Mobile home parks usually suffer from a dowdy image of small communities occupied by buildings that are modest and nondescript—at best. That image could be polished, slightly, as a few states are enabling buyers of mobile homes to qualify for Fannie Mae loans.
In New Hampshire, occupants of approved resident-owned communities (ROCs) can already have their homes titled as real property. Now Fannie Mae and the agency’s lending partners have structured a loan program to finance the properties. In addition, Rhode Island has created its own resident-owned communities, replicating at least part of New Hampshire’s efforts.
ROCs are mobile home cooperatives that are owned by residents, much like a multi-unit co-op apartment buildings. The ROC USA, a non-profit group estimates that about 1,000 mobile home communities are organized as co-ops, representing fewer than 2 percent of all of the property types. Given the small scope of ROCs, experts expect the impact of Fannie Mae’s newest lending program to be small.
“The mobile home sector will gain a higher profile, because Fannie Mae has said it will do this,” said Benjamin L. Kadish, founder of Maverick Commercial Mortgage, a Chicago-based commercial mortgage-banking firm. “I do think it is positive, but it will not create a lot of deal flow for that end of the business.”
Cooperative home communities might be just finding their collective footing as a commercial property sector, and tangible payoffs might be years down the line, but mobile homes are still gaining steam in other ways.
For starters, industry participants are trying to lift the stigmas associated with calling mobile homes “trailers,” and part of that image makeover includes referring to them as manufactured housing. As Kadish notes, the only mobile aspect of the properties is how they are transported to the private parks. They rest on concrete pads, and from them resemble small subdivisions. They even have infrastructure such as internal roads and utilities, which are owned by the park and not the municipality where they are located, Kadish said.
The dominant financing structure involves one owner of the entire park who than rents or leases the individual units to occupants. In that sense the community’s owner, known as the sponsor, becomes like a bank extending a form of credit to the occupants, Kadish said. In some cases lenders set limits on the percentage of sponsor-owned units are in the park before agreeing to provide financing.
The sector has become more beneficial, especially for entities that own existing mobile home parks with high occupancy rates. High-end units in senior housing communities can cost between $80,000 and $150,000, which make them attractive options for retirees looking to downsize their primary residence in retirement, Kadish said. Cap rates have tightened between 100 to 150 basis points, while property values have increased by about 20 percent over the past five years, Kadish said.
Transaction amounts are increasing because property values are increasing, Kadish said.
“Senior parks in Florida, for instance, are trading between the 5 percent to 6 percent cap rate range,” Kadish said, adding that cap rates can reach between 6.5 percent and 8 percent on properties in the Midwest. “The market itself right now is ultra-competitive.”