Slow, Steady And Predicable, Manufactured Housing Investment Continues To Be A Consistent Hedge Against Economic Volatility

A true passive and steady but slow investment vehicle in the commercial real estate sector continues to be manufactured housing. 

The sector is, for the most part, a resilient and consistent investment vehicle and an answer to the affordable housing crisis that is now accompanied by rising mortgage interest rates. As volatile as the commercial real estate (CRE) market is right now, you can’t find a more consistent investment than manufactured housing (MH), according to one investment management firm.

“It’s not necessarily exciting, but it’s resilient,” said Al Otero, a portfolio manager with Armada ETF Advisors.”When you start getting concerned about financial markets and broader issues like the Fed and inflation and whatever unsavory scenario, manufactured housing tends to shine in these moments.”

Armada is a real estate investment trust (REIT) asset manager and offers investment management services in real estate with its own exchange-traded fund (ETF). The company this month merged with REIT technology company Arialgo. According to Otero, the company’s investment portfolio includes 12% to 15% in manufactured housing.

“The nice thing about manufactured housing is when you hit rocky tiers like now, year in and year out, they’re going to get solid top-line revenue growth around 6% to 7%, though this year we’re looking at 5% to 6%,” Otero said.

According to 2022 U.S. Census Bureau data, more than 50,000 manufactured homes were shipped nationwide, a 31% year-over-year increase.

One factor that separates manufactured housing investment from that of apartments and other multifamily assets is that the industry is much less aggressive in rent hikes, especially from 2021 through 2022, when rents skyrocketed. 

“It’s one of the reasons manufactured housing didn’t see the double-digit growth that some apartment investments saw. Apartment renter turnover is every couple of years, but for MH, the average is a 14-year stay,” Otero said. “The MH folks handle their own improvements, and they’re also paying rent on the land. They’re not moving, so the returns are more consistent.” 

He adds that the manufactured housing investment popularity is driven by its “safe and predictable” returns and calls it a “phenomenal asset.”

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