Pros and Cons of Investing in a MHP REIT (Real Estate Investment Trust)

RV & mobile home parks (MHPs) are a massive headache, but can be very lucrative.

If you'd rather just invest in a MHP REIT (real estate investment trust), below are the big 3, with pros and cons + my favorite.

1. Equity LifeStyle Properties (ELS) - 41 P/E Ratio & &12B market cap

ELS owns & operates lifestyle-oriented properties, included MHPs, RV resorts, and campgrounds with over 155,000 pad sites.

Pros:

‣ 400 properties across 33 states in the US.

‣ Stable Cash Flow: The RV resorts and campgrounds provide seasonal income, whereas the MHPs have long-term residents only.

‣ Most properties are in high-demand, sunny areas like Florida

‣ They have a long history of good financial performance.

‣ ~95% occupancy rates, good rental pricing power

‣ 2:1 debt to equity ratio.

‣ Steady (but small) 2.5% dividends and 70% payout ratio

Cons:

‣ Economic Sensitivity: RV resorts take a big hit by economic downturns; people travel less.

‣ Already super big, not a ton of levers to pull.

‣ Pretty small dividend

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2. UMH Properties (UMH) - 17 P/E Ratio & 900M market cap

A pure-play MHP only REIT, with properties mostly in the Northeast and midwest with 26,000 pad sites.

Pros:

‣ MHPs are the cheapest form of housing. When the economy does well, MHPs do well. When things go south, MHPs do even better.

‣ Aggressive Expansion: They're buying more parks.

‣ 80% payout ratio and 4.5% dividend

‣ Lots of growth potential left

‣ Family run, longstanding leadership

Cons:

‣ Quite a bit smaller than giant competitors like ELS.

‣ 2.5:1 debt to equity ratio, a bit more leverage than average

‣ Regionally concentrated
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3. Sun Communities (SUI) - 15 P/E Ratio & 13.4B Market Cap

Very similar to ELS in that they do both MH and RV parks, with around 160,000 pad sites.

Pros:

‣ Large geographic footprint, in 39 states + Canada.

‣ Very steady growth despite already large size.

‣ Very strong occupancy rates

Cons:

‣ Like ELS, they are at risk on the RV side if the economy tanks

‣ The lowest payout ratio and dividend of the 3, 65 and 2%, respectively.

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My take?

I like UMH because I like that they're family run and I feel like the share price is a great value.

I like that they aren't reliant on RV at all and still have a long way to grow. Not investment advice, I have no affiliation with any of them.

All 3 have very solid management teams. It's a great asset class, regardless of which you choose.

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