Recession-proof real estate Featured

7:00pm EDT February 24, 2008

Despite the market changes, investors still have great opportunities in real estate, including manufactured home communities — one of the most affordable forms of housing.

“Land lease manufactured home community investments are typically more passive than some of the common real estate investments but provide great cash flow, and some have a significant future upside,” says Michael J. Nissley, senior vice president of the manufactured housing group at CB Richard Ellis, Atlanta. “Some investors view them as ‘land bank’ investments.”

Smart Business learned from Nissley about investing in manufactured housing (MH) communities.

What differentiates MH properties?

Other rental investments are much more active investments because owners have the responsibility for maintenance and repairs of the buildings as well as the property's landscaping. In land lease MH communities, the investor typically doesn’t have any responsibility to repair or maintain the interior or exterior of the homes. Operating expenses for apartments typically run closer to 50 percent of income, while MH communities on average run closer to 40 percent.

Where are MH and RV communities located?

The U.S. has approximately 50,000 MH communities and 15,000 RV communities ranging from a single unit to 2,000 units. The majority of the homes and communities are located in the Sunbelt states. Florida is the largest followed by Texas, North Carolina, California and Georgia. Other states with a large number of MH sites are South Carolina, Alabama, Arizona, Michigan and Tennessee.

What types of MH communities exist?

There are two main categories of MH and RV communities with three subtypes including: senior (55-plus) communities, family (all age) communities and resident-owned or condo communities. It is generally believed that the 55-plus communities have fewer turnovers, more pride of ownership and more stable paying residents — many on fixed incomes. The all-age family communities are also good investments that can have high demand but are believed to have slightly higher operating expenses due to the higher turnover related to younger families with less stable incomes. Resident-owned communities are not typically available as investments, but the people living there always have the option of selling the entire community by a unanimous resident vote.

What kinds of investors could easily transition into this type of real estate ownership?

Many apartment and self-storage owners also buy land lease manufactured home community investments. They like the passive nature of the investment and the ability to combine similar management components with their other property types.

What third-party management services are available for these properties?

Currently, both the MH and RV community segments have several quality, regionalized third-party management companies throughout the U.S. with the largest ones based in California, Oregon, Texas and Florida. At this time, both the MH and RV segments do not have a single management company serving all of North America. But as the field continues to consolidate, the need for a single national source of third-party management will likely emerge and would give completely passive investors the ability to easily enter this industry segment.

What exit strategy options exist with these investments?

The majority of MH and RV community investments are bought and sold for a price based solely on cash flow. The best investment grade communities, in the high-demand Sunbelt states, such as Florida, Arizona and California, trade for cap rates of 5 to 6 percent. But investors can find higher returns in this industry. It’s common to see 7.5 to 9 percent cap rates depending on the location and condition of the community.

Alternative strategies: A popular option in Florida is to sell the community to the current residents, which is known as a ‘condo or resident-owned community.’

Lastly, owners can sell the community to a buyer for a ‘change of use.’ This means that eventually the community residents will be relocated and the land will be developed into something else. It’s highly recommended that you consult a professional and understand the risks and the varying state laws before getting involved in an alternative method of acquisition or disposition.

Are there companies that can provide information about investing in MH communities?

A good place to start is to call Michael O’Brien at the Manufactured Housing Institute ( or look up the MH industry guru George Allen, who publishes the Allen Letter and wrote the book ‘How to Buy Manage MH Communities’ ( Another good place for resources and communities for sale is the Mobile Home Park Store ( Or visit CB Richard Ellis’ manufactured housing group site (www. cbre/

MICHAEL J. NISSLEY is the senior vice president of the manufactured housing group with CB Richard Ellis in Atlanta. Reach him at (404) 504-5970 or