MHC (mobile home parks) sector
Is this a sector one would be be bullish on long term (20+ years)? Have an opportunity to work in the sector, I get that apartments are not rocket science and I can always fall back on that, but will working in MHC's be too niche or should I just be a generalist? Agency folks who finance a lot of MHC's, feel free to chime in please! Appreciate any insights, thank you!
Based on the most helpful WSO content, the MHC (mobile home parks) sector has several factors that could make it an attractive long-term investment. Here are some insights:
However, there are also considerations to keep in mind:
As for whether to specialize or be a generalist, it's a personal decision that depends on your career goals and interests. Specializing could make you an expert in a field with less competition, while being a generalist could offer broader opportunities but also more competition.
Agency folks who finance MHCs might provide additional insights into current lending trends, interest rates, and the financial health of the sector, which could further inform your decision.
Ultimately, if you're bullish on the sector's fundamentals and comfortable with the niche, specializing in MHCs could be a rewarding path. If you prefer broader exposure to the real estate market, then a generalist role might suit you better.
Sources: https://www.wallstreetoasis.com/forum/hedge-fund/best-industries-to-specialize-in?customgpt=1, Leave MF PE for H/S MBA and Pursue Goal to Develop Country?, If you had $100M where would you invest it today ? Real estate only, Employment Dilemma, Most Promising Industries
bump, appreciate any insights. Thank you!
As a Multifamily guy, I’m bullish on this sector. I’ve paid for courses on it to learn more on the niche because I find it interesting and think long term, could be a great sector.
Note: there is no (or very little) new supply in this niche. Building brand new mobile home parks are about as hard as it comes because of zoning and cities aren’t optimistic in opening new parks because trailer parks have a harsh reputation, existing owners allowing parks to deteriorate, and less tax revenue to fund the schools, police, fire, and other gov sectors. Several years ago it was not uncommon for those lucky enough to get zoning and permits to build new communities and fill up quickly - but financing has hindered the influx of homes to parks in all these high demand markets. So the 50,000 parks currently in the nation likely won’t change. On the flip, there are crazy stats that push affordable housing to Americans:
- roughly 34% of Americans make less than 50$k a year.
- roughly 10k baby boomers retire every day.
- these baby boomers receive roughly $1700/month from social security.
- when considering the average lot rent is less than $500 a month in the us, where else can you get a 2/3 br and yard for that price?
- opex is traditionally 30-40% compared to 40-50% in Multifamily.
- very little turnover, turns out mobile home are not that mobile lol 95% of homes never leave the park they were originally delivered to.
- expensive to breakdown and move homes. And when raising rents in a park, it’s less justifiable to move as a tenant than to endure the increase.
- best of both worlds - raising rents and not having turnover.
The list goes on, but MHP are great investments. Just like other re investments buying the right properties and being a strong operator are extremely important here. Lenders have been much more accepting of mobile home parks and are willing to lend on it the same as Multifamily - MHP have the lowest default rate of any type of re loan. You are seeing more corporate entities in the industry now as they see the momentum as well.
Fantastic sector, curious who you are talking to. You’ll get more / better reps at some shops than others.
Feel free to PM me with questions.
Source: I work in acquisitions for a top 10 MHC owner.
I have always thought it’s an amazing sector. But scaling and generating enough fee income to grow a business has always seemed like a challenge. What are your thoughts on scaling a business in this sector?
Almost bought a small one (45ish pads/homes) back at the beginning of COVID. The numbers pencil great, but there’s a lot of problems that come with them. Some terrible holdover tenants/vagrants and a lot are not on public sewer which gets very expensive running pumps and servicing it.
I’m sure better ones exist. Not sure they’re for sale that often though, quite profitable.
A sector that you can skate by with lower operating expensive margins that any other asset class plus doing the most minimal capex?
Sign me the fuck up.
If its sounds so simple, then more people will be doing it and making a lot of money. It is hard. It is a niche space and the ones dominating it are the ones in the trenches who know how to operate in the space.
Can someone in the acquisitions or brokerage area of mobile home parks please shoot me a message ? I have a couple of questions regarding a deal. Thanks!
About $3.8B was done in 2023 at Fannie. Mainly in Credit Facilities due to the small Loan per prop size. Based on UPB Keybank did the most, but watching the market I know they issued a couple MHC Credit Facilities in a row, like $100-$300MM ish each over a couple months.
Other large Agency Lenders were
Lument
PGIM
Berkadia
For Freddie it was JLL, KeyBank, PNC, and Berkadia.....It is harder to track the MHC deals once placed in a WI, K-Deal, or M-Deal you'd have to pull the prospectus for each issued and then look it up in BBG to determine the performance factors.
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