Manufactured Housing

Overview

Land underneath manufactured homes, where residents own their home and pay lot rent to the community. DSTs in this sector are typically portfolios of communities, sometimes spread across the Midwest, Southeast, or Sunbelt. The product ranges from older 3-star communities to newer 4 and 5-star age-restricted communities.

Analyst Notes

Look at occupancy stability over the last five to ten years. Stable occupancy through cycles is the signature of a good community. Check the percentage of resident-owned versus park-owned homes. Park-owned homes add operational complexity. Look at the trajectory of lot rents and the spread to comparable communities. The best opportunities are in supply-constrained markets where 4 to 6 percent annual rent increases are achievable without driving residents out.

Advantages

• Tenancy is extraordinarily sticky. Moving a manufactured home costs five to ten thousand dollars or more, so residents almost never leave voluntarily.

• Operating intensity is low. Residents own and maintain their own homes, so the operator is mostly maintaining roads, common areas, and utilities.

• New supply is severely constrained. Almost no new MHCs get permitted because of zoning resistance, which protects existing communities.

Disadvantages

• The sector has political and reputational headwinds around lot rent increases, particularly when out-of-state owners raise rents on older fixed-income residents.

• Quality varies enormously. Older communities can have aging infrastructure, deferred capex, and a tenant base that limits rent growth.

• The credit profile of residents is generally lower than other residential property types, so collections and turnover require active management.

Frequently Asked Questions (FAQ)

Property Type Performance Averages