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Money men become trailer park boys

Real estate investment trusts, young buyers drawn to manufactured home parks
Demand for affordable homes helping manufactured home communities enjoy high occupancy levels. - Lindal Homes

Manufactured home communities are attracting both institutional buyers and small-town investors because they “are recession proof”, according toEugen Klein, a former Real Estate Board of Greater Vancouver president and a specialist in modular home parks with the Klein Group of Vancouver.

When the economy is rising, more entry-level jobs are created which translates into more people needing affordable housing. When the economy turns down, Klein explained, the affordability of manufactured home parks helps attract new tenants, some of who are downsizing from larger homes. Also, many British Columbia retirees like the low cost and carefree living that modular home parks provide.

“For the price of a new truck, a person can buy a modular home,” Klein explained.

Mortgage manager Abdul Safi of TD Canada Trust in Vancouver agrees that modular homes offer an “extremely affordable” alternative for homebuyers in Metro Vancouver, where a recent Royal Lepage survey found the average bungalow now sells for more than $1 million. Most of TD’s modular home loans are for less than $80,000, he said.

Safi added that modular home buyers can qualify for a chattel mortgage, which are used to buy modular homes, easier than with a conventional mortgage because of the much lower loan values. The chattel mortgages offer the same financing options as a conventional home loan and include mortgage insurance, most often from Canada Mortgage and Housing Corp.

Large investors apparently see a stronger road ahead for modular homes. In 2010, British Columbia’s biggest pension fund, the BC Investment Management Corporation (BCIMC) bought Parkbridge Lifestyle Communities Inc., Canada’s largest modular park developer, for $790 million.

Three years ago, Toronto-based Canadian Apartment Properties Real Estate Investment Trust (CAPREIT), one of Canada's biggest landlords with 31,000 rental units, bought 12 modular home parks in B.C., Alberta, Saskatchewan and Ontario for $72.3 million.

It is the cash flow potential, not esthetics that attracted CAPREIT's acquisition squad, which has been quietly buying up modular home parks across the country since 1997 (they now make up more than 10 per cent of the REIT's portfolio).

According to CAPREIT, the typical vacancy rate at the parks it purchased is less than 1.5 per cent.

Modular home parks provide "secure and stable long-term cash flows, high occupancies, steady increases in average monthly rents and significantly lower capital and maintenance costs [when compared with apartment buildings]," explained Thomas Shwartz, CAPREIT president and CEO.

Unlike tenants in rental apartments, residents in modular home parks own their own home and lease the lot it sits on for a monthly rental charge, usually around $300 to $500 per month.

Klein said few modular home park operators sell because the parks offer consistent returns and turnovers are low.

“There are 937 modular home parks in B.C. and only 25 to 35 sell every year,” Klein said.  Yet, buying an existing B.C. mobile home park can be profitable, Klein believes.


- This article originally appeared in WI October 14.  Read an update on manufactured home communities in the October 2016