Mobile home park operators, one of the least attractive real estate sectors, is seeing an increase in demand for low-housing options. Although there are not very many new mobile home communities being built, larger companies within the sector are quickly snatching up the smaller players, which in turn dramatically reduces competition.
Meanwhile, significant demand from families interested in space in mobile home parks has made it possible for landlords to increase rent. As a result, strong growth is evident. Mobile homes are also referred to as “manufactured homes” because they are manufactured in a factory and then shipped to the park.
Jonathon McClellan, senior director with Marcus & Millichap, the national manufactured home communities group, has been in the business for nearly 10 years and confirms that demand for manufacturing housing communities has never been greater.
Manufactured Home REITs
Within the sector are three REITs to include Equity LifeStyle Properties, Inc., Sun Communities, Inc., and UMH Properties, Inc. When asked about demand for affordable mobile park living, all three agree there are incredibly strong gains, not only pertaining to the number of properties but also revenue.
For instance, Michigan-based Sun Communities has almost doubled holdings in the past three years. Today, this company operates a total of 249 communities that consist of approximately 90,000 individual sites compared to 136 communities that have roughly 45,000 home sites.
President and chief operation officer with Sun, John McLaren, said due to low interest rates coupled with a number of small players eager to get out of the business, his company has expanded. Average rent in 2013 was $445 whereas today, it is $456, a 2.5 percent increase. The company also reported a 6.2 percent jump in net operating income during the fourth quarter compared to the prior year.
Continued Growth Expected
According to several top analysts, the good fortunes experienced by mobile home park owners will probably continue to improve. Total return for the three REITs mentioned for quarter ended in March was 44 percent. In a statement from the National Association of Real Estate Investment Trusts, for any REIT category this was the best performance. While there was some recent performance slippage in the stock market vitality, among REITs this is still one of the top performers.
Mobile home living is not only attractive to lower income families but also people looking for affordable vacations homes and retirees who want to downsize. Compared to conventional style homes, mobile living is more cost-efficient. In fact, for many markets, the monthly cost to own a manufactured home is less than the cost of renting an apartment.
As of this past February, the median price for an existing single family home in the US was $202,000, this according to the National Association of Realtors. However, the median price for a manufactured home was just $64,200. Over the past five years, apartment landlords have increased rent by almost 15 percent, which means the average monthly rent is now at $1,131.
While many people are optimistic about growth in mobile park home living, Equity Lifestyle in particular is optimistic. This company expects this sector will see growth at least for the nest 15 years, especially for people over the age of 55.