These Aren’t Your Father’s Trailer Parks!

A while back I owned some mobile homes that I rented out. Although they were easy to rent, they were a real pain to maintain: Leaks in the roofs, leaks in the walls, rotting pressboard floors, aluminum wiring, and constantly blowing fuses. I just knew I’d get a call saying that one of the places had gone up in flames. Fortunately, that never happened.

And as far as the type of tenants they attracted ... let me just say they were an interesting lot.

So even though I hated losing the income, it was a blessing in disguise when I got rid of them.

The manufactured home industry has come a long way since those days.

Warren Buffett’s Berkshire-Hathaway owns Clayton Homes, the largest company in the manufactured housing industry, and creator of the environmentally friendly factory-build i-house, as shown in this YouTube video. 

The trailer parks have come a long way, too. Upscale communities of manufactured homes have popped up, and that’s were I see opportunities for real-estate-minded investors.

Real estate investment trusts (REITs) that specialize in manufactured homes get most of their income by leasing the space for the homes. They also own the utilities, such as street lighting, and take care of the community property. The homeowners maintain the space they rent, as well as their homes. 

The manufactured housing sector is a small, often ignored one, with a market cap of $4.36 billion and three publicly-traded REITs. Each focuses on a different part of the country and different homeowners:

·       Equity LifeStyle Properties (ELS) — Florida, Arizona, California, NE U.S.; for retirees

·       Sun Communities (SUI) — Midwest U.S.; all ages 

·       UMH Properties (UMH) — PA and NJ; lower income, affordable housing

I’m taking a close look at this sector, and may add one of the above to the e-FinancialWriter REIT portfolio. You might want to check them out, too. I’ll give you a better idea sometime during the week.

Meanwhile, here is the e-FinancialWriter REIT portfolio for the week ending April 13, 2012.   

REIT	Sector	Blog date	Price	Closing price 04/13/12	Return to date %	Dividend yield %
PSA	Self storage	3/14/2010	90.75	136.78	50.72	2.89
VTR	Health care	12/30/2010	52.87	55.92	5.77	4.19
HCP	Health care		36.81	38.93	5.76	4.98
HCN	Health care		47.53	53.22	11.97	5.42
SNH	Health care		22.00	21.16	-3.82	7.14
IAECREIN:CN	Canada	9/27/2011	19.45cn	23.86cn	22.65	0
ZRE:CN	Canada		16.29cn	19.47cn	19.52	5.16
INVRLPRA:CN	Canada		5.45cn	5.48 cn	0.50	1.96
NNN	Retail	1/29/2012	27.18	26.55	-2.32	5.78
Index return since inception*					19.80
Avg 12-mo return of REITs in portfolio*					9.19
Avg dividend yield of REITs in portfolio						4.17
12-mo return S&P 500					3.83

Source: Bloomberg

*Does not include dividends paid

If you have trouble seeing the chart, just in zoom in with your web browser.

To read the posting where I introduced a specific REIT, click the “Blog date” link. And if you’d like to see prior reports, type “reit index” in the search box.

Enjoy the rest of your weekend!

George

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