On Fostering a Sense of Community in Manufactured Housing
Reece Stead of Forrest Street Partners describes the property improvements that matter most to MHC residents.
Reece Stead, Partner, Forrest Street Partners. Image courtesy of Forrest Street Partners
Investor interest in manufactured housing continues to gain momentum. But, with the availability of new product so limited, acquisitions favor value-add plays that offer opportunities for long-term appreciation.
Forrest Street Partners has been investing in MHC parks since 2019, having owned and operated 850 mobile home lots across the Southeast. Multi-Housing News asked Partner Reece Stead to expand on his company’s value-add strategy and to discuss the upgrades and improvements that help Forrest Street build a sense of community, enhance residents’ lives and, ultimately, gain their trust.
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Most communities previously managed by mom-and-pop operations require improvements. What are the most common upgrades that the MHC communities you buy need? 
Stead: Our business model focuses on the value-add and making meaningful upgrades to improve the quality of life for residents. The most common larger CapEx we typically budget for when buying new parks is repairing and laying fresh asphalt on the roads and the parking pads. Other immediate infrastructure upgrades might include repairing water and sewer line leaks.
We have also started installing Metron Smart Water meters where no water submeters exist. These meters monitor irregular usage which helps to identify potential leaks. This monitoring can reduce each tenant’s monthly water bill. We connect our properties to municipal utilities where available and install additional security lighting. Many of the parks we see have fallen into disrepair and upgrading these components adds immediate value to the property and enhances daily life for residents.
We also work hard to implement a professional management team by either training the existing manager and maintenance personnel or hiring new staff to manage the communities.
What type of improvements contribute to a greater sense of community and pride as well as security?
Riverside Estates in Covington, Ga. Image courtesy of Forrest Street Partners
Stead: To engage our residents, we have to demonstrate a willingness to invest in things that may not get a great return yet improve the overall conditions and environment of the park. General clean-up efforts and removal of debris promote goodwill among the residents of the park. Removing all abandoned homes from the property helps to make an immediate impact on the appearance of a park. Simple tidying like removing trees and limbs around their houses, helping residents seal their roofs, and installing new skirting on the homes contributes to a greater sense of pride.
We also place an emphasis on creating a sense of community by upgrading entrance signage and landscaping, improving street lighting, replacing mailboxes, and other miscellaneous park clean-up that gives the entire community a safer, cleaner feel.
Implementing technology like lease payment software simplifies the payment process while also giving residents different avenues to pay and track their rent and utilities. Adding conveniences and helping them monitor expenses helps build self-esteem and accountability.
Are there any long-term, revenue-generating actions you can take to add value to a manufactured housing community?
Stead: Our strategy centers around adding value to the communities in which we invest. Many times, this means purchasing brand new mobile homes to offer as rent-to-own or selling them to new residents. Most of the parks we acquire typically have a 20 to 40 percent vacancy. We invest considerable capital into making the park a desirable place to live. This may include removing old homes that have reached their useful life or upgrading the pads to fit new home specifications—like increasing power capacity by installing new power pedestals. By making these upgrades, we can begin to replace older homes with newer, more desirable options for residents.
Tell us more about one of your successful MHC repositioning projects. 
Stead: In 2020, Forrest Street purchased two mobile home communities in Kentucky. The parks were not well maintained and needed significant upgrades. Many residents had been living in the park for a long time, so we helped them refresh their homes by either power washing or painting their homes, replacing their skirting and, in many cases, sealing their roofs.
The previous owners had not reinvested much into the parks, so the improvements were well received. In the end, it created much better living conditions for residents while improving the overall feel of the community. This value-add strategy provided both upgrades for residents and a return on investment when we sold both parks in 2022.
What is your strategy when it comes to filling vacant lots and improving a property’s overall occupancy?
Riverside Estates in Covington, Ga. Image courtesy of Forrest Street Partners
Stead: First impressions are everything. Our main strategy is to do most, if not all, of the improvements to the park before we bring in new homes. When potential residents visit the park for the first time, we want it to feel safe and inviting.
Also, we try and keep our homes priced at or below apartments in the market. We like to have our three-bedroom/two-bath homes priced at what two-bedroom/two-bath apartments are renting for. Giving them the added value of an extra bedroom and a yard goes a long way for residents when trying to choose what rental option best suits their needs.
To what extent is the current financial climate impacting your ability to invest in value-add opportunities?
Stead: The uncertainty of how much interest rates are going to increase has definitely influenced the manufactured housing market. Some investors and lenders are pulling back until there is a little more clarity on how things are going to shake out. However, there are also many that are still very active. The movement of institutional investors into this asset class happened later in the cycle than some other property types. We continue to see new players enter the market even amidst uncertainty. So, there are still opportunities in the market. We just have to be a little stricter in our underwriting of potential deals than we were a few years ago, while being cognizant that rates could continue to rise well into next year.
Inflation has also had a significant impact on our investing model. The cost of new homes has drastically increased over the past few years along with many of the materials we use to improve the parks, like asphalt. Luckily, Forrest Street Partners is not new to the MHC space. We know the trends, and we know how to successfully manage the deals to create positive outcomes for all, residents included.
Mobile home parks historically tend to do better during economic downturns as they provide the only form of non-subsidized low-income housing. Considering the looming economic recession, how do you expect this asset class to perform going forward?  
Stead: We do see this asset class performing better than others in recessionary times because it still is the most affordable housing in the market. However, there are obstacles that could tamp down growth. One of the biggest challenges is the lack of new communities being developed. Most municipalities still have a negative perception of manufactured housing communities, which makes it extremely hard to get them to approve the construction of new parks. We believe if they took the time to look at the current quality and standards that exist within new mobile homes, they would be pleasantly surprised.
Unlike years past, these homes are being built with modern conveniences in mind and a higher standard of materials. By educating the market, we might change the stigma that can sometimes be associated with mobile homes.
