Original Article by Lucia Morosanu from CPExecutive
The manufactured housing sector is experiencing an increase in popularity among investors and tenants alike. As the pandemic aggravated an already deepening affordable housing crisis and the unemployment wave hit the retail, hospitality and leisure sectors the hardest, manufactured homes are deemed a viable solution to the housing crisis.
The following list tackles the most common misconceptions about investing in manufactured housing. From financing to building quality and tenants, manufactured homes have evolved to be defined by affordability rather than mobility.
5. HARD TO FINANCE
One myth regarding manufactured homes is that they are troublesome to finance. While this used to be the case several years ago, the situation has changed with increased investment interest and now both GSEs and private lenders have ramped up financing manufactured housing.
4. POOR BUILD QUALITY
While many still see them as old-fashioned mobile housing, manufactured homes are actually a specific type of factory-built housing and very closely resemble single-family residences. They are built under HUD’s strict Manufactured Home Construction and Safety Standards code. They are then transported to the site and assembled rapidly to ensure minimal weather exposure that can result in increased expansion, contraction and warping. Compared to a traditional site-built home, a manufactured one must withstand transportation, making the final products sturdier once completed.
3. BAD INVESTMENTS
Demand for manufactured homes keeps increasing and the pandemic has only accelerated the need for affordable housing. Total investment in manufactured housing increased 23 percent in the second quarter compared to the first three months of the year. In addition, institutional capital accounted for a record-high 28 percent of total investment volume year-to-date. The sector can be seen as a safe investment in times of uncertainty since manufactured communities recently experienced low residential turnover and high rent.
2. HIGH BARRIER TO ENTRY
Compared to other asset classes, the manufactured housing sector has one of the lowest investment barriers. With limited new supply and an aging existing stock , investors have plenty of value-add opportunities in this niche sector.
1. TARGETING LOW-INCOME RESIDENTS
While most asset types use letters to differentiate properties by age and construction quality, manufactured housing communities are differentiated using a star system, each targeting a different type of tenant. Tenants can include seniors on fixed incomes, low-income families, people with disabilities, veterans and others in need of low-cost housing.
Another growing demographic is comprised of aging Baby Boomers with disposable income who opted to reduce retiring costs or simply added a second home. These residents are mostly considering 55+ communities, which offer amenities comparable to those of traditional senior communities, but at a fraction of the price.