Understanding The Pros And Cons of Investing in Manufactured Housing

There is one asset class that’s often overlooked but has proven time and time again to be one of the best investment opportunities… mobile home parks. Until recently, investing in mobile home parks has remained relatively quiet largely due to misperceptions and stereotypes.

Mobile home parks (MHPs) or manufactured housing communities (MHCs) are an excellent subclass of real estate to be invested in, especially during times of uncertainty. Whether it be to invest in the parks themselves, rehabbing and flipping mobile homes, investing in funds that purchase parks, or even investing in funds that buy mobile homes to flip them, there is a myriad of investment strategies you can implement in the manufactured home space.

Investing in manufactured home communities is an ideal investment opportunity for busy physicians and entrepreneurs because of their unique performance qualities.

Why Physicians Should Invest In Manufactured Housing

There is a lot of demand right now, in the U.S., for this form of housing. Demographic data reveals that roughly 20% of U.S. workers earn less than $20,000 per year!

As a result, the country’s low-income earning workers can maybe afford $575-$600 tops for housing per month, while the average 2-bedroom apartment in the U.S. more than doubles that. Another worrisome fact is there are only about 44,000 manufactured housing communities in the entire U.S.

We’re definitely in an affordable housing crisis right now, to a great extent, because we’re extremely underbuilt for our low-income earning workforce. On top of this, the vast majority of municipalities aren’t allowing for more manufactured housing communities to be built. This is changing, however, as more and more municipalities are beginning to address the nation’s affordable housing crisis.

The Pros of Investing in Manufactured Housing Communities

Mobile homes are by far the least expensive form of detached housing by about six times! This is a great win for tenants because it provides them with an affordable pathway to ownership.

For park owners, mobile homes generally offer high cash-on-cash returns because, at the moment, these assets are selling at higher capitalization rates, which means higher cash flow for the buyers. This seller population is also more amenable to strategies like seller carryback and other forms of creative financing which can really increase cash-on-cash returns. 

Compared to investing in single-family homes, you can infill manufactured housing communities much faster and more economically than you could a build-to-rent single-family home community. It’s also much easier to rehab existing mobile homes than single-family homes. 

Another route to increase returns is to refurbish mobile homes in your park to sell to tenants. This is a win-win scenario. You will get a lot of rent and they get to walk a path to ownership. As a result, they are much more likely to take pride in their home and often will take better care of their mobile homes, which is a huge plus for the overall community. 

With this strategy, you’ll likely notice the issues of trash around the park, littering inside and outside the mobile homes, and quick move-in and move-out scenarios start to diminish. People often take better care of something they own versus something they rent. 

Investing in Mobile Home Communities
Photo via Canva

In large part due to the stigmas surrounding these assets, it’s relatively easier to get a pretty good deal on mobile home parks for the time being. However, this is changing as more and more sophisticated investors realize the potential of this asset class and decide to enter the space.

The people that own mobile home parks or manufactured housing communities, in large part, operate them. They would be called “mom and pop” owners in most circles. Because they have been the owners and operators for many years, they have very low debt on the parks. They are generally more reasonable in their offering prices and have much more flexibility in terms of sales. For instance, in regards to financing, they may be able to offer seller financing for some or maybe even the entire loan. If the seller can self-finance the transaction…it becomes a non-recourse loan!

As far as operations go, systems can be put in place to ensure you are working on your asset, not in it.

For instance, having someone live at your mobile home park and be the property manager is a very common scenario. This person can be trained to take on the daily tasks that need to occur and can be given decreased rent in return. This is a much better alternative than you managing the park yourself and you will have someone watching your asset 24/7.

The Cons of Investing in Manufactured Housing Communities

There are a lot of misperceptions and stigma surrounding mobile home parks. Many of which you are most likely aware of. Fortunately, implementing proper systems can help mitigate stigmas most of the time.

For instance, having proper management, giving tenants a pathway to ownership, enforcing park rules, evicting troublesome tenants, and having things like “park clean up day” can really foster community pride and turn a park around very quickly. When people feel they are a part of a community many of the issues that feed into the bad reputation surrounding mobile homes will often diminish. 

A vast majority of municipalities across the U.S. aren’t open to the idea of having new mobile homes built in their communities. However, due to the affordable housing crisis, there are some major U.S. cities that have begun to address this issue, including Minneapolis and Portland.

For instance, at the start of 2020, Minneapolis became the first major city in the U.S. to eliminate single-family zoning. Later, in August 2020, major updates to Portland’s housing-related zoning code went into effect which addressed affordability, access, and supply issues for the city’s low-, moderate-, and middle-income earning community members. Although there is still a lot more work to be done, these municipalities have set the bar for addressing the nation’s affordable housing crisis.

Another hurdle of investing in manufactured housing communities is lending can be difficult, especially for smaller mobile home parks. In recent years, however, both recourse and non-recourse lenders have begun to step into this space. There are some pretty strict parameters that must be met, which can make it difficult but still possible to achieve.  Remember, a large group of manufactured housing community owners have room to be more flexible and creative with the financing they can offer as well.

Investing in Manufactured Home Communities
Photo via Canva

Start Your Financial Freedom Journey

Whether you’re interested in getting your feet wet as an investor or searching for new opportunities to diversify your portfolio, investing in manufactured home communities is one investment strategy I recommend keeping in mind. 

There are ways you can passively and actively invest in this subclass of real estate and even invest in ancillary funds around it. You have multiple options available to invest in the space and there is definitely a path for you that can help you achieve your overall goals and expectations.  

If you’re ready to start your investing journey and would like to learn more about investing in manufactured housing communities or any number of different investment strategies, click here to schedule a free 30-minute call with me. 

I look forward to helping you win back your time!

More Posts:


Often, physicians ask me the “one thing” they need to know to be successful in investing. I think usually they are waiting to hear something

Read More »