Article
February 3, 2021
Manufactured housing is a type of prefabricated housing largely assembled in factories and later transported to placement sites. It is a “hot commodity” according to Rana Foroohar in “Why Big investors are buying up American trailer parks” for the Financial Times. Drawing on data from Cornell University she shows that cost of housing contributed to, “a record 81 percent of core inflation in summer 2017, which resulted in Affordable Housing Crisis in much of America. Manufactured Housing Communities (MHCs) provided a solution to this problem by offering affordable options for Americans to achieve the American dream.” Approximately 22 million people live in manufactured homes nationally according to the Manufactured Housing Institute. It is a thriving, recession resistant industry where demand continually exceeds supply.
“Manufactured housing has solved the problem of lack of affordable housing and lack of just housing in general by creating the efficiency which Henry Ford invented on an assembly line. If we can build a house on an assembly line in a third of the time it would normally take us and with a third of the cost of what it would normally cost us, we can get more housing units into the population with more affordable rent,” says Peter Tripp, Senior Vice President at Onyx Capital. “Everything we have in life is built in an assembly line – except for our house. This is the foundation of why I think this industry is going to continue doing well.”
Additionally, MHCs can create higher yield for investors because there is minimal turnover and on average home and residents remain in the community for 14 years. “Residents living in MHCs are homeowners, rather than renters. Picking up and relocating manufactured homes can cost upward of $10,000. As such, manufactured housing community residents are less likely to pick up and move when their leases expire,” adds Foohar. “In many ways, investing in a four- or five-star manufactured housing community isn't much different from investing in a luxury apartment complex. Both types of assets attract financially stable residents who are unlikely to be evicted for nonpayment of rents,” according to Whitson Huffman in “Why Manufactured Housing Is A Strong Foundation For Investment” for Forbes.
Manufactured housing is the least expensive kind of housing available without a government subsidy. Huffman points out that MHC’s are now widely considered a lower-cost alternative to single-family housing and developers are able to achieve economies of scale and “offer attractive, sturdily-built dwellings at relatively low cost.” It is a good time to invest in MHC’s because the current economic downturn has caused individuals to lose their permanent streams of income and they are considering affordable housing options. As there are fewer operating costs: MHC owners are only responsible for covering common areas and any amenities. “Thanks to the growth of four- and five-star communities, investors can benefit from a potentially recession-resistant residential asset that offers a robust yield and plenty of staying power,” adds Huffman.
Investing in MHCs is a financially sound move because you are really investing in a community and everything that comes with it. Brian Spear in his article “What You Should Know If You're Considering Investing In Mobile Home Parks” says “The stable cash flow generated by [MHC’s and] mobile home parks reduces investor risk and I believe the more sophisticated investors will certainly jump into the space.”
“We are shining as a stable, extremely well performing asset class through one of the worst economic cycles the world has ever gone through,” adds Peter Tripp from Onyx Capital. If you have been considering investing in Manufactured Housing Communities, now is the perfect time to do it.”
