The Mobile Home Misunderstanding

The manufactured housing industry is continually one of the most underrepresented and disrespected real estate asset classes on the market.  The stigma of run down trailer parks with high crime acts as a repellent for both investors and potential residents alike, but in most cases this couldn’t be further from the truth.  As mentioned in a USA Today opinion by Suzanne Anarde (link to article below), mobile home parks are a great option for lower income families to live in comfortable and spacious dwellings. Park Street Partners agrees as it understands the dire need for affordable housing in the United States and views the mobile home park industry as a partial solution to the affordable housing crisis.   

Much of the public perception surrounding mobile home parks is as outdated as many of the parks themselves.  Restrictive zoning  (NIMBY – “Not in my back yard”) and limited access to financing has prevented additional parks from being developed since the 1960s & 70s.  As mentioned in the article, even though most mobiles homes are fixed to the ground much like stick built homes, they’re still titled as chattel or personal property like RVs or cars.  This penalizes purchasers with higher interest rates even though in most cases the mobile home hasn’t been “mobile” since the day it left the factory.  In addition, a new single or double-wide home can be hard to distinguish from a single family home.  

Hollywood’s portrayal of mobile home parks is incorrect.  The vast majority of Mobile Home Parks are safe, clean and offer a compelling housing option for low and middle income families. 

Largest Private Owner of Mobile Home Parks Sells Portfolio

Industry News

The largest private owner of mobile home parks, Northstar has agreed to sell its portfolio. Here is a quick summary of the deal:

  • Buyer: Brookfield Asset Management 
  • 135 Communities
  • $2.04 billion sale
  • 33,000 pads

Brookfield is a huge ($240 Billion) global asset manager. This is their first mobile home park purchase that we're aware of. It just also happens to be the largest one ever made. We think it's safe to say Brookfield agrees with our favorable views on the industry. 

So what does this mean?
The mobile home park industry is starting to enter it’s consolidation phase. However, despite the size of this transaction, it’s still very, early. The mobile home park industry remains extremely fragmented. Large operators are focused on 200+ space, 4/5 star communities, many of which are retirement (55+ age) communities. Of the ~50,000 parks nationwide, the largest players in our industry own less than 5% of the properties. Furthermore, there are only 3 publicly traded firms in our industry (0 that focus exclusively on affordable parks vs. upscale communities). Compare that to the apartment industry, where there are ~30 publicly traded apartment REITs, most of whom only pay a ~3% dividend each year. Many of the apartment investments in these REITs sell in the 3-6% cap rate (unlevered yield) range. Thankfully, we keep finding mom-and-pop sellers willing to part with their lower risk mobile home parks for 8-10% cap rates. This has enabled Park Street Partners to pay its limited partners double digit cash flow yields. 
We do not believe this large portfolio purchase will immediately change the dynamics of our industry. Mobile home park cap rates are not going to drop 50% overnight, nor are mobile home park rents going to double anytime soon. However, the Northstar transaction might be the first domino that will lead to further asset consolidation within our industry. This should eventually translate to higher lot rents and lower cap rates for those of us that already own mobile home parks. 

Thankfully, Park Street Partners is uniquely positioned to capitalize on the forthcoming industry consolidation. We already have a sizable portfolio and we have the deal flow, management platform and operational expertise necessary to continue our growth for the foreseeable future. 
Once again, it’s still early, but as industry consolidation takes hold, we believe our fund investors will benefit greatly from the hard work we've put in to accumulate an attractive portfolio. 

Episode #22: Things Mobile Home Park Brokers Say

Jefferson and Brad share some funny and true stories about the things they have heard mobile home park brokers say regarding their mobile home park listings. Keep in mind that the vast majority of brokers have the utmost integrity, but - like any profession - there are certainly a few characters in the mobile home park broker business that you'll want to look out for. 

Show notes:

[1:32] Caveat - the Park Street Partners love the brokers that they deal with, but they have also been told things like, “sewage lagoons are wonderful”, by brokers. 

[3:51] Don’t let any broker tell you that anything other than City Water and City Sewer is somehow better.

[5:35] When you find red flags during diligence and a broker says, “Don’t worry about that, you’ll run the property much, much better than he will”.

[7:14] “If you don’t hurry up and buy this park…I’ve got another buyer who’s gonna snap it away from you” - said by a broker.

[9:20] One broker sent Brad an off-market deal with few details about the area it was located in - turns out it was located in a 250 person town with no county and in the middle of nowhere.

[10:31] When you ask if a deal meets all your criteria and a broker says, “Well, I think it’s gonna be right at the edge of your criteria”.

[11:40] A broker once pitched 10 million bucks for a 10-pad mobile home park located in the Canadian oil sands.

[13:27] Brokers have said, “There has never been a plumbing expense, that’s why that line item doesn’t appear”, but that’s almost never the case.

[15:30] “This is a 10, 12 cap on paper - easy.”

[17:34] Any mobile home park broker that’s listening to this podcast - “we are not talking about you”.

Mentioned in This Episode:

Park Street Partners

Park Street Partners - Investment Opportunities

Park Street Partners - Resources

Mobile Home Park Investors

Mobile Home Park Investors Group on LinkedIn

Send your deals to:

Wave of Retirees Will Create Tremendous Demand for Affordable Housing

There will always be a need for affordable housing in this country. However, with 10,000 baby boomers entering retirement each day on a fixed income with little to no savings, the demand for affordable housing should reach a fever pitch in the coming decade. 

According to the U.S. Census’s National Population Projections, the population aged 65 and older is expected to jump to 74 million by 2030, an increase of 33 million in just two decades.

Today, 30 percent of elderly renters are paying more than half their incomes on housing. The average senior citizen is living longer than ever before, yet has little to no retirement savings.

Good news – American’s are living longer. Bad news – the vast majority cannot afford to live longer.  

While life expectancy is up, fertility rates are down. According to research put out by the hedge fund manager Stan Druckenmiller, currently there are ~5 workers supporting each retiree. Unfortunately, by 2030 that number will be only be ~3 and by 2050 it will be ~2.5.

Consequently, the current entitlement math does not work. 

Our government has promised seniors far more than we can afford to pay. Without dramatic reform, entitlements (Social Security, Medicare, Medicaid) could act as a giant drag on the US economy, with higher taxes over the coming decades as fewer workers are available to support an aging population. 

Needless to say, the middle and lower-income classes continue to struggle. In many American households, both the husband and the wife are working long hours, but it's still not enough.  With each passing day, more Americans are losing their place in the middle class and this has pushed government dependence to an all-time high. 

According to the U.S. Census Bureau and the Social Security Administration, 49 percent of all Americans now live in a home that receives money from the government each month and 51% of all workers in the United States make less than $30,000 a year.

As we've mentioned before, we’re not economists....but we're quite confident that the aforementioned demographic trends will positively impact the need for the most affordable housing option our nation has to offer: mobile home parks.

Park Street Partners and its investors take pride in helping lower-income and middle-class American families secure housing at an affordable price. We look forward to making a small dent in America's affordable housing crisis by increasing the supply of affordable housing in the markets we operate.

Mobile Home Loans - Fannie and Freddie to Create a Secondary Market for Mobile Home Loans

The momentum to create a secondary market for mobile home (chattel) loans is growing. The Federal Housing Finance Agency (FHFA) is preparing a directive that would require Fannie Mae and Freddie Mac to purchase manufactured home loans from lenders, thus creating a secondary market for such loans. This is yet another positive development in our industry.

Read More

San Jose Moves to Block Mobile Home Park Conversions

Stop the presses. San Jose city officials are actually moving to prevent mobile home park conversions to "higher and better use" (aka more attractive) residential development projects. 

San Jose real estate, along with every other city in the bay area, is on fire. With tech startup valuations approaching nosebleed territory (once again) "affordable housing" has pretty much become an oxymoron in Silicon Valley. 

It's rare a city makes a stand against a mobile home park conversion,  but it happens from time to time in sky-high rental markets that can only support a fraction of the overall demand for low-income housing. 

The lack of affordable housing is a nationwide problem. However, in the markets we operate in city officials have yet to enact policies to save mobile home parks, such as the MHP conversion moratorium San Jose is seeking to approve.  In our experience, most cities break out the red carpet for developers looking to redevelop / up-zone mobile home parks into "higher and better" uses. Alternatively, pitch a city on developing a new mobile home park and out come the pitchforks and torches.

Of course, we're not complaining, as this constrains mobile home park supply and prevents future competition for our properties. However, it's a shame as most cities desperately need additional affordable housing units. 

While we are not fans of excessive governmental involvement in sacred property rights, we understand why San Jose is trying to preserve this mobile home park. The underlying trend (widening gap between supply and demand for affordable housing) is a systemic, national problem that needs to be addressed. 

To help make a dent in this problem, Park Street Partners looks forward to purchasing additional properties, infilling lots with new mobile homes and increasing the stock of affordable housing in the markets we operate in. 

Here is a link to the story. 

Manufactured Housing Communities Top 2015 REIT Sector Performance

As reported by UrbanLand, aging baby boomers and strong demand for inexpensive housing have helped boost the small manufactured housing real estate investment trust (REIT) sector. Here are a few key takeaways from that article:

  • Total year-to-date return of 13.13 percent far exceeds the FTSE NAREIT All Equity REIT average of –1.07 percent.
  • The market is supply-constrained and fragmented. It can be difficult to get land zoned for new communities because of the public’s generally poor perception of manufactured housing.
  • At the same time, rising rents and home prices are causing more people to consider manufactured housing rather than site-built housing.

We (Park Street Partners) expect a couple existing mobile home park firms to take their portfolio public over the next decade. These firms will have access to cheap capital (most REIT dividends are in the 3-5% range) and we will need to expand their portfolios to satisfy Wall Street's insatiable need for growth. We see this slow, but steady consolidation trend continuing for the foreseeable future.

Park Street Partners (“PSP”) announces the acquisition of the Desert Trails Mobile Home Park in Green River, WY

(PRWEB) JULY 22, 2015

“This marks the first acquisition in our 2015 mobile home park fund. It is very exciting to both have a few dozen accredited investors backing our partnership and co-owning parks with us, and to be able to reward them with such a strong initial acquisition. The property’s occupancy increased during our closing period, and we look forward to upgrading the quality of the mobile homes in the property. We acquired Desert Trails ( at a 10% cap rate, and specialize in improving this type of commercial property. We can’t make guarantees about profits, but feel we will likely generate a better than 50% annual return this first year for our limited partners. Many of our investors are becoming increasingly nervous about valuations in the public markets, and would prefer to invest in lower volatility real estate niches that still offer annual returns that are likely to be in the upper teens over a long-term holding period. Judging from some of the large manufactured housing REITs we estimate manufactured housing communities have a beta of around 0.65, and we feel PSP can generate consistent annual returns in the high-teens for our early co-investors. Also important to note is that this asset class is not correlated with stock markets or other real estate niches,” said Jefferson Lilly, Co-Founder of PSP.

“Park Street Partners is about more than just making money for our investors; we are increasing the supply of affordable housing for American families. We rehab and purchase mobile homes to fill vacancies, while improving property operations through professional management.” remarked Brad Johnson, Co-Founder of PSP.

“We were very happy to lend money on this acquisition because of Park Street Partners’ deep and focused experience in the manufactured housing industry. They specialize in improving mobile home park investments such as Desert Trails and we hope to work with them on subsequent acquisitions,” commented Tim Ostic, Branch President at FirsTier Banks.

About Park Street Partners 
Park Street Partners is a private equity real estate investment firm (PERE). Our mission is both financial and social. We seek to deliver to our investors superior cash flow returns by acquiring and investing in undervalued and underperforming mobile home parks. We do this while helping to solve America’s affordable housing crisis by enabling families in the bottom 1/3 of income distribution to get out of the game of paying rent forever in apartment complexes, and into 3- or 4-bedroom mobile homes that they will own for as little as $550/month. Park Street Partners is actively raising capital from accredited investors and institutions to acquire additional manufactured housing communities through our 506 Reg. D fund. Information on how to co-own manufactured housing communities with us is available at

Why Is Now Such A Great Time to be a Mobile Home Park Investor?

…because "Mom & Pop" are opting for the gold watch (retiring). 

The mobile home park industry was started 60+ years ago by the greatest generation.  They won wars, made babies and built a lot of mobile home parks. Now Mom & Pop are retiring. They’ve been managing these parks for decades; now they’re over it and are finally ready to sell their little gold mines.   

We love buying parks from mom & pop. They typically have no debt on the property, so they 1) haven't been as motivated to maximize park profits (by filling vacant pads, controlling costs and charging market rents) and 2) are typically more flexible on pricing and terms.

However, this Mom & Pop buying window won’t last forever. Other mom & pop owners are not going to replace the current mobile home park owners. Not a lot of today’s MHP investors are looking to move into a mobile home park and keep rents 30% under market because they’re friends with the neighbors.

The friendly tableside chat / seller-bonding with Pop to discuss due diligence findings and the unfortunate, but necessary, price reduction can’t last forever. The “Aw shucks son, I understand….how about I carry a note?” will eventually turn into contentious conference calls with the professional MHP investor's law firm: Dewey, Cheetham & Howe.

This same dynamic has occurred in other niche real estate investments. Industrious individuals develop great properties / business models, hold them until retirement and then sell to small investment firms that are early to identify the strength of the business model before the secret gets out. Then comes the institutional players and an affordable mobile home park IPO will eventually follow. We’ve seen this movie before (self storage industry).

Not surprisingly, It’s harder to buy a tremendous deal from a professional owner / operator. They want market prices (who likes to pay retail?) and they typically can’t offer seller financing.

We certainly hope the opportunity to buy parks at today’s attractive pricing levels continues indefinitely. However, we suspect the deal flow will eventually slow down as parks are inherited by younger owners or sold to “pros”, who’ll either sell for nosebleed pricing or hold for the long term because the cash flow yields are too attractive to give up.

While we might be in the later stages of this MHP buying opportunity, there are still far more great parks to buy than there is capital for us to invest. So, if you’d like to join us in sending Mom & Pop off to Florida in style while increasing the inventory of affordable housing and still earning a stellar return, kindly review our fund documents by clicking the link below.