Changing Stereotypes in Manufactured Housing
Regal Communities' Director of Acquisitions Zachary Ratzker shares details of the company's ambitious renovation plans.
Despite the widespread myths about manufactured housing that circulate in the commercial real estate space, some investors continue to be stubbornly focused on this asset class. Furthermore, interest from institutional buyers is on the rise due to the asset class’ recession-resistant nature.
Regal Communities, a manufactured housing investor that currently operates almost 1,300 lots spread across 11 properties in Georgia, Florida, Arkansas, Texas and Pennsylvania, has begun the ambitious process of revitalizing its portfolio. The company has invested significant resources into infrastructural improvements, refurbishing units and adding new homes, all with an eye toward reshaping the perception of manufactured housing.
Multi-Housing News asked Zachary Ratzker, director of acqusitions, to expand on his company’s operations, and about all the ways efficient property management can break the stigma around this asset class.
Please provide some details about the enhancements you’re performing at your properties?
Ratzker: We have undergone the process of infilling brand-new homes into a bunch of our communities, thereby enhancing the value of our parks but also establishing a more economical place of living for our residents as an affordability crisis has hit many parts of the country.
We are expanding and developing additional lots to increase the size of one of our parks. We are also building a sports field for our residents to enjoy, providing a real community feel.
We have also worked on infrastructure improvements, namely road repairs, removed trees, skirted and painted older homes that needed a fresher look, and created new signage at all our parks.
Revitalizing MHC properties in this high interest rate environment is quite challenging. To what extent are the current economic uncertainty and debt market volatility impacting your business plans?
Ratzker: As rates continue to rise, it creates a challenge to pencil out a solid investment opportunity. We are still seeing activity and deal volume even in these uncertain times due to the availability of Freddie and Fannie debt options that exist for select properties. These enticing financing terms can encourage investments and give solid overall returns.
The other solution to the high interest rate climate is figuring out a sophisticated way to educate the seller on carrying a note on the property. Often times, this allows the buyer to negotiate a much lower interest rate with some other variables tied in, all while the seller getting his/her price.
What are he most common false narratives that persist about manufactured housing today.
Ratzker: I think the biggest misconception in the space is the management headache associated with all the intangibles that could go wrong. I believe that with proper due diligence and a sharp business plan, this once stigmatized asset can actually reap solid returns in both a down and up market.
How much are property improvements contributing to changing the negative stereotypes often associated with manufactured housing?
Ratzker: I think more updated technology and well-installed factory-built homes have somewhat negated these stereotypes. More and more parks have established and implemented drainage infrastructure, created post-storm tree clearance, invested in renewable energy, and have carefully monitored all utility issues that can arise.
Besides stigma, are there any other barriers that need to be overcome for manufactured housing to be adopted on a larger scale?
Ratzker: I think one of the biggest hurdles is lobbying the government to adopt the need for more MH/RV communities, and the high barrier to entry for new development. Affordable housing remains a serious problem and restricting development just exacerbates the serious threat.
The Biden administration’s 2022 housing plan includes extensive support for manufactured housing parks. What is your take on the plan, and have you felt its effects in any way so far?
Ratzker: I think we are still in the early stages of the plan and have not witnessed anything concrete to date. With that said, if we can increase state funding across the board to keep manufactured housing communities, and grant subsidized loans to residents who want to purchase homes, we’ll open up a wave of more affordable solutions to the millions of people in this country who are starving for more economical and cost-saving alternatives.
What can industry leaders do to better position manufactured housing as a quality lower-cost housing option?
Ratzker: Industry leaders need to show how the number of families living on minimum wage, the absorption of new homes being infilled and placed, and the low risk and maintenance to upkeep these homes all make manufactured housing a good quality choice.
How do you anticipate the manufactured housing sector to perform in the second half of this year and in 2024?
Ratzker: I think we are going to see more deal flow and more inflow of capital into manufactured housing as it is a great recession-resistant asset.