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.