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Multifamily Finance Blog
Last updated on Feb 23, 2023
5 min read
by Evelyn Jozsa

Why Invest in Manufactured Housing Communities

Manufactured homes are affordable, fast to construct, and regarded as recession-proof. Find out why.

Better Financing Starts with More Options Start Your Application and Unlock the Power of Choice. Click Here to Get Quotes →$1.2M offered by a Bank at 6.0%$2M offered by an Agency at 5.6%$1M offered by a Credit Union at 5.1%Click Here to Get Quotes
In this article:
  1. What Are Manufactured Homes? 
  2. Why Invest in Manufactured Homes? 
  3. Affordability
  4. Quick Construction Timeline
  5. Flexibility
  6. Increased demand
  7. Recession-resistant.
  8. What Are the Best Financing Options for Manufactured Homes? 
  9. 1. Freddie Mac® Manufactured Housing Community Loans
  10. 2. Fannie Mae® Manufactured Housing Community Loan
  11. 3. CMBS Loans for Manufactured Housing Communities
  12. Related Questions
  13. Get Financing

Due to the rising cost of living and continuously growing income inequality across the country, millions of Americans can’t afford a home and spend more than half of their income on rent. The solution to a more affordable housing market is to increase the housing supply — especially in high-wage metro areas. 

However, developing affordable housing can be a lengthy and highly expensive process — as can investing in existing multifamily properties. In contrast, manufactured housing communities (MHCs) can provide a faster and more affordable solution to the nation’s housing crisis.

What Are Manufactured Homes? 

Although wrongly regarded as unsafe due to their association with traditional mobile homes, manufactured homes have evolved over the years and now come in a wide variety of styles and sizes. Manufactured homes are built in a factory and then transported to the site where they are assembled. These homes now usually feature luxury amenities — similar to those found in traditionally built homes. 

Additionally, manufactured homes are constructed according to the HUD Code. This code requires manufactured homes to be constructed on a permanent chassis. Thanks to this code, manufactured homes are just as safe and sturdy as site-built homes but at a fraction of the price. 

Why Invest in Manufactured Homes? 

Affordability

There are several reasons why manufactured housing is a great investment. First of all, these properties tend to be very affordable — the national average for a new manufactured home was around $89,809 in the first half of 2022, according to Cushman & Wakefield. That makes them an attractive option for first-time investors working with a limited budget. Moreover, because they're often smaller than traditional residences, they're easier and less expensive to maintain.

Quick Construction Timeline

Compared to site-built homes, manufactured homes can be constructed much faster — often in as little as 60 days. This quicker construction timeline means that investors can get their properties up and running faster and start generating income sooner.

Flexibility

Another considerable advantage of manufactured homes is their flexibility. Manufactured homes can be placed on leased land or owned land, giving investors the ability to be nimble and move their properties if necessary. Additionally, many manufactured home communities offer amenities like pools, fitness centers, and clubhouses that make them attractive to residents.

Increased demand

The demand for manufactured homes has been growing in recent years, partly due to the increased awareness of their quality and affordability. This increased demand means that manufactured home prices are more likely to appreciate than depreciate over time, making them an excellent long-term investment.

Recession-resistant.

One of the significant benefits of investing in manufactured housing is that these assets are highly recession-resistant. Thanks to their affordability, people will still be looking to buy or rent manufactured homes even when the economy is struggling — so you can rest assured knowing that your investment will weather any storms.

SEE ALSO: 5 Tips for Shopping for a Commercial Real Estate Loan

What Are the Best Financing Options for Manufactured Homes? 

1. Freddie Mac® Manufactured Housing Community Loans

Freddie Mac’s manufactured housing loan program is available for the acquisition or refinancing of existing, stabilized, and professionally managed manufactured housing communities, with or without age restrictions, not including purpose-built senior housing communities. 

Eligible borrowers include sponsors with two or more years of experience in operating MHCs and should also own at least one other property. The minimum loan amount is $1 million, with five-, seven- or 10-year terms. This loan offers fixed- and floating-rate terms and amortization periods of up to 30 years.

2. Fannie Mae® Manufactured Housing Community Loan

Fannie Mae has provided financing solutions for manufactured housing communities since 2000. Similar to the Freddie Mac option, Fannie Mae’s loan program is available for existing, stabilized, and professionally managed manufactured housing communities, with or without age restrictions. 

The loan features fixed- and variable-rate options, with terms from five to 30 years, amortization periods of up to 30 years, maximum LTVs of 80%, and minimum DSCRs of 1.25x. Prepayment options include yield maintenance for fixed-rate loans and graduated payment for variable-rate financing. Fannie Mae loans also offer early rate lock opportunities through the Streamlined Rate Lock option. 

3. CMBS Loans for Manufactured Housing Communities

CMBS loans offer fixed-rate, non-recourse financing for a variety of property types, including mobile home parks or manufactured housing communities. 

CMBS loans can help investors expand an existing property through the acquisition of adjoining land to grow their manufactured housing community. While CMBS loans generally can’t be used for purchasing land, mobile home parks are an exception, since turning a profit doesn’t depend on the lot. 

CMBS loans are also ideal for buying a new property or obtaining funds for renovations. As newer manufactured homes are built to match high standards with luxury amenities, some of the older products might require significant upgrades to make them desirable to new tenants.

Furthermore, in case you currently have a variable-rate loan on your manufactured home investment, refinancing into a fixed-rate CMBS loan might be a great option — especially with heightened uncertainty in the macroeconomic environment. 

CMBS loan terms include a minimum loan size of $2 million and five- to 10-year fixed-rate terms with amortizations of 25 to 30 years. CMBS mobile home park loans are fully assumable and include yield maintenance or defeasance as prepayment penalty options.

Related Questions

What are the benefits of investing in manufactured housing communities?

Investing in manufactured housing communities offers several benefits, including flexibility and recession-resistance. Manufactured homes can be placed on leased land or owned land, giving investors the ability to be nimble and move their properties if necessary. Additionally, many manufactured home communities offer amenities like pools, fitness centers, and clubhouses that make them attractive to residents. Furthermore, these assets are highly recession-resistant, as people will still be looking to buy or rent manufactured homes even when the economy is struggling.

For more information on commercial real estate loans, check out 5 Tips for Shopping for a Commercial Real Estate Loan.

What are the risks associated with investing in manufactured housing communities?

Investing in manufactured housing communities can be a great way to generate income, but there are some risks associated with it. One of the main risks is that the value of the homes can depreciate over time. Additionally, the land that the homes are placed on may not appreciate in value, which can make it difficult to sell the homes in the future. Additionally, there can be zoning restrictions that limit the number of homes that can be placed in a certain area, which can limit the potential for growth. Finally, there is the risk of tenant turnover, which can lead to vacancies and lost income.

For more information on the risks associated with investing in manufactured housing communities, please see this article.

What are the key considerations when evaluating a manufactured housing community investment?

When evaluating a manufactured housing community investment, there are several key considerations to keep in mind. First, it is important to consider the location of the community and the local market conditions. It is also important to consider the quality of the homes and the amenities offered, as these can have a significant impact on the attractiveness of the community to potential residents. Additionally, it is important to consider the potential for appreciation of the homes over time, as well as the potential for rental income. Finally, it is important to consider the financing options available for the purchase of the manufactured housing community.

For more information on financing manufactured housing communities, please visit Multifamily.loans. We offer a variety of loan products for manufactured housing communities, including Fannie Mae, Freddie Mac, and FHA loans. Our loan products offer competitive rates and terms, and our experienced team of advisors can help you find the best financing solution for your investment.

What are the most important metrics to consider when investing in manufactured housing communities?

When investing in manufactured housing communities, there are several important metrics to consider. These include the occupancy rate, the average rent per unit, the average age of the homes, and the quality of the amenities offered. Additionally, it is important to consider the local market conditions, such as the population growth rate and the economic outlook.

The occupancy rate is an important metric to consider when investing in manufactured housing communities, as it indicates the demand for the homes. The average rent per unit is also important, as it can give you an idea of the potential return on investment. The average age of the homes is important to consider, as older homes may require more maintenance and repairs. Finally, the quality of the amenities offered is important, as they can attract more residents and increase the value of the community.

For more information on investing in manufactured housing communities, please visit this article.

What are the tax implications of investing in manufactured housing communities?

Investing in manufactured housing communities can have a variety of tax implications, depending on the type of investment. For example, if you own the land and the manufactured home, you may be eligible for a variety of deductions, such as depreciation, mortgage interest, and property taxes. Additionally, if you rent out the manufactured home, you may be eligible for deductions related to rental income. It's important to consult with a tax professional to understand the specific tax implications of investing in manufactured housing communities.

What are the financing options available for investing in manufactured housing communities?

The two best financing options for investing in manufactured housing communities are Freddie Mac® Manufactured Housing Community Loans and Fannie Mae® Manufactured Housing Community Loan.

Freddie Mac's manufactured housing loan program is available for the acquisition or refinancing of existing, stabilized, and professionally managed manufactured housing communities, with or without age restrictions, not including purpose-built senior housing communities. Eligible borrowers include sponsors with two or more years of experience in operating MHCs and should also own at least one other property. The minimum loan amount is $1 million, with five-, seven- or 10-year terms. This loan offers fixed- and floating-rate terms and amortization periods of up to 30 years.

Fannie Mae has provided financing solutions for manufactured housing communities since 2000. Similar to the Freddie Mac option, Fannie Mae’s loan program is available for existing, stabilized, and professionally managed manufactured housing communities, with or without age restrictions. The loan features fixed- and variable-rate options, with terms from five to 30 years, amortization periods of up to 30 years, maximum LTVs of 80%, and minimum DSCRs of 1.25x. Prepayment options include yield maintenance for fixed-rate loans and graduated payment for variable-rate financing. Fannie Mae loans also offer early rate lock opportunities through the Streamlined Rate Lock option.

In this article:
  1. What Are Manufactured Homes? 
  2. Why Invest in Manufactured Homes? 
  3. Affordability
  4. Quick Construction Timeline
  5. Flexibility
  6. Increased demand
  7. Recession-resistant.
  8. What Are the Best Financing Options for Manufactured Homes? 
  9. 1. Freddie Mac® Manufactured Housing Community Loans
  10. 2. Fannie Mae® Manufactured Housing Community Loan
  11. 3. CMBS Loans for Manufactured Housing Communities
  12. Related questions
  13. Get Financing

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