Why Investors Love Mobile Home Parks: The Surprising Power of Manufactured Housing

By Paul Moore, Founder of Wellings Capital

Affordable housing, limited new supply, loyal residents, and opportunities for professional operators make manufactured housing communities a compelling commercial real estate investment.

I shouldn’t have listened to my mama

My mother always told me to stay away from trailer parks.

I listened.

Unfortunately, that advice may have cost me a fortune.

Early in my investing career, I had an opportunity to invest in a mobile home park. I dismissed it almost immediately. I couldn't imagine why anyone would deliberately invest in what I considered the least glamorous corner of real estate.

After making my first few million dollars at age 33, I spent several years confusing investing with speculating. I made some money, lost plenty, and eventually discovered that creating wealth and preserving it require very different skills.

Looking back, that mobile home park investment I rejected represents something important about my early investing philosophy: I was paying too much attention to appearances and not nearly enough attention to economics.

After years of investing in residential real estate, developing properties, helping build a hotel, and eventually writing books on commercial real estate investing, I discovered that some of the most attractive investments are hiding in plain sight.

Manufactured housing communities are a prime example.

Warren Buffett recognized the business potential of manufactured housing through Berkshire Hathaway's acquisition of Clayton Homes and a few companies who lend to this sector. 

Legendary real estate investor Sam Zell also invested extensively in manufactured housing communities. He saw the potential of manufactured housing decades before most of the world woke up to it. He became a multi-billionaire in the process. 

Perhaps they understood something I missed.

The secret isn't that mobile home parks are glamorous. It's that they combine several characteristics commercial real estate investors look for: an essential service, recurring income, substantial barriers to new competition, a fragmented ownership base, and opportunities to increase property value through improved operations.

Let's examine why this overlooked asset class deserves serious consideration.

1. First, Understand What Investors Actually Own

The manufactured housing business model has a particularly attractive feature that distinguishes it from conventional apartment investing.

In a traditional apartment community, the landlord typically owns the buildings, appliances, fixtures, roofs, flooring, plumbing, and all the other wonderful things that can break at 2 a.m.

In a manufactured housing community structured around resident-owned homes, the tenants own their homes.

The community owner primarily owns the land and infrastructure. This generally includes the individual home sites, roads, utility systems, common areas, landscaping, and community amenities.

Residents pay monthly site rent for the land beneath their homes. They are generally responsible for maintaining their own houses.

This creates an interesting division of responsibility.

The resident owns the home. 

The investor owns the land and infrastructure.

Of course, not every community follows this model. Some operators own and rent individual manufactured homes as well. But from an investment perspective, communities consisting primarily of resident-owned homes have characteristics I particularly appreciate.

Residents have a financial incentive to maintain their own homes. The community owner focuses on maintaining the land, infrastructure, common areas, and overall quality of the neighborhood.

This can reduce operating complexity and the capital expenditures associated with maintaining hundreds of individual rental homes.

It also creates something valuable: two distinct parties with a financial interest in the community's continued success.

That's a much different arrangement from replacing the carpet in an apartment for the fourth time because somebody decided to raise three Saint Bernards there. 

2. Manufactured Housing Addresses an Enormous Economic Need

One of the most compelling reasons to consider manufactured housing is that it addresses a fundamental problem in America: affordable housing.

Millions of Americans struggle to find housing that fits their budgets. Traditional homeownership has become increasingly difficult for many households, particularly first-time buyers, retirees living on fixed incomes, and families with modest earnings.

Manufactured housing offers an alternative.

A resident may be able to purchase a manufactured home and rent a site for significantly less than the cost of purchasing a comparable site-built home and its land.

Many residents enjoy their own detached home, a yard, parking near their front door, and a neighborhood atmosphere that may be difficult to find in similarly priced apartments.

These advantages appeal to several different groups.

Young families may want more room without taking on an enormous mortgage. Retirees may prefer to downsize, release equity from a larger house, and simplify their living arrangements. Workers in rural or smaller metropolitan communities may find manufactured housing offers a practical route to homeownership.

Of course, the complete affordability calculation matters. Residents must consider the home's purchase price and financing, site rent, utilities, insurance, maintenance, taxes, and any applicable community fees.

Still, the fundamental advantage is compelling: manufactured housing can provide an affordable form of detached homeownership while allowing residents to rent the land beneath their homes.

Why affordability matters to investors

Demand driven by an essential need is different from demand driven primarily by fashion or speculation.

Consumers may postpone buying luxury goods, purchasing a vacation property, or upgrading their vehicles. Housing, however, remains a necessity.

This doesn't make manufactured housing recession-proof. Residents can experience unemployment, rising living expenses, or difficulty making payments.

But when conventional housing becomes less affordable, manufactured housing may become increasingly attractive.

Check out this comparison of apartment rents and manufactured housing site rents across several states. Although those historical figures should not be represented as current prices, they illustrate the substantial affordability gap that helped attract me to this sector. 

Furthermore, keep in mind that we are comparing two-bedroom apartments to manufactured homes, which are more typically three bedrooms. And they have a deck, parking spaces, and direct access to a yard, and more. Plus they don’t share paper-thin walls and ceilings with noisy neighbors. 

3. The Supply-and-Demand Imbalance Creates Barriers to Competition

Economics students learn that attractive profits generally attract competitors.

If a particular city needs more apartments, developers can buy land, secure approvals, and construct apartment communities. The same is true of self-storage, retail buildings, and many other commercial property types.

Manufactured housing communities face a somewhat different situation.

In many communities, obtaining approval to develop a new mobile home park is extraordinarily difficult. If not impossible.

Municipalities may favor other uses for valuable land. Neighbors sometimes oppose proposed developments. Zoning restrictions, infrastructure requirements, utility connections, and the economics of new construction can make development impractical. Manufactured housing communities place a significant burden on public services (schools, etc.) without contributing a lot to tax revenues. 

The result is a substantial barrier to new competition in many markets.

Manufactured housing communities are the only asset type I know of that have increasing demand and stagnant or decreasing supply… year-in and year-out.

Think about that. 

Unlike conventional apartment buildings, an existing manufactured housing community may be difficult or impossible to replace nearby.

That is a meaningful advantage for owners of well-located properties.

Why limited supply matters

Consider two hypothetical investments.

The first is an apartment complex in a rapidly growing metropolitan area where developers can construct thousands of additional units.

The second is a manufactured housing community in an established neighborhood where demand is steady, occupancy is strong, and local zoning makes new manufactured housing development extremely difficult.

The apartment owner may eventually compete against thousands of additional units. The manufactured housing community owner may enjoy considerably greater protection against new competition. And he is providing affordable housing, something that is desperately needed in every point of the economic cycle. 

This doesn't mean manufactured housing communities are immune to problems. Population decline, poor local employment conditions, excessive rents, or deteriorating infrastructure can undermine an investment.

And community preservation matters. Closing down an existing park can eliminate affordable housing and impose substantial hardship on residents who own homes that are expensive or impossible to relocate. 

But for investors acquiring and improving established communities, restricted new supply may provide a significant competitive advantage.

I was visiting mobile home communities in Fairbanks Alaska in 2020 and was surprised to find that two of the four competing parks I visited were shut down due to the costs of failing infrastructure (septic systems in this case). This put a significant hardship on former residents. 

4. Fragmented Ownership Creates Acquisition Opportunities

The scarcity of new parks is only half the story.

The other half is ownership.

Manufactured housing has historically been an unusually fragmented commercial real estate sector. Many communities have been owned by individuals and families for decades. Some owners originally developed their communities. Others inherited them or acquired them many years ago.

These owners may have dependable income and little debt. They know their residents, understand their neighborhoods, and see no compelling reason to dramatically change their operations.

There's nothing inherently wrong with that approach.

But it can create attractive opportunities for professional operators.

An experienced buyer may discover a community with below-market rents, outdated management practices, vacant sites, poor expense controls, or additional land that could be used more productively.

The property may already be profitable. Yet a professional operator could potentially increase its income while making substantial improvements for residents.

The key is acquiring the property at a sensible price, accurately evaluating its condition, and identifying improvements that produce lasting value.

An underperforming property isn't necessarily a bargain. Sometimes it's simply underperforming for very good reasons.

Investors should distinguish between a property with readily achievable operational improvements and one requiring a tremendous amount of capital to overcome fundamental problems. 

Check out this graphic showing significantly higher mom-and-pop ownership in the manufactured home sector versus apartments and self-storage. 

5. The Opportunity to Create Value Through Better Operations

One of my favorite things about commercial real estate is that property values are largely determined by the income they generate.

For a stabilized manufactured housing community, the basic valuation formula is:

Property Value = NOI ÷ Cap Rate

NOI = Net Operating Income

Cap Rate (aka Capitalization Rate) is a subjective measurement for the expected return for an unlevered asset of a particular asset type in a particular location at a particular point in time. 

This means an investor doesn't have to rely exclusively on market appreciation.

A capable operator can increase a property's value by increasing its net operating income through higher revenue, lower expenses, or both.

The opportunities in manufactured housing include filling vacant home sites, improving collections, upgrading management systems, creating additional income sources, and identifying operating expenses that can be reduced without compromising the quality of the community.

A simple example of value creation

Imagine acquiring a community with an unused parcel of land that can be converted into secure parking for boats, recreational vehicles, and work trailers.

The operator obtains the necessary approvals, installs appropriate fencing and security, and rents the spaces to residents and local customers.

Suppose the project produces $60,000 in additional annual NOI after accounting for its incremental operating expenses.

At a hypothetical 7% capitalization rate, that additional income could create approximately $857,000 in property value.

A relatively straightforward operating improvement might produce substantial appreciation.

The opportunity is nevertheless real: skilled management can unlock value that was previously overlooked. And in this case, it produces a side benefit: a less cluttered community. And a storage opportunity for residents. 

But wait… there’s more.

Consider the impact of leverage in this example. Let’s assume the park was acquired for $4 million, with debt of $2.5 million (equity of $1.5 million). And let’s assume this storage area was created for an investment of $75,000. 

This $75,000 investment created a theoretical value increase of $857,000, a ten-to-one return on investment. 

Furthermore, the $857,000 appreciation increases the theoretical value of the asset by over 21% ($857k ÷ $4 million). But it increases the value of the equity by over 50% ($857k ÷ $1.575 million). (Note that I added $75k to equity outlay to account for the cost of construction.) 

This demonstrates the power of the CRE value formula combined with leverage. 

6. Residents Tend to Stay for a Long Time

Manufactured housing communities possess another characteristic that investors appreciate: relatively low resident turnover.

Consider what happens when someone moves out of an apartment.

They pack their possessions, rent a truck, return their keys, and leave. And often leave behind damage and filth that must be addressed by property management before acquiring a new tenant. 

Moving a manufactured home is an entirely different proposition.

Many homes are intended to remain on their original sites for years, sometimes permanently. Relocating one can be extremely expensive and may require specialized equipment, permits, utility disconnections, transportation, and substantial installation work at the new location.

Moving a single- or double-wide manufactured home isn't quite as easy as putting a couch in the back of a pickup truck.

In many cases, relocation simply isn’t economically practical. CFPB analysis of U.S. Census data found that more than 80% of owner-occupied manufactured homes remain on the site where they were first placed. 

As a result, residents who own their homes may remain in the same community for many years. They establish friendships, maintain their properties, and become part of the neighborhood.

This can produce relatively stable occupancy and reduce the costs associated with constantly replacing residents.

But there is an important distinction here.

Residents who cannot easily relocate are also unusually dependent on responsible community ownership.

I've heard investors describe manufactured housing residents as captive customers. I prefer to think about them as long-term customers whose continued satisfaction is essential to the success of the community.

There is nothing wrong with earning appropriate returns or implementing reasonable rent increases. However, an operator who exploits residents' difficulty relocating may undermine both the community and the investment's long-term sustainability.

The most attractive business model creates value for both parties: residents benefit from a safe, pleasant, well-maintained neighborhood, while investors benefit from stable occupancy and predictable income.

That's the kind of relationship worth preserving.

7. Lower Maintenance and Capital Expenditures

Here's where we return to one of my favorite subjects.

Toilets.

Specifically, not owning them.

In a conventional apartment investment, the owner is responsible for maintaining the building and its components. Roof replacements, plumbing repairs, appliances, flooring, heating systems, and unit renovations can create substantial expenses.

In a manufactured housing community where residents own their homes, most of those responsibilities belong to the homeowners.

The community owner primarily maintains the land, infrastructure, and common areas.

I’ll draw your attention to this graphic. Note the capital expenditure percentages of parks with tenant-owned homes versus other asset types. Further note the dramatically higher costs borne by parks who own the manufactured homes.  

Yet lower home-maintenance responsibility doesn't mean maintenance expenses disappear.

Water and sewer infrastructure, roads, electrical systems, storm drainage, and common amenities can require substantial capital. A community with aging private utilities may face extremely expensive repairs.

That's why careful infrastructure inspections are among the most important elements of manufactured housing due diligence.

Still, when the infrastructure is sound and the homes are resident-owned, the operating structure can offer attractive efficiencies.

It's an opportunity to own real estate without personally owning every bathtub on the property.

8. Institutional Buyers and Attractive Financing Options

Another interesting feature of manufactured housing is the relationship between smaller sellers and larger buyers.

A professional operator may acquire an independently owned community, improve its operations, upgrade infrastructure, fill vacant sites, and develop a portfolio of similarly managed properties.

That portfolio may eventually become attractive to REITs, insurance companies, family offices, and other institutional investors.

Large buyers frequently prefer stabilized properties with consistent operations, reliable financial records, adequate scale, and predictable income.

As a result, professionalizing a community may increase both its income and its appeal to potential buyers.

Combining several professionally managed communities can create additional operating efficiencies and sometimes attract portfolio buyers.

These advantages aren't guaranteed. Institutional buyers aren't required to pay a premium simply because a seller has assembled several properties.

But a well-managed portfolio can offer an attractive exit strategy.

Financing provides additional options

Manufactured housing communities also have access to specialized financing.

For example, Fannie Mae offers acquisition and refinancing programs for qualifying manufactured housing communities. Eligible properties generally must be existing, professionally managed communities with at least 50 sites, and financing is subject to property, borrower, and underwriting requirements. 

Independent owners may also occasionally offer seller financing, potentially providing flexibility when conventional financing isn't appropriate.

These alternatives can benefit experienced operators and their investors. However, leverage must remain conservative enough to withstand disappointing operating performance, interest-rate changes, and refinancing uncertainty.

Debt can magnify investment returns.

Unfortunately, it is equally talented at magnifying losses.

9. The Surprising Tax Benefits of Manufactured Housing

This was one of the biggest surprises when I began studying manufactured housing communities.

I initially assumed that because community owners primarily own land, their investments would provide relatively modest depreciation deductions.

After all, raw land isn't depreciable.

But a manufactured housing community is considerably more than a piece of dirt.

It may include paved roads, utility systems, parking areas, fencing, landscaping, community buildings, and other improvements. Many of these assets may qualify for depreciation or accelerated tax deductions. And based on its location, the value of the raw land itself is often less than higher-priced land in prime locations (making the improvements relatively more valuable in the equation). 

A cost segregation study identifies these different components of a property and assigns eligible assets to their appropriate depreciation categories.

Depending on the property and applicable tax law, this may accelerate deductions substantially.

Current federal law also permits 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025, subject to eligibility requirements and applicable elections. 

For an investor in a properly structured partnership, these deductions may reduce taxable income even while the investment generates positive cash distributions.

But there are several important qualifications.

Passive activity rules may limit an individual investor's ability to deduct losses against other income. Depreciation can also affect taxes when an investment is sold. And tax benefits depend on the actual property, purchase-price allocation, investment structure, and investor's circumstances. 

Understanding the manufactured housing tax shield

Let’s consider a manufactured housing community acquired for $10 million. Assume this asset was acquired with $6.5 million debt plus $3.5 million equity. 

Assume the value of the land equals 20% of the total ($2 million). This is not eligible for depreciation and therefore provides no tax benefit. 

Assume 3.5% of the purchase price ($350,000) is classified as regular commercial property that is not eligible for accelerated depreciation. This could include the “permanent” components of structures such as a clubhouse, laundry or office. This produces 39-year straight line depreciation of $8,874 annually (1/39th of $350k).  

Assume 1.5% of the purchase price ($150,000) is classified as residential property that is not eligible for accelerated depreciation. This could the “permanent” components of park-owned manufactured homes or a house. This produces 27.5-year straight line depreciation of $5,454 annually (1/27.5th of $150k).   

Assume 75% of the purchase price ($7,500,000) is considered infrastructure with the potential of accelerated depreciation. This may include roads, sidewalks, utilities, tech, and more. These components may be accelerated to 15 years or less. Under the 2025 tax law, accelerated depreciation for these elements can be compressed into the first calendar year of ownership. 

The result: Year One paper tax losses from depreciation of over $7,514,000. 

Now assume for a moment that you put in all the equity ($3.5 million). Your theoretical year-one tax loss would be about 214% ($7.514 million ÷ $3.5 million). And of course, if you put in any portion of the equity, your pro rata share should be the same: about 214% of your equity investment. This loss should show on your K-1 and count against other passive income.  

And some owners take additional depreciation for goodwill. I know one operator who allocates up to 35% for goodwill amortization; reportedly all depreciable in year one. 

The percentages aren't universal. An actual acquisition requires an appropriately supported allocation among the assets purchased.

Nevertheless, the principle is important.

An owner may be able to depreciate qualifying infrastructure and other improvements even when the manufactured homes themselves belong to residents.

Tax advantages should improve an otherwise attractive investment—not rescue a bad one.

10. The Risks Investors Shouldn't Ignore

Every compelling investment story has another side.

First, acquiring independently owned manufactured housing parks can be surprisingly complicated. Financial statements may be incomplete, historical expenses may be difficult to verify, and infrastructure problems can be expensive to discover after closing.

Second, filling vacant home sites can require considerable capital. Purchasing homes, arranging transportation, preparing sites, connecting utilities, and finding qualified buyers may take longer than expected. This is a major reason that mom-and-pop owners often have a high percentage of vacant sites. Which can provide an opportunity for a well-capitalized operator-buyer. 

Third, the affordability of manufactured housing creates responsibilities that owners of other commercial properties may not face to the same degree.

Residents often have substantial equity invested in homes that cannot easily be moved. Unexpected rent increases or community closures can create serious financial hardship.

Responsible operators must understand local regulations, residents' rights, and the financial realities of the families living in their communities.

Fannie Mae, for example, requires specified resident lease protections for qualifying financed communities. These include renewable lease provisions, advance notice of rent increases, and rights related to selling manufactured homes. 

Finally, investors should be particularly cautious about aging infrastructure, environmental concerns, local employment trends, property taxes, insurance, debt maturities, and aggressive assumptions about future rent increases.

These risks don't negate the investment opportunity. But they make professional management and thorough due diligence essential.

The objective should be to acquire a community where the operator can improve profitability while preserving the property's long-term affordability and desirability.

The best community is one where residents want to stay… not one where they simply cannot afford to leave.

11. How Passive Investors Can Participate

You may agree with everything in this article and still have absolutely no desire to buy and operate a mobile home park.

I understand.

Locating properties, evaluating infrastructure, negotiating acquisitions, arranging financing, managing residents, and overseeing improvement projects require specialized knowledge and considerable effort.

Fortunately, investors don’t need to operate these properties themselves.

They can pursue exposure through publicly traded REITs, individual syndications, private real estate funds, and other investment partnerships.

Each approach offers different levels of diversification, liquidity, control, and risk.

My firm invests alongside experienced operators in manufactured housing communities and several other commercial real estate sectors. Our investors participate passively rather than managing the underlying properties themselves.

Whatever investment vehicle you consider, evaluate the sponsor's experience, acquisition discipline, operating capabilities, financing strategy, fees, reporting practices, and treatment of residents.

Pay particular attention to how the sponsor has handled difficult investments. Every operator has attractive projections. A demonstrated record of overcoming problems can tell you a lot.

Passive investing shouldn't mean passive due diligence.

The Bottom Line: An Essential Service with Compelling Investment Economics

Manufactured housing communities combine several characteristics that have attracted sophisticated investors for decades. 

They provide an essential housing service at a relatively affordable cost. New supply faces substantial development barriers. Independent ownership creates acquisition opportunities. Resident-owned homes may reduce operating complexity. Long-term residency can support stable income, while operational improvements may create substantial appreciation.

Investors may also benefit from specialized financing, potential tax advantages, and interest from larger institutional buyers.

None of these characteristics guarantees an attractive return.

But together, they explain why manufactured housing deserves consideration alongside more familiar commercial real estate sectors.

My original reluctance to invest in mobile home parks was based largely on appearances.

I've learned that the appearance of a property tells us very little about its investment potential.

I now prefer to examine the underlying economics, the quality of the operator, the durability of the income, and the risks involved in achieving the projected returns.

Investing successfully doesn't require owning the most impressive-looking buildings in town. 

Live where you want… and invest where it makes the most financial sense. 

Sometimes the most interesting opportunities are found in communities that traditional investors overlook. 

And sometimes your mother, wonderful as she may be, shouldn’t have the final word on investing.

In our next article, we'll examine the manufactured housing investment market in greater detail, including the opportunities and challenges facing investors today.

This article is for educational purposes only and does not constitute investment, tax, or legal advice. All investments involve risk, including the potential loss of principal.