Manufactured/Mobile Home Investing

Question

Curious if anyone has any experience in this asset class, seems to be fairly niche similar to affordable housing, but is the general underwriting at all similar to multifamily?  I'm assuming it;'s more yield driven due to property cap rates, locations, etc?

ThatGuyBalls · Accepted Answer

Typically targeted by the larger and more high octane REPE firms (think 20s levered IRRs & equity multiples north of 1.75x).

To my knowledge the investment thesis is (i) great relative basis play at this point in the cycle (ii) great return on invested capital metrics (ie: strong stabilized yields and reversions [$25k invested capital to realize a $100K reversion premium]) and (iii) niche investment segment with small pool of players allowing those with exp & knowledge to lever past exp during IS process.

Have buddy who has completed a bunch of these deals as of late.

picklemonkey · Answer

I recently interviewed at a REPE shop that has a big presence in the MHP industry. The general gist was that these things cash flow like crazy. 10 years ago the majority of MHP were owned by individuals, but now there has been a notable move to consolidate these assets. Usually the investment period on these properties are longer, 7-10 years. Almost no one leaves these parks once they move in so tenant roll is extremely small.

As another person commented, there is a major difference between "high quality" and "low quality" MHP's.

PacNumber · Answer

Read up on the different between a 1 star park, a 2 star and so on.  There are very high quality 4 star parks throughout the US.  There are literally master planned MHP's all over the US.  Yes, there are some dumps.  It's just like every other asset class with regard to quality.  Good owners, bad owners and such.

You're not investing in the coach's/double-wides/triple-wides.  Rarely will you collect coach rent as that is not "real estate."  Coach's are personal property.  Lenders don't even calculate coach rent into gross rents.

Non-PC Broker · Answer

I know a few multi-family guys that switched over to that game.  Think of it kind of like a hybrid between multi-family and self-storage.  You have to have on-site management but there are a lot of value-add plays throughout the country due to mismanagement.

It's definitely become more competitive with cap rates heading to the 6 range.  One of my clients bought something around a 7cap on in-place numbers last year but there was 30-40% vacancy and he saw a lot of potential to fix the place up.  However, it took him a lot of searching to find a deal like that.

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