Investment in Manufactured Home Communities
Manufactured Home Community Update
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Investments in manufactured home communities performed very well during The Covid-19 pandemic and are expected to outperform as the economy recovers. New inventory is limited as renters continue to look for more economical living conditions. The large spike in unemployment during the pandemic brought on a strong demand for lower priced housing options. As home prices in the suburbs have increased as a result of people moving out of densely populated urban locations, more and more people looking for more economical housing are considering manufactured home communities. Due to a lengthy permitting process, the number of new communities built over the last 20 years has been unable to keep up with the demand. Some jurisdictions concerned with lowering the cost of housing are starting to take note by easing construction restrictions. See mobile home park loans.
The shortage of available locations coupled with the need for lower cost housing is generating strong demand for existing properties. Last year, nearly every market showed a large decline in vacancy numbers as more and more available locations were leased up. We are seeing strong demand from young people, young couples and retirees looking to downsize. Very active locations exhibiting strong demand are communities located in warmer climates and the sun belt. Vacancy rates in seniors only communities are showing the lowest vacancy rates overall.
The rising occupancy rates have generated strong rent growth for investors. Rental increases in manufactured housing communities outpaced increases in the general apartment sector last year. One reason is that it is relatively inexpensive for an apartment renter to leave and move into a lower cost apartment. The cost to move a manufactured home to a lower cost community is relatively high. Most manufactured home dwellers tend to stay in place longer and are slightly less sensitive to rental increases for this reason, although many localities are starting to look into rent controls.
Strong performance in the manufactured home community sector has generated investor interest and positive capital investment into these properties. we are seeing many large investors, as well as many private investors, exploring investments in this sector. Actual sales are somewhat limited by the lack of available listings.
Author
Stephen A. Sobin is the President and Founder of Select Commercial Funding LLC. Mr. Sobin has over 35 years’ experience originating commercial real estate loans. He formed Select Commercial to offer commercial mortgage banking and real estate capital advisory services to his clients on a national basis. His goal was to become an advocate for his clients and to help them navigate the ever-changing economic conditions facing the banking industry and to assist them by providing access to commercial real estate funds despite the uncertainty of the capital markets. The company was founded on the belief that most small to medium sized property and business owners lacked the expertise and sources to obtain the best financing options in the $1,500,000 to $10,000,000 range. While large real estate companies often have in-house finance professionals, most small to medium sized borrowers do not have the same access to professional advice and sources of funds. Mr. Sobin focuses on providing those services to this segment of the market.