Mobile Home Park Investing

Mobile home park investing means buying the underlying land, roads, and utility infrastructure of a manufactured housing community, and in most parks the individual homes themselves are owned by the residents rather than the park operator. That distinction, land lease versus home ownership, is the core of the business model: the park collects a monthly lot rent for the pad and shared infrastructure while the resident owns and maintains the home sitting on it.

Manufactured housing communities have drawn increasing institutional interest over the past decade because lot rent tends to run well below the cost of a comparable apartment unit in the same market, which supports resilient occupancy through downturns, and because relocating a mobile home is expensive enough that most residents stay put even when lot rent increases, giving the operator unusually low turnover and correspondingly low turnover-related expense.

A park where most homes are resident-owned carries lower capital exposure for the operator, since the homes themselves aren't a maintenance liability on the balance sheet, but it also means less control over the community's physical condition, since the operator can't force a resident to maintain their own home. A park that owns a share of its homes and rents them out directly takes on more capital risk and maintenance responsibility in exchange for more control and a higher rent per pad.

Water and sewer infrastructure in older manufactured housing communities can be decades past its intended service life, and a failing septic system or aging water main is a capital expense that falls entirely on the park owner regardless of how the homes themselves are owned. A pre-purchase inspection of the utility infrastructure, not just the homes and pads, is one of the most consequential diligence items on a park acquisition.

A fee-simple purchase of the land and infrastructure underlying a manufactured housing community qualifies as like-kind real property for a 1031 exchange when held for investment or business use, the individual manufactured homes owned by residents are not part of what the exchanger is purchasing. Community inventory near Aspen is essentially nonexistent given land values in the county, so this asset type is typically sourced well outside the immediate market for an exchanger drawn to its lower turnover profile.

A growing number of states and counties have passed rules limiting how quickly lot rent can increase or restricting a park's ability to convert to another use, and those rules vary enormously from one jurisdiction to the next. A community that looks attractively priced on its current income can carry very different upside depending on whether local rules cap future rent growth or leave the operator free to reprice lots toward market over time, which makes jurisdiction-specific research a required step before underwriting projected rent increases.