By: Andrew Keel
Savvy investors are always on the lookout for alternative ways to diversify their portfolios. Mobile home park REITs (Real Estate Investment Trusts) are an investment strategy that shouldn’t be overlooked. Investing in mobile home communities offers the potential for steady cash flow and attractive returns while positively impacting society.
While manufactured housing may not be as glamorous as other forms of commercial real estate, it can offer substantial rewards for those willing to take the plunge. With a growing demand for low-cost housing across America, now could be the perfect time to give this asset class a closer look.
What Are Mobile Home Park REITs?
Mobile home park REITs are a type of real estate investment trust specializing in owning and operating mobile home communities. These communities provide affordable housing options for several demographics, including low-income families, retirees, and others who may be unable to afford traditional homes or multifamily apartments. They are focused on the manufactured housing industry and generate income by renting out the land and infrastructure to residents who own manufactured homes.
Investing in a real estate investment trust allows individuals to invest in real estate without actually owning physical property. Instead, they own shares of the trust, which gives them a portion of the income generated by the properties owned by the company.
There are two types of REITs for investing in mobile home parks: public and private. Public funds are traded on stock exchanges and can be bought and sold like stocks. Private investment trusts are not publicly traded and are currently only available to accredited investors with a high net worth or institutional investors. Those that are publicly traded offer more liquidity, while private investment companies may offer higher potential returns but with lower liquidity, making them suitable for those with a longer-term investment horizon.
Largest Public Manufactured Housing Community REITs
The largest public manufactured housing investment trusts are Equity LifeStyle Properties, Sun Communities, and UMH Properties. These trusts typically purchase existing properties, invest in redevelopments or expansions, and manage the day-to-day operations, such as tenant selection and leasing activities. The performance details for each company are available from NAREIT (National Association of Real Estate Investment Trusts), as of February 2023.
Equity Lifestyle (Sam Zell)
Equity LifeStyle Properties (stock symbol ELS) owns and operates manufactured housing communities, RV resorts and campgrounds across the U.S. Boasting more than 200 properties in 23 states, they are a leader in the North American market.
● Market cap: $13.1 billion
● Dividend yield: 2.32%
● 5-year return: 13.26%
● 10-year return: 16.85%
Sun Communities (stock symbol SUI) has been a part of the manufactured home and RV park industry since 1975. The company owns, operates, or has an interest in 669 properties in 39 states, Canada, and the UK:
● Market cap: $19.0 billion
● Dividend yield: 2.29%
● 5-year return: 14.54%
● 10-year return: 16.22%
UMH Properties (stock symbol UMH) was organized in 1968 and owns and operates 135 manufactured home communities in Alabama, Georgia, Indiana, Maryland, Michigan, New Jersey, New York, Ohio, Pennsylvania, South Carolina and Tennessee. The company also owns and operates two communities in Florida through a joint venture.
● Market cap: $963 million
● Dividend yield: 4.75%
● 5-year return: 12.34%
● 10-year return: 11.47%
Benefits of Investing in Mobile Home Parks
The housing shortage in the United States is “everywhere, all at once,” according to a
recent report from Fannie Mae. Supply constraints in the housing market could potentially benefit mobile home park investors by increasing demand and occupancy rates as more people consider mobile homes as a viable option. The shortage of housing may also make it easier for mobile home park owners to attract higher-quality tenants who may have difficulty finding other affordable housing options.
Additionally, manufactured home communities are often considered a ‘recession-resistant’ investment because they provide housing for people during tough economic times. When the economy is struggling, many people cannot afford to buy homes ($348,079 is the avg. home price in the US as of 2022) or rent apartments ($1,942 median apartment rent as of Jan. 2023), so they turn to mobile homes as a more affordable alternative. This means that rent demand tends to remain high even during economic downturns. Another advantage of investing in mobile home parks is that the lot leases are typically short-term, ranging from 6-24 months. This leasing structure gives Land-lease community owners the ability to increase rents to match inflation rates and ensure a growing income stream over time.
Furthermore, compared to traditional rental properties, mobile home parks have lower maintenance costs because tenants are usually responsible for maintaining their own homes.
Mobile home parks often foster a sense of community among residents, which can lead to higher tenant retention rates and less turnover.
However, as with any other investment, there are some potential disadvantages to consider as well. The success of a mobile home park investment is heavily dependent on its location. Mobile home communities located in areas with low demand or unfavorable economic conditions may struggle to generate positive returns.
Investing in a mobile home park can also require significant capital upfront due to the cost of acquiring the properties and the additional funds typically needed to cure the deferred maintenance caused by previous management. Most mobile home park properties are being purchased from long time mom-and-pop owners that haven’t been making the necessary capital improvements or upgrades. For these reasons, investors often choose to place funds in mobile home park investments to generate recurring passive income distributions while allowing experienced professionals to operate and manage the manufactured housing communities.
How To Directly Invest in Private Mobile Home Park REITs
Investing in mobile home park investment funds that are not publicly traded can offer several
potential benefits for investors. First, they can focus on generating long-term profitability rather than satisfying the short-term market expectations of publicly traded REITs (real estate investment trusts).
Non-publicly traded mobile home park investments can also typically have higher dividend yields compared to publicly traded mobile home park REIT returns, potentially providing investors with a steady passive income stream. Mobile home park investments also offer investors exposure to helping the greater good, through assisting with sustaining the supply of affordable housing available in the United States.
Investors interested in mobile home parks should carefully consider their investment goals and risk tolerance before making any investment decisions. It’s important to do thorough research and due diligence before investing in anything, including mobile home park REITs.
If you want to learn more about investing passively in manufactured housing communities, check out the Passive Mobile Home Park Investing Podcast today! You’ll hear interviews from experts in the mobile home park space so you can better understand the benefits and risks associated with these types of alternative investments. Don’t miss out on this opportunity to invest in affordable housing and potentially earn steady passive returns!
Thanks for reading,
To learn more about the author Andrew Keel please visit AndrewKeel.com