Manufactured/Mobile Home Investing

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?

Comments (24)

Oct 17, 2016

Would like to learn more about this. My buddy is investing his family's fortune in creating affordable housing, trailer parks.

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Oct 17, 2016

Cool - is he combining a portfolio to finance or doing asset by asset deals/financing?

Oct 17, 2016

I know nothing about it but would also be interested. Hope you'll get some responses

Oct 17, 2016

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. He said 3 or 4 years ago the deals were very plentiful but now it's competitive like anything else.

Underwriting is similar to multi-family but conceptually it's a bit different.

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Best Response
Oct 17, 2016

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. I can ask more specific questions if you'd like.

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Oct 17, 2016

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Oct 17, 2016

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. The idea behind MHP's is to simply be a grounds keeper and collect a fee for doing so. The tenants fix and repair their own toilets, electrical, etc. It's a great investment. Cap rates in CA are under 5% in many markets. You can borrower very close to MF rates. Inventory is extremely tight out West.

Many MHP's in CA are rent controlled. Every 20 years or so a new Accord is issued by a specific agency in each town. They tend to allow owners a 10-15% rent bump every new Accord.

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Oct 17, 2016

Are the different star ratings similar to Class A, B, C etc for commercial/multifamily? Are there certain attributes that determine or is it more of a subjective rating?

I've seen listings for sale where there are vacant MH's that are included in sale, so a lender will not count any rental income derived from renting the actual improvements? Is that cash off the books or what?

Oct 17, 2016

1 star parks are, depending who you talk to, all single-wides. As you move up in % of double wides and ammenities you become a 2 star. As you get in to the more elaborate parks a 4 and 5 star can come along. To be a 4 or 5 you're basically talking about 2000sqft+ MFG homes, excellent park maintenance. Mostly newer product. Elaborate landscaping.

Oct 17, 2016

It's an asset class that has gotten attention from bigger REITS. For example, Northstar Realty Finance has a $1.8 billion portfolio of Manufactured Housing. http://www.nrfc.com/business-lines/real-estate-por... ....It looks like they're about to sell the portfolio too.

Oct 18, 2016

Good interview by Joe Stampone with the guy doing mobile park investment:
http://astudentoftherealestategame.com/park-street...

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Oct 18, 2016

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. The best MHP's are usually age restricted to seniors and are just another form of a retirement home. These properties attract the most institutional capital. Properties that aren't age restricted tend to have more problems (think Trailer Park Boys), but this isn't always the case.

I know the Washington State Pension fund is the sole backer of Hometown America which is a huge MHP owner/operator, Sam Zell has a REIT that focuses on MHP that has performed really well over the past couple decades, also Green Courte Partners out of Chicago assembled and sold off a massive Portfolio of MHP's to Sun Communities within the past 24 months. It is still a very fragmented asset class, but I would expect this trend of consolidation to continue.

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Aug 22, 2018

Holy f*cking shit. One of Hometown America's communities in Northern Virginia has houses for sale for $48,000 and $80,000. Wow. There has to be something to this.

Oct 18, 2016

This article was in WSJ recently. Looks like GIC and Stockbridge Capital have a large presence in the segment:

http://www.wsj.com/articles/singapores-sovereign-w...

Oct 19, 2016

I spent a while exclusively buying MHP around the country. Closed on about $250mm worth of communities in the period I was doing it. Cap rates are relatively low right now. Someone above said funds target 20% IRR, I don't see how you could achieve that right now unless you're renting out the homes right now, which is not a business I'd want to be in.

Our financing sub 3% and 75% LTV. That's where all the value comes from. It's difficult to repositon these assets thanks to Frank-Dodd act; however, there are firms that do it. PM if you want to know more or have specific questions.

It's very similar to multi-family just different expenses, lower turnover and usually different rent control statutes than for apartments.

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Nov 24, 2017

From what I understand, the "investing" is the easy part. The difficult part is simply "identifying" the "mom and pop" owners to find a deal. Does anyone know how to acquire a list of off-market mobile home park owners? I know some states require licensing and list the licensees.

Nov 25, 2017

I have built arguably one of the best databased of owners out there across several states. PM me.

Nov 30, 2017

Hi, Guys, I am looking for a contractor in Sydney for my construction work. Can anyone help me out from this situation?

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Nov 30, 2017

Lots of great info on here, and it looks like the message was an unrelated bump, but wanted to add one more point: one of the major strengths of the sector is that municipalities these days will 9 times out of 10 downright refuse to approve new mobile home parks due to pressure from neighbors who are worried about property values, poor and often unfounded public perception, and the strain they can put on public schools due to the high densities of families. There isn't really any other sector with such a high barrier to future supply.

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Aug 22, 2018

I've been actively working on/researching prefabricated modular homes, which are basically regular houses with permanent foundations that are made in a facility, trucked to the site, and then stitched together over a few days. They cost roughly the same as a site-built house.

Seems like most people here are talking about the classic "mobile" home community, but I really think there's something to this. About 1/3 of the population is lower-middle class--this type of housing could be a real boon to this class of society if it could be made more ubiquitous and higher quality.

Aug 22, 2018
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