Phil: 0:00

I know you guys have all thought about it. You want to buy your own plot of land, build a custom home on it. But how much does that cost and can you put a manufactured home on it? Is that a cost-effective way of having a really nice house and are they as good as a regular home out there?

Phil: 0:19

So today we have on our Steven Ellefson. He is a manufactured home specialist in my area. He's the owner of Stell Ari Group. It's a company built around helping clients purchase and develop manufactured homes on land here in California. He's going to bring his expertise talking about manufactured homes and really comparing that to regular stick-built homes, which are just regular homes with a wood frame on foundation. What is the difference between that? A mobile home, what's the process like if you wanted to build your own? And he even gives us a little insight into some of the new features they're coming out with and some of the differences that you'll see in the build quality and energy efficiency between that and your regular homes. So you started as a general contractor in the industry and then over the last few years kind of saw that the manufactured homes are really a great avenue for people to purchase a home, and it also allows you to get someone in a brand new home with some acreage, or at least some land, as opposed to just a tract home.

Steven: 1:31

The way it kind of started is, I've always had a desire to be in the real estate space and when I got into construction I very quickly learned the amount of money that was in it. And as I started to pursue that, I found the best avenue was something that not many people do and not many people are in the manufactured home space. When I was looking into getting into the real estate space, I noticed that a lot of investors are going down the typical flipping in that category, so in the manufactured home space there's not much competition. So I went down that path, learning everything that I could.

Phil: 2:06

So you started as a general contractor and did that for several years and wanted to kind of continue that but in the real estate space and saw that the manufactured homes were an area where there just wasn't a whole lot of competition. The investors weren't really working much in there. So it's a niche that you felt like you would be able to just go all in on and there was a lot of opportunity.

Steven: 2:28

It's a category that not many real estate investors focus on or have enough knowledge in. There's a lot of investors that'll flip your typical stick built house. But manufactured housing is its own category in itself.

Phil: 2:41

There's manufactured homes, there's mobile homes, there's stick built homes, and we're talking about in the US here. What are the differences between those?

Steven: 2:52

Yeah, so let me answer that for you. Technically there's two answers for mobile homes and manufactured homes. They kind of mean the same thing, but what it really started with is mobile homes is the old school term. It's the terminology used of what people think of back in the day, back in the 60s. It's a trailer on wheels in a park somewhere. That is a mobile home by definition.

Steven: 3:18

In 1975 there was a lot of different regulations that took place because those old mobile homes, they were not built the same day that homes are built. Even the new manufactured homes today they're not built in the same way. The old 1970s or 60s homes were honestly very dangerous and there was a lot of incidences where they would catch on fire or the electrical systems would be bad. They wouldn't have smoke detectors, they were built like a junky RV and there was no regulation over them until 1975. That's when all the regulations came out for having the electrical systems be up to building standard codes. They need to have smoke detectors, they need to have certain types of plumbing that made them up to par with normal building standards and that got implemented in 1976.

Steven: 4:12

That is a very crucial year, in 1976, and that's when they are now built to the standards with building and safety. Housing and community development is HCD. That's the one that governs everything related to manufactured housing. After the age of 1976, any home that is a prefab or manufactured home is built to codes and to standards and therefore is financeable. After that year is when you can now call that a manufactured home. So the terminology changed after 1976 to now be from a mobile home to a manufactured home and by definition a manufactured home is safer and built to the same specs as a normal house.

Phil: 4:58

So before 1976, if you're seeing any kind of manufactured slash mobile home, it's actually a mobile home and it's not built to the standards that a regular home is, so probably a good idea to stay away from that, ideally. That's something that makes it really difficult when you're shopping and you see these mobile homes or manufactured homes and you see this really low price and oftentimes that's because they're really not financeable and you would have to pay cash for them. But again, that safety factors there, so you really have to make that decision. Is that something that you want to be living and something that doesn't really meet the building codes even of that time?

Steven: 5:38

You will see that out on the market as a realtor. I'm sure we both can agree. You can see a home and I've seen a hundred and fifty two hundred thousand dollar price difference between a lot that has a home that's a nineteen seventy five and a lot that has a home that's a nineteen seventy eight. I mean it could be a two year difference. They can look the same, they could be the same make and model technically, but you'll see a huge price difference. And that price difference comes from the ability to finance and that comes to whether they're safe pretty much safe to live in and whether they're past that threshold.

Phil: 6:10

Okay, so you said seeing them on a lot. I want to explore that a little bit more. So you've got really two different scenarios right. You've got a land lease which is kind of your standard trailer park. I guess you could say where you're leasing the land. You don't own it, what other types of purchases or possibilities that you can have with a mobile or manufactured home?

Steven: 6:32

So typically in the manufactured home space you're going to be put into two categories Are you in a park or are you on your own land? And in a park, like you said, it is like a land lease. You're able to bring your home in or maybe there's a home existing there that you're purchasing from that park or from that seller and those are very cheap because you can buy $80,000, $100, $150,000 type price point. Typically they're 55 older communities or they're going to have a land lease, that's, you know, four to $800 a month and that's why the price is cheaper. You'll either get short term or hard money type financing to acquire that and you won't really have a house payment. But you just got to cover your land lease and for some older individuals that's typically retirement for them is if they can acquire to. You know they work their whole life, they cash in and they're going to buy $80,000 house. Now all they need to cover is their land lease for 500 bucks a month and they're living in a park.

Steven: 7:30

The other side to that is when you're buying on your own land, and that's the category that I focus in. A lot is manufactured homes on their own land and in that space there's actually two categories as well, that's whether the home is on a foundation system or whether it is not, and both of them are. You own the land. You can acquire the land as itself, as the real property, and then you have the manufactured home that you would then bring in on a trailer and install on that land. Whether it's on a foundation or not, you are still bringing two pieces together. You are bringing the real estate on the bottom, which is the dirt, and you're bringing the mobile home or manufactured home on top of it and connecting it to that land.

Phil: 8:14

I'm going to throw a number out there 433. What is that?

Steven: 8:17

433 or, as some people call it, 433a, is basically the term for permanent foundation.

Steven: 8:26

I'm not sure if you know this or not, but that 433 number actually comes from the HCD Housing and Community Development form number.

Steven: 8:36

It actually is the number of the form. If you look up online HCD 433a, it's actually 433a is the form for manufactured home installed on a foundation system. It's basically a certification that acknowledges that a manufactured home has gone through the process of installation on a type of foundation system that is approved and that will tie a manufactured home to real property and therefore make it one A manufactured home. When you first acquire it is actually personal property. It is a type of trailer that you own HCD, you will have it, have a title for that and, if you choose, you could put that on a 433 or put it on a permanent foundation system, and when you do that and you complete it, you have now got rid of the personal property aspect and you have now tied that home to the land, making the entire structure both the land and the manufactured home all one, and it is now all classified as real property, which does help a lot in financing and other things that we can get into.

Phil: 9:42

When you're putting that manufactured home on a 433a permanent foundation. That's basically meeting all the same kind of code as a stick built home.

Steven: 9:55

In the eyes of lending, in the eyes of construction. Yes, it is. It is a method of attachment to make it one.

Steven: 10:04

To compare a manufactured home on permanent foundation to a stick built home, you can think of it as the concrete foundation of a stick built house. So if you think of a track house, they typically pour the concrete that is sitting on the dirt. That is real property. They then build up from there with, you know, bolts and studs, and then they put their framing up and then you work from there plumbing, electrical, all that fun stuff and it is all tied to the dirt. That's the base of it. So when you finish a track built house through the construction process, you have real estate. It is all one as the terminology real estate or real property and a manufactured home, even though it may come in on wheels. Once you do that process of foundation system, you have technically attached it to the land in the same capacity. So the lenders will see that, as that is now real property, that is now all one real estate and that definitely makes a big difference.

Phil: 11:01

So if you're thinking about buying land and then having something built on it, so whether that's manufactured or stick built, can you maybe give a quick idea of what the difference is in the process, maybe even as far as like build quality, permits, timelines, things like that?

Steven: 11:18

Yes, a big difference between the two is going to be the timeline for building, because a manufactured home you can go place an order, purchase it. You can then go acquire your lot and, as you're working on your lot, somewhere on a factory line, your home is being built. It's typically they can build those homes in a few days, if that you have a good factory. They'll bring it to you in one to two pieces. Typically people are buying double wide, so it's two pieces. You can bring that home onto the lot and you already have a completed home. Basically the only thing you need to do is set it on the piers and connect it to the utilities. So when it comes to inspection timeline, the inspection process for doing it, that method is going to be a lot faster. I've seen three to six months turnaround from bear dirt to home on a foundation system, recorded, done, complete, a certificate of occupancy and you can now go get a loan on it in a few months.

Steven: 12:16

Where a stick build home in a track, you will get ready to pour the foundation, do an inspection, you'll pour the foundation. Get an inspection. Do the lumber, get an inspection. Electrical inspection, plumbing inspection. You're going to do that throughout the entire process because they need to inspect every single little piece and typically that's where you have one to two year timelines. I mean, obviously some big track builders have really gotten that down, but you go to build a stick, build house.

Steven: 12:42

It's going to take a while for sure and it's a lot more inspections and they're going to have a new inspector out there every time, nitpick and different things. But if you have a manufactured home, you already have a done, completed, stamped, approved. Everything is to code. You bring it out there.

Phil: 12:57

All you need to do is hand the piece of paper saying it's approved and you're done not only is it cut down on the time, what are we looking like from a cost standpoint? How is that compared between the two?

Steven: 13:07

a manufactured home will come in cheaper if you are a very big builder. Maybe you can, you know, be at the same price. But typically you're not like that. If you're going to go find your average general contractor, go build you some house on a side of a hill. You found a lot that you love and you want to build a stick build home. You're going to spend a few hundred thousand dollars.

Steven: 13:27

A manufactured home cost out the door for your typical, let's say, 1500 square foot, three bedroom, two bath. You're going to be looking at maybe 150,000 dollars, 160 perhaps, and that's going to get you transported, taxes, fees, everything to get that home to your lot. From there you just have a little bit of construction to put the skirting around the sides, the stairs, connect the utilities, a little bit of drywall work inside where they seem the two together, the foundation system and you can do all that construction for about 40,000 dollars. So think of a standard house with construction and they'll be at about 200. And then you add the cost of the land. Say you found a nice lot for 100,000. Now you've just acquired a 300,000 dollar all in cost.

Steven: 14:15

And I've seen a lot of the projects that I do. They're appraising mid 400s. The home I'm sitting in right now with you is a 450,000 manufactured home and we spent about 300 to get it done. And we just came from another property that you just seen and it was the same thing. It was about 300,000 to get it completed and we will be at about 475 as as the exit price. So it's faster, it's cheaper and it still appraises the same that's great.

Phil: 14:44

It still holds its value. Yeah, we talk a lot with first-time homebuyers. Do you think going that route is something that a first-time homebuyer would feel comfortable in?

Steven: 14:55

It really comes down to their timeline, because you can go two routes. You can find one that's already on the market and is turnkey and ready to go and, yes, you are going to pay it a bit more than what it would be if you were to do it separately. But you don't need any capital because these homes qualify for FHA financing. Three and a half percent down. Everything's normal like that. The price to acquire or to buy a manufactured home will be cheaper typically than a stick built. I have some homes in our market that we're selling manufactured home. They're in the mid-400s and we have stick built around us for 525-550. They both can go FHA Typically.

Steven: 15:34

As a new homebuyer, you may want to go down that route or at least consider the manufactured home if you are looking for something that is turnkey. If you want to do something on your own or from the start, you would want to team up with someone who definitely has experience or is a manufactured home specialist, or find a dealer or find these contractors. I do that. That's what I do for a lot of my clients is I am that realtor, I'm that manufactured home salesperson, I'm that contractor. I try to bring everything together and make it easy, and finding someone who can do that for you would be a good place to start.

Steven: 16:10

But the biggest thing to keep in mind is there's not many loans out there for ground up construction, development or investors that want to take that risk of the unknown. Manufactured homes are a newer industry and there's not many lenders that will take that gamble on you. So if you have money to spend 100%, it may be a great route to do it. I have a lot of investors that come in and as long as you can buy the land, typically they can finance the mobile. Or maybe they have half the money, they have 100 or 150,000 and they want to do something. You can temporarily borrow that money hard money a lot of people will do. They'll get the project completed and now they have this $450,000 asset that they can now go to the bank. It's now on permanent foundation and you can cash out, refinance and 65% loan to value. But doing something like that, you can make all your money back plus some and just have a whole bunch of equity to put in the bank.

Phil: 17:11

The actual purchase of the manufactured home is not something you're going to typically find through any kind of normal mortgage lender, because it's not real estate and so they can't finance non-real estate until it's permanent foundation sitting on land that you own.

Phil: 17:28

And then, when it comes to land, from a lending standpoint, that's usually a higher percentage down, sometimes 20%, sometimes more.

Phil: 17:36

It's a high risk type of purchase from a lending standpoint because land doesn't have as much value when it doesn't have a home built on it.

Phil: 17:45

It's a lot tougher but, like you said, there's ways to do it and it's about finding the right kind of agent who knows how to navigate that and has the connections with the types of lenders like hard money lenders or private money. Or you just happen to have cash that you could put towards that. Again, after it's built, it can be refinanced into a standard type of loan and, depending on appraisals and things like that, you might be able to cash out, like you said, and from there you're basically making your own money from just putting those two together and improving the land. So I think that there's some great opportunities and if you're a first time home buyer and you really want something that's yours, you want a bit of land, which is oftentimes why people want the manufactured home. They want an area of land, they want to custom build their home. The manufactured home lets you choose from a ton of models, like how many of them are there, from different manufacturers and versions, like as much as there are cars.

Steven: 18:46

Pretty much. Yeah, there is hundreds of different floor plans that you can choose from. You can go small, go to a nice little single wide. I've seen older people. They want a big shop to put all their toys in, but they just want a little single wide, nothing fancy, two bedroom and or go more normal, double wide, three bedroom, two bath, All the way up to. They make three wide, four wide, five wide custom homes. They go pretty crazy and you can go two, three thousand square feet plus.

Phil: 19:13

And tell me a little bit about the duplex ones that you've been doing lately, because those are really interesting.

Steven: 19:19

Those are definitely a new product. Skyline as a factory makes those. They just started releasing them. They are an R2 building and it is a double wide manufactured home. That is. There's different. There's a few different floor plans, but typically like the average one is a three bedroom, two bath on each side, or a three bedroom, one bath on each side, and you have two front doors, two back doors. You put it on the same type of foundation system, it becomes real property and you can have two different tenants on each side, or perhaps do it and put a tenant next to you. You live in the main house, do a little house hack there and refinance it as a primary. I mean, there's a lot of different options with that and that is definitely a new product that a lot of my investors are trying to acquire land in. I have two projects right now that are actually going to be putting those duplexes on it and I definitely see that being a very lucrative category for the investors.

Phil: 20:14

I've worked with you on a lot of manufactured homes and you would never know it from the inside. You would never know it's a manufactured home. You know it because you recognize the layout and I recognize the layout when I'm inside. But if you didn't tell me and I'm just walking through the rooms, I'd have no idea. The build quality, the types of kitchens, the sizes, the appliances are all standard. That's not like your grandma's mobile home. I think people have this misconception of a single wide and it creaks when you walk and the floor is sag and you could hear everything. And can you tell us a little bit about the build quality? And just some common misconceptions.

Steven: 21:01

Definitely. And if I were to teleport you I speak to a lot of different buyers and I tell them the same thing If I were to teleport you into the center of this house you're blindfolded and bring in you would stand in the middle, spin in a circle and you would not know that you were in a manufactured home. The standard features that they build these days are the same, if not better, than most track homes. You got normal half inch drywall. It's two by four walls. It's blown in insulation in the ceilings R13, normal insulation, dual pane windows, stainless steel appliances, the cabinetry, soft clothes, all kinds of fancy stuff.

Phil: 21:40

It's crazy because we just looked at a house today together one of your projects and it's got a full formal dining room and I never would have expected a formal dining room in a manufactured home, but it had that. It was a nice three bedroom. I was like, oh, I didn't realize this is a walk-in closet in every one of the rooms. The master bedroom was big. The master bathroom had a full-sized tub. It had, you know, the dual vanities and everything. It's like this feels like your regular home, brand new home.

Steven: 22:14

Yep, the model that we were in today also had a very large I think it was like six foot by four foot huge island in the middle, can lights in the ceilings, stainless steel appliances around the cabinetry, and the island was all white. You had colored cabinets behind it for their you know remaining walls. Those are styles that you would see in a, in a custom home, in a half a million dollar, million dollar home, and that was. Those are the standard features on some of the lower in budget model manufactured homes. The manufactured homes these days are built, in my opinion, better than stick built homes, and I can say that just because I worked general construction.

Steven: 22:57

I've been on the job sites at these different track built style homes and a lot of contractors will cut corners. They'll try to hide some you know a little bit here and there and oh, hopefully the inspector doesn't catch it type thing. You don't see that in manufactured homes. You almost can't do that in a manufactured home because that home has to travel down the freeway at 60 miles an hour. So it has to be built in such a quality to withstand just transporting it at that type of speed. And when it arrives it's perfect, it's straight, it's square, it's, you know, ready to go. So that tells you that the quality is there. You know the materials that they use are definitely high quality.

Phil: 23:38

A lot of people consider manufactured homes because they think it's going to be less expensive. Maybe it's just a different option. So in your experience, Is that the case when we're looking between two homes that have already been built? Same kind of land, but one's manufactured and one's stick built?

Steven: 23:58

Typically, yes, you will see manufactured homes come in a little bit cheaper than a stick built home and that mostly is due to just the stigma behind manufactured homes. People don't know that. You know, they look at it and they think it's a mobile home, they think it's a trailer. Still to this day people will call me and be like, hey, your trailer for sale. You know what's the details on it and I'm like, oh, that's $475,000. And they're like, oh, for a trailer. And I'm like that's a little different than a trailer these days. But it's about just knowing what it is and it comes down to learning the differences between the two different. Because once you learn the way that they're built and the quality of them and the fact that you can convert them to real property and get the same type of loans and the same type of insurance and all the same everything that you're getting the same type of home but you're just saving a little bit of money just because half of the buyers out there don't know what it is.

Steven: 24:53

So, they are going for the stick built for $500,000 more, just because they think it's a real house and it's not a trailer.

Phil: 25:01

I think we'll start seeing that change more and more over the next few years, especially as we see these really great floor plans coming out of these manufacturers, as I think new people like yourself are getting into the manufactured side, and for people who are maybe looking to get a little bit more land and a little bit more custom home and not settle for something when they could get a manufactured home, and I think we're going to start seeing prices evening out between them. So now is probably a pretty good time to start looking at manufactured homes. If you hadn't considered it in the past, yes, definitely, and you're comparing between the two and trying to decide do I want to go manufactured home? From a build quality sounds like, if anything, manufactured homes might be better. What about things like energy efficiency? Are we seeing a difference there between that and the stick built homes?

Steven: 25:55

You're getting that same insulation. You're getting this shingled roof. They do a high quality blown insulation up in the trusses and stuff like that, so you get the same type of protection from the sun. When it comes to that, some people think that maybe you can't get solar. That's actually been a topic that has been a concern for some people, and if you have your home on a foundation system, it's seen as a real home. My home, I have over 20 panels on the roof. That really helps with my electricity bill. That makes me compare to a lot of these new tracks, because I know a lot of these new developers. They're putting solar up on the roof. They're giving incentives for that and for a new buyer who's trying to think what are my utilities going to be? That is definitely a determining factor and not only can I say the features and the efficiency is the same, but you have the same opportunities when it comes to solar and other things like that, being that this is real property, real estate.

Phil: 26:57

Continuing that comparison between the two. Is there anything that you can't get with a manufactured home? Can you get a three car attached garage? Can you do central AC what are? Is there anything that you can't do?

Steven: 27:12

These days you can do almost anything custom. There's a few factories out there that will build you anything that you draw on a piece of paper. You want it like this and you want this there and turned this way and you want a huge deck off the front. A lot of homes come ready for attaching it to a two car garage, so there'll be a certain side that has the eaves a certain way with a door at the back door and that goes right into a two car garage. Or people will have the roof ready for a breezeway to be able to have their detached garage off the side or different features like that.

Steven: 27:43

Most of the newer floor plans I've been seeing in the last year to actually come with a small porch on the front. So you'll have steps to a nice, pretty porch that will then lead into your kitchen and living. That's been a real selling point for the people who, when it's raining and you're trying to rush to the front door and you're not sitting in the rain, you're covered over the front like a normal house would be. Is there such thing?

Phil: 28:05

as a two-story manufactured home.

Steven: 28:09

That's a good question. They are out there and I'm sure that they definitely come in different pieces, but they are possible and pretty much anything is possible, because we are talking about a factory built prefab style home where you draw it, they build it.

Phil: 28:26

What about basements? Or being able to have the home at ground level without requiring steps up to it?

Steven: 28:34

For basements. Yes, I have seen people typically it's not on the west coast, it's more on the east coast and they will dig a big hole. They'll put a perimeter around it. They'll build the basement first and then they will crane over their manufactured home and then they'll basically have a basement slash, crawl space that they can have that downstairs, and typically that's for the areas that have tornadoes and things like that. So that definitely is an option. I have seen that.

Steven: 29:02

As far as lowered foundation systems, yes, it's a similar process to build. They'll dig down a little bit, they'll put a very small skirting 6 inches to 12 inches above ground is all you're going to see and underneath you'll have maybe a 2 foot hole. You can then put a nice concrete single step right into your house any normal track house. You're going to have one step to get into anyways, and I've seen these manufactured homes sitting inches off the ground concrete in the front, nice concrete perimeter step in the front. Put the plants around it. You can stand in front of that. You would not know it's a manufactured home Inside and out Most standard foundation systems they are a foot and a half, 2 feet, 3 feet off the ground. That's the cheaper route to go and that is more common. But for you know, $5,000, $6,000, $7,000 more typically, you can get that low profile foundation system. It'll put your home a lot lower. That definitely makes a big difference when it comes to the curb appeal when you're standing outside of that home.

Phil: 30:00

For my first time, home buyers that are out there and they're seriously considering doing something like this, whether they're going to purchase a manufactured home that's already on a lot, or maybe they want to go the route where they're picking their home, picking their land, putting them together, making some real property. What's their first step?

Steven: 30:18

You would need to find someone that understands the manufactured home installation process. That's the key to kind of everything. There's a lot of dealers out there that can sell you home. There's a lot of laborers and contractors out there that can install the home. But someone who really understands the permit process, the installation process, the paperwork process behind ensuring that that lot is good for that home. And that also comes to having a good realtor who really understands that particular category of development to know that this lot's good, that lot is bad or this one's $50,000 too high of a price point and you need to not go that route. You're probably not going to make money. So they all kind of tie together and finding that person who can get you the lot and know how to install it is definitely the key component to the starting point.

Phil: 31:10

You're based out of California. So if we have people that are outside of that area and they're looking for agents, what kinds of questions should they ask them when they're trying to find someone that would actually know how to get started on this?

Steven: 31:22

That is a good question. I personally would probably start with finding the people that are in the market that are already doing it. If you go online and you look for, you know whether it's Zillow or you get a realtor to help you. Find the new construction manufactured homes, see who's building them, see who's the contractors behind that, and try to get in with those people, make friends with them and say, hey, I like what you did here, I want to do the same thing. That would probably be your fastest route to get to someone who is actually going to have the knowledge and rather than just calling any realtor and every realtor out there is probably going to be like yeah, I can totally do that.

Steven: 32:03

I'm amazing at everything, so finding the people that are physically doing it out in your local market would definitely be my first starting point. So and in Southern California, I'm typically Riverside County. Most of my projects have all been in Riverside County. I know the permit process very well for Riverside County. I'm licensed all across California so I can help with everything in California, but I focus my knowledge on a local market. So being able to find someone in your local market that's doing it would definitely be a good starting point for you.

Phil: 32:34

I think, stephen, you're available. If someone wants to just pick your brain, I assume I'll get you all of your contact info here on the show notes on the website and feel free to reach out. He can give you some great tips and if you're in the local area, he can help you pick out your manufactured home and help with the entire process from A to Z, a to Z.

Steven: 32:57

That's what I try to do.

Phil: 32:59

I really appreciate you coming on and sharing your knowledge. This is not easy to find people who are experts in this field. I can tell you that right now.

Steven: 33:07

I appreciate you having me.

Phil: 33:09

And for all of my listeners out there, please head over to FTHBproscom and take a look at all the different articles, all the episodes, tools and links to Stephen's website and contact info so that you can reach out and maybe just get your own manufactured home, custom built on a piece of land that you choose and not hear your neighbors.