead of owning it. You can invest in one or several homes in a single park. This would make it easy to manage your assets. But you can also own homes in several different parks.
When renting these out for investment purposes, you’d include the cost of leasing the land as well as a rental charge for the home itself. The ease of not having to maintain the land is appealing. You’d just be responsible for maintenance of the home if issues arise (i.e., plumbing leaks, structure issues, air conditioner problems, etc.).
2. Invest in mobile homes that come with property
Mobile homes for sale on private land typically involve purchase of the property, as well. If the property is not for sale, you can move the home to another location of your choosing to rent it out.
If the property is for sale, depending on its location, this strategy may cost a bit more since you’d also acquire land. However, if the land is an area where potential expansion exists, you could invest now, rent the mobile home out for short-term income, and then sell the land later for an even greater profit.
3. Acquire entire mobile home parks
This is perhaps the most lucrative way to invest in mobile homes. When you purchase the entire park, your investment includes the land and the homes.
You collect rental fees from each homeowner for lease of the land their mobile homes sit on. This has the potential to produce a steady stream of income for a relatively low-cost investment depending on the size and location of the park. You maintain the land and streets within the park, but the homeowners are responsible for their homes and any issues that arise regarding the structure (leaky roofs, air conditioner issues, backed up toilets, etc.).
This makes mobile home parks a bit more cost effective to own than apartments. In typical multifamily housing investments, you are responsible for the property as well as for the maintenance issues of each rental unit.
What Is a Real Estate IRA?
Real estate IRAs hold diverse investments that include residential and multifamily housing, commercial property, syndications, land, tax liens and deeds, and even private mortgages. Individuals who invest using IRAs can avoid capital gains and other taxation on property sales because the real estate is an IRA-owned asset and enjoys the tax-sheltered status that retirement plans provide.
As more people seek alternative investments to combat stock market volatility, real estate holds its position as the number one asset held in self-directed retirement plans.
People who use self-directed IRAs get a great deal of freedom in managing their own retirement funds and the ability to choose their own assets. When you use an IRA to invest in real estate, there are a few rules and regulations you should be aware of to maintain the tax-advantaged status of your plan.
How to Invest in Mobile Homes in a Real Estate IRA
- Assets are titled in the name of your IRA and owned by your IRA.
- All expenses related to the investment must be paid with IRA funds.
- As the IRA owner, you’re unable to perform any maintenance or manage the property; you must hire third parties to perform this work, and they cannot be considered disqualified persons related to your account.
- You or disqualified persons may not use the property (i.e., live in a mobile home your IRA owns).
- Income is deposited directly into your IRA on a tax-sheltered basis.
- You must learn about prohibited transactions and disqualified persons your IRA can’t interact with so you can maintain compliance with the IRS.
Are You Ready to Get Started?
To learn more about how you can invest in mobile homes using a self-directed retirement plan, contact Advanta IRA. Many of our clients use these assets to build retirement wealth. We are familiar with the process and have the experience you can rely on to ensure the administration of your investment meets IRS guidelines.
Additional reading about self-directed IRAs: