The manufactured housing sector’s meteoric rise in the past few years has attracted the attention of an increasing number of investors, particularly institutional ones. Meanwhile, this heightened interest also generated changes in property management, with operators quickly adapting their practices to residents’ needs.
Full-service third-party management company Blank Family Communities has been managing MHCs for more than half a century. Currently, the firm oversees 5,000 units across the country, working with both private and institutional owners.
Multi-Housing News asked President & CEO Steven Blank to talk about the pandemic-inspired shifts in MHC property management practices and the particularities of this ever-growing niche sector.
How have MHC management practices changed since the onset of the health crisis?
Blank: With the onset of the pandemic, we had to jumpstart our ability to work remotely and utilize technology wherever possible. Now, more than 90 percent of our residents pay online, all documents are signed electronically and our applications are electronic. In relation to communication, we have implemented phone trees, two-way text messaging systems, video conferencing, work order submissions for residents and more.
The difference is in apartments, your building is your main asset, whereas in a manufactured housing community, your land is. Operating a community is like operating a small town and all the town’s utilities and infrastructure are your concern.
Are there any major trends in this sector that you have noticed in the past year?
Blank: An interesting trend that we have been seeing is the compression of capitalization rates for park-owned homes. Traditionally, income generated by rental homes has been devalued in the eyes of investors, as the income is not looked at as stable compared to site income generated by owner-occupied units. But, with rents growing nationwide, it makes sense to see the value of rental income grow as well.
As eviction moratoriums begin to expire across the country, how do you expect that to impact the MHC sector?
Blank: In most markets that we operate in, we have had the ability to evict for some time now. Even in the markets where the moratoriums remained in effect, we had high collection rates.
What are the misconceptions about MHCs that are the hardest to break in the eyes of potential renters?
Blank: The misconception regarding MHCs is that they are trailer parks with undesirable residents and homes. The truth is that if you have been in a new manufactured home or community, you would be proud to call it home. Of course, there are exceptions to that statement, but it is important to highlight the fact that these are exceptions and not the rule.
The MHC sector has seen a significant influx of new investors in the past few years. What are the most common mistakes first-time community owners make? What would you advise them?
Blank: Do not underwrite a community with a 0 percent vacancy assumption. I cannot tell you how many times I see people underwrite a community that over a 5-year span shows no one moving in or out. Even in a fully owner-occupied community, people leave.
Do not fool yourself on how much it costs to operate a community, especially small ones. Small communities—under 150 sites—traditionally have expense ratios closer to 50 percent, not the 30 percent ratio that some of our larger communities enjoy.
How do you anticipate the industry to perform this year? What are your longer-term expectations for this sector?
Blank: I believe that our industry will have another successful year, we remain one of the most affordable forms of housing in the country. Long term, I believe that our sector will continue to succeed and become more of a focus as a lasting affordable housing solution. But there should be some bumps in the road ahead as interest rates rise and the supply chain issues continue to hurt us.