Is Manufactured Housing The Next Big Thing In Real Estate?
As many Americans struggle to afford housing, a market is emerging for single-family home alternatives. Some real estate investors are betting big on manufactured housing, a sector with a particularly strong outlook.
“For many years, the benefits of investing in manufactured housing seemed like well-kept secrets in the real estate industry,” said Chad Hagwood, head of manufactured housing community production at Hunt Real Estate Capital. “Now, as housing affordability issues persist, everyone is starting to look at this sector and the returns it offers.”
Hagwood has specialized in financing for manufactured housing communities for over two decades, and he understands the massive impact these properties can make on both the investment community and on America’s affordable housing crisis. Bisnow spoke with him to learn more about what sets manufactured housing apart and where he sees this market heading in the future.
Bisnow: What defines manufactured housing?
Chad Hagwood: Manufactured housing is typically found in land-lease communities, such as mobile home parks, where residents own homes but rent the sites where those homes are located. Although far less common, communities can also be owned by the residents themselves.
Bisnow: What makes manufactured housing projects attractive to investors?
Hagwood: Historically speaking, these types of properties have residents that are not as prone to turnover as tenants in traditional multifamily housing. You have residents who have invested in their home and likely plan to stay there for a while. As you can imagine, this type of stability is very attractive to investors.
Bisnow: Where do you see the industry heading in 2020?
Hagwood: In a very positive direction. This is a much-needed form of affordable housing and there has been a major push to build more manufactured housing communities in cities across the country. In fact, the U.S. Secretary of Housing and Urban Development, Dr. Ben Carson, has been championing this product type and has called it “vital” for meeting America’s affordable housing needs. I don’t see the demand for manufactured housing diminishing anytime soon. Quite the opposite, in my opinion.
Bisnow: What are some of the unique challenges of financing manufactured housing projects?
Hagwood: Financing for manufactured housing is very different than financing for other commercial real estate assets. There are a ton of nuances with this property class. The lease-up period for these types of properties is typically much, much slower than the lease-up time for a traditional apartment community. This is challenging for both the owner and the lender, who need to have patience as new or redeveloped properties stabilize. Not all lenders are willing to exercise that patience.
Bisnow: What types of financing are best for these projects?
Hagwood: Every property and every borrower is different. There is no one-size-fits-all solution for manufactured housing financing, and it’s important that borrowers are choosing something that works best for their purpose and their business plan, not the purpose of what one particular originator or company is trying to push on them.
At Hunt, our dedicated MHC team makes it their goal to provide owners and operators with loan terms and white-glove service during the transaction process so the owners can focus on what really matters: running their properties and serving their residents. Our team has financed billions of dollars of these projects and can help our clients select an option that’s best for their unique goals — whether it’s a Fannie Mae or Freddie Mac loan, a CMBS or a loan from our Proprietary program.
The mission-driven manufactured housing sector will remain a continued focus for Hunt in 2020 and beyond, as supporting this asset class provides families and communities around the country with an affordable path to homeownership.
Bisnow: What should borrowers know before they start searching for financing for manufactured housing projects?
Hagwood: We work primarily with clients who are seeking financing to acquire or refinance manufactured housing community properties. The best thing we have to offer them is the knowledge that comes with decades of experience financing this often-overlooked property type.
There are many potential pitfalls that even experienced lenders just don’t know or understand about manufactured housing communities, and that could have a huge negative impact on the borrower. It’s important that the client work with someone that knows, understands and has the specialized experience that can guide you through the deal process.
This feature was produced in collaboration between the Bisnow Branded Content Studio and Hunt Real Estate Capital. Bisnow news staff was not involved in the production of this content.