Manufactured Housing Financing: The Hidden Gem of CRE
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Manufactured Housing Communities (MHCs), also called mobile home parks, provide one of the most stable and resilient income streams in commercial real estate. As affordable housing demand increases, so does lender appetite — especially when the right structure is in place.
Warning in advance: There's a lot of jargon and acronyms in this piece. But it's essential to understand these elements of the asset class if you're going to secure financing for an MHC. This guide is part of our wider series on how to finance any type of commercial property.
What Is Manufactured Housing?
MHCs are real estate assets where the owner leases individual lots ("pads") to residents who own their homes. Income primarily comes from pad rents, and operational responsibility is low — unless the owner also owns the homes.
It's important to distinguish between financing the community (the real estate) and financing the homes. The loans discussed here are for the real estate. Individual homes owned by residents are typically financed with separate, personal property loans known as chattel loans.
Tenant-Owned vs. Park-Owned Homes
Tenant-Owned Homes (TOH)
This is the ideal setup. Residents own their homes and pay rent for the lot. The park operates more like a land lease. Turnover is low, and lenders love it.
Park-Owned Homes (POH)
Here, the park owner rents out both the home and the lot, similar to an apartment. This increases revenue but also operational complexity, maintenance burden, and turnover risk.
Where to Find Capital
Agency Lenders: Fannie Mae and Freddie Mac
Fannie and Freddie both offer dedicated MHC programs, providing long-term, fixed-rate, non-recourse financing.
- Fannie Mae: Will typically allow up to 25% of pads to be Park-Owned Homes.
- Freddie Mac: Far more conservative, typically requiring less than 5% POH to qualify.
Both agencies prefer stabilized communities with primarily TOH models, strong occupancy, and clean utility infrastructure.
CMBS Lenders
CMBS is a common alternative if a deal falls outside of agency criteria — such as having more POHs, private utilities, or unconventional layouts. CMBS loans are also non-recourse but usually come with more rigid prepayment penalties (defeasance or yield maintenance).
Banks and Credit Unions
Often the most flexible for smaller or non-institutional MHCs, especially if recourse is acceptable.
Life Companies
Selective but active, especially on stabilized, institutional-quality portfolios with excellent fundamentals.
Utilities
- Public Utilities (city water/sewer) are preferred.
- Private Systems (well/septic) introduce capex and regulatory risk.
- Master-Metered Utilities: Parks where the owner pays a master meter and bills tenants can raise lender concerns. Direct billing to tenants is the preferred setup.
POH Concentration
Higher POH ratios reduce lender interest. Many lenders treat a community with lots of POHs more like an apartment complex — which brings different underwriting standards.
Density and Layout
Overly dense parks with tight pad spacing can be a red flag. Lenders prefer:
- Adequate setbacks
- Off-street parking
- Functional circulation
Age and Quality of Homes
Even in TOH communities, if the homes are outdated (especially pre-1976 HUD Code), lenders may flag quality concerns. Well-maintained, modern units reflect pride of ownership and support long-term stability.
Mom-and-Pop Management
Lenders want to see professional records, digital rent rolls, and experienced operators. Poor books and fragmented management can kill a deal.
Value-Add Opportunities
Convert POH to TOH
Many value-add buyers purchase parks with numerous POHs and execute conversion plans, selling homes to tenants over time.
Infill and Expansion
Parks with vacant pads or surplus land offer excellent upside potential — if zoning allows.
Operational Uplift
Professionalizing a previously mom-and-pop-run park can improve collections, boost NOI, and increase valuation significantly.
Final Thoughts
Manufactured housing isn’t just affordable housing — it’s durable income with the backing of agency programs. But financing success depends on your ability to present a stable, TOH-heavy asset with modern infrastructure and professional operations. Understanding the nuances — especially POH ratios and utility structures — is key to selecting the right lender and closing the deal.