Why Investors Are Paying Attention to Manufactured Housing

Ali: You speak of legacy, and I have to say, with manufactured housing I think a lot of folks are starting to figure out that this is the solution for housing, and in some cases the only solution. It's not the last resort. I don't want to hear that anymore. It's a choice, and people are choosing this lifestyle because they get it. They're smart. It's like buying one of these EVs. I still love the old gas cars too, but some of these EVs are smart cars, and when people buy them, they may buy them because it's a smart choice.

Corwyn: Money is one of my languages, and you'll hear me go 'money' when we start talking about it. But today we're not talking about that, so don't get too excited. What we're talking about today is also in my wheelhouse, and it is my language. We talk about housing affordability, we talk about investing, and all the things that come from combining the two. I'm super stoked about this conversation.

Corwyn: We've talked about affordable housing and new ways families can make ownership more attainable. What if one of the most overlooked solutions has been right in front of us for decades? That is manufactured housing, and it is often misunderstood. What happens when we stop looking at the stereotypes and start looking at the true opportunity? We've explored modular housing and other approaches to making homeownership more attainable. Today we're taking this conversation in a slightly different direction, looking at manufactured housing not only as an affordable housing solution, but also as a real estate investment opportunity. When responsible investors improve communities, they can potentially create value for both residents and investors.

Corwyn: Today's guest is Nasir Ali, or Ali as he goes by, founder and managing partner of Rise 360 Ventures. He grew up in a manufactured housing community, began acquiring homes at the age of 16, and has decades of experience evaluating, operating and revitalizing manufactured housing communities. So wherever you are, put down your fork, your spoon, your coffee or whatever you're making, and give Ali the slow clap this morning. Ali, how are you doing?

Ali: I'm doing absolutely fantastic, Corwyn. I love your energy and your passion for what you do. I'm excited to be here.

Corwyn: I don't even know where to start, but I do. I have to get to the beginning: 16. How did growing up in a manufactured housing community shape what you've done and what you're doing now? And what do people misunderstand about manufactured housing overall? What are the myths? Let's get into all of that.

Ali: Sure. You're right, 16 is when I started leasing homes, selling homes and buying homes. By 19, or even earlier, I was able to start buying real properties like mobile home parks and RV parks, which are now manufactured housing communities. But we got into our first community when I was 12. I went from living in a McMansion in Orange County, California, to living in a trailer park, and that was quite a change. What's relevant about that today is that it came out of the Iran crisis in the late '70s, and in 1981 we bought that first community. Just last month marked 45 years of our history in this business.

Ali: At 12 I was moving picnic benches and cleaning the pool and the restrooms. By 15 or 16 I was running the shop. It was a KOA, an RV park, so I was running the general store. We quickly realized how seasonal the RV park business is, and we needed to eat all year round, so we started putting in trailers. Today the concept of ADUs and tiny homes is nationally accepted and popular. Back then I think we were doing it before it was a thing. We doubled the size of the park, bought trailers and rented them out long term. We realized this is the business we need to be in, because we didn't want all the management-intensive headaches of the retail operation of an RV park. We never looked back. We acquired more and more communities along the way, all built from that first one.

Ali: We operated it diligently for 10 years ourselves as a family. My father had 120 single family homes in Orange County, and when the market crashed back then he was highly leveraged, and it came down like a house of cards. He had enough liquidity to put a down payment on that park. You hear about Patels running motels, and I come from that same tribe. I'm proud of that story, because it provides not just property but housing for the family and employment for the whole family. Mom is running the counter, dad is running the grounds, and the kids are helping in the back office. It's a family business.

Ali: My father was a lone wolf who thought ahead of the curve, and this is what's relevant to your crowd: you have to be thinking ahead. His mindset was that single family was already saturated by the '70s and '80s. Multifamily was essentially saturated by the '90s and 2000s. Not that you can't make money in any of these asset classes. Then you saw the herd go into self storage in the early 2000s, and that became saturated too. One of the things I love about this business is that it isn't saturated yet. And even when it does become saturated, we have enough verticals and different profit centers that you can keep increasing your revenue and your bottom line.

Ali: One more part of your question. On affordable housing, Corwyn, we're on the verge of what most people say is at least a 4 million unit housing shortage, and some would argue it's double that. I've heard the argument that there is housing available, but people just can't afford it. All of that is true. So we're a real big part of the solution, and we've been held back because of the stigma that was associated with this for decades. Finally we're starting to overcome that, and this is our moment.

Corwyn: Thank you for that, Ali. I want to reframe this. I'm a student within the industry, and the 21st Century ROAD to Housing Act just passed. Embedded in it is factory-built housing as a whole, to help ease pressures like low inventory that cause prices to rise. I also want to frame one other thing that I just shared with my agents and my client base. There are essentially two economies going on. There are people who have assets, they're fine, and they're still spending money. And there are people who don't have assets and are working every day to get by. Those are the people struggling most to get into homeownership, and manufactured housing is an opportunity for them. What does manufactured housing do for people as far as affordability?

Ali: Let's start with the latter, because it's quite compelling. You said there are two groups out there: those who have the assets, can hedge inflation and keep spending, and those who are working and trying to survive. The American dream has become more and more elusive for that second group. I hate to say it, but I think we're getting to a place where that's something like 90% of the population. Maybe I'm wrong, and I hope I'm wrong, maybe it's up to 20%, but I would say only about 10% are enjoying a lot of that, including homeownership. Manufactured housing is one way in. If you don't want shared walls, if you want a backyard, if you want to park your car right next to your home, and you want to actually own your home and make the improvements you want, we're the most compelling solution you can still afford.

Ali: I'm in Silicon Valley, and the average price of a home near where these tech companies are is probably $2.5 million. I know the official number is a lot lower, but around the towns where the work is happening, many folks earning a good salary are commuting one or two hours out to afford a home. Except the ones who figured out there are manufactured housing communities here as well. You have folks earning a lot of money choosing to live in manufactured housing communities so they can avoid that two-hour drive. California is on the extremes of everything in terms of valuations, but the general point applies across the country. We represent almost 10% of the population, and we're talking about 40,000 to 50,000 manufactured housing communities nationwide. We haven't gotten our due, much to our own fault as an industry in the past. But the cat's out of the bag, and people understand this is the way to still get the American dream.

Corwyn: That's a great segue to shift this around and drop in the investor's perspective. But first I want to hit one of the misconceptions, which is that manufactured housing is cheap or poor quality. I'd love your take on that. And I also want you to get us into what makes manufactured housing attractive to investors.

Ali: I'll try to remember both, because I get excited and passionate about these things. What makes it attractive to investors is that it's simple. I rent dirt. I don't rent toilets, and I don't deal with termites and tenants in the traditional sense, because I don't own the home. They own their home and they're renting the lot, which is essentially dirt. So I've got all the upside of real estate, the appreciation, the cash flow, the ROI, but I don't have the typical landlord headaches. That's huge, and everyone is finally starting to figure it out. We've got a frenzy of investors coming into this asset class because of it.

Ali: As for the home itself, it has come a long way. We were a trailer in a trailer park, and then we were a mobile home. Technically it's mobile, but that's really the wrong definition, because once it's set in place it typically never leaves. In a community, a resident may pass away or move, but that's unlikely. That's another big reason investors love this: tenant retention. Our customers are typically tenants for life, dare I say, or at minimum five, seven, 10 years. I can't give you an exact average, but it's a long time. We don't have turnover every six months or a year like you do in multifamily. To have a permanent tenant renting dirt and still get great metrics without the headaches is incredible. You can make money in all real estate classes, but if I can make the same or better money by renting dirt, it's a no-brainer.

Ali: Going back to the stigma: we went from trailers in a trailer park to mobile homes, and in 1976 the homes started meeting HUD code. They were better built, and that's one reason they started calling them mobile homes instead of trailers. But the word mobile didn't describe the permanency or the benefit to the resident. Particularly in the '90s, the quality improved so much. These homes have always been built in a factory, but now you have energy efficiency, pitched roofs, island kitchens and beautiful exterior facades. Sometimes you can't tell the difference between a stick-built home and a manufactured home. And we moved from mobile home parks to manufactured housing communities, to remove the inaccurate mobile label and show that this isn't a random park. It's a community where people live and thrive.

Ali: The stigma from 8 Mile, which you've mentioned on one of your podcasts, that kind of trailer park is not representative of where most people live. For example, we have one community with eight man-made lakes. It's a gated, country club type community with tennis courts and pools, and many people have second or even third homes there. So we've come a long way from back in the day.

Corwyn: This is a perfect place to shift. I want you all to know that affordable housing and responsible real estate investing do not have to be competing ideas. When investors take a long-term approach to improving communities, everyone can benefit. Let's take a quick break.

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Corwyn: Ali, I want to jump into community impact. You've operated in this space for over 40 years. To you, what does responsible community revitalization look like with manufactured housing?

Ali: By the nature of what we do as an industry, we're already making an impact by providing truly affordable housing. You hear that term thrown around a lot, but this is the real deal. In addition, the industry associations are doing a great job providing services, grants or contributions to low-income folks in our communities who need help. In the western region where I am, they have a grant program and look for people they can assist. MHI does similar things. I also see a lot of community owners doing their part. In one of our communities, the local property management team put together a vegetable garden where everybody can plant what they want. People are gardening together and sharing the fruit of their labor, literally. It's an amazing experience. Other examples are food drives and clothing drives. I see a lot of that at the ground level, much of it unrecognized and done anonymously, and it's a beautiful thing.

Corwyn: Ali, you've watched the industry shift, grow and reinvent itself. Where do you see manufactured housing going over the next 5 to 10 years, and what opportunities should investors be looking for or watching out for?

Ali: More and more you're going to see syndications, funds and private equity groups buying communities in middle and tertiary markets. The REITs and the larger private equity groups are already in the primary markets. I don't even compete there, Corwyn. I'm not even trying. In the middle and tertiary markets, if you want to do it yourself, there's still plenty of room to be an investor on your own, or through a syndication where you have training wheels, so to speak, while you learn the business model. The opportunity over the next 5 to 10 years still lies in secondary and tertiary markets, for private investors and smaller groups to acquire communities that are mostly still owned by baby boomers who are retiring and selling. Their heirs don't necessarily want to get into the business.

Ali: And I might add, a lot of these communities in secondary and tertiary markets are only half full today. Not from lack of demand for affordable housing, we all know that's there, but because of upfront costs and other barriers that keep people from using the available lots. So make sure you're involved with a company, or set yourself up, so you're vertically integrated and can get the home purchased, transported, installed and financed, so it's turnkey. Then you can go from 50% or 60% occupancy to, dare I say, 90% or 100% relatively quickly, maybe in 3 to 5 years, and essentially double the asset value if you started at about 50%. I'm using simple math. That's the opportunity. And at some point, when those lots are fully absorbed, we'll have to look at what happens after that.

Corwyn: This is a great place, Ali, to make sure our listeners can reach you. I talk to a lot of people in manufactured housing, and there are a lot of conversations going on in this space right now. How can people connect with you and with Rise 360 Ventures?

Ali: Thank you for asking, Corwyn. If I may, I love that there's so much attention on our business now from lenders, appraisers, brokers and investors, both private equity and individuals. It has allowed us to become a real asset class by everybody's definition. But with that, be careful, because you're seeing a lot of sponsors who don't have the operating experience. That's where the challenge is. You need to be with operators who are now offering sponsorships and opportunities to invest, if you're not going to do it alone. Or just get some free advice from any of us. You can reach me and my team at rise360ventures.com. That's the best way. I think there's an 80-page detailed report on the website, complimentary, that gives you a good understanding of the business and the opportunity today. You can also find us on LinkedIn and every other social under Rise 360 Ventures.

Corwyn: Awesome, Ali. Thank you. We're quickly getting to the end of today's show, and I want to recenter us. We've really only been around the edge of the manufactured housing arena. For our legacy piece today: when investors can create financial returns while also creating better, more affordable places for families to live, what kind of legacy can that combination create? That's the conversation we've been having today, because creating housing at a price that is affordable and attainable is often a challenge. As Miss Caroline used to say, this is where the rubber meets the road. So Ali, as a closing question, how do you frame this for others, that investors can make a real difference in their communities, and that manufactured housing is a great asset class to consider?

Ali: You speak of legacy, and I have to say, a lot of folks are starting to figure out that manufactured housing is the solution for housing, and in some cases the only solution. It's not the last resort. I don't want to hear that anymore. It's a choice, and people are choosing this lifestyle because they get it. They're smart. I still love the old gas cars, but some of these EVs are smart cars, and people may buy them because it's a smart choice. I'm using that as an analogy. Our homes are a smart choice. It's not just somewhere you land or end up. People are choosing to live in these communities.

Ali: On legacy, I'll be brief because I know we're tight on time, Corwyn. I'm living proof of what you talk about on your podcast: thinking long term, thinking generationally. My family has been in commercial real estate for eight generations, and we've lost wealth along the way. I'm not saying I've got eight generations' worth of money. Due to wars, partitions and all kinds of crises out of your control, you can lose your wealth and start over, as my father had to. What transfers, and what's most important in legacy building, is the knowledge, the wisdom, the tenacity, the ambition, the morals, the values and the ethics that have to be instilled and carried forward.

Ali: You talk about love a lot, and I'm going to end with that. When I was 12 or 13, we had weekly family meetings, and my dad would ask, 'What do you want to do when you grow up?' There were five of us kids, and everybody said doctor, engineer, lawyer. My answer then, and I stick by it today, was, 'I just want to love and be loved.' So hats off to you, Corwyn. If that's the core of what we're doing, it applies to business and to everything. You have to think long term, for the generations ahead, and make use of the generations behind. We're too comfortable these days with the dopamine, the instant gratification and the short-term thinking. I want your audience to snap out of that.

Corwyn: Ali, thank you so much for taking time out of your busy schedule to be with us today. It's been a heck of a conversation, and I thank you for your insights as we try to educate, inform, encourage and inspire people, and all that goes into being good humans. Listeners, this has been an awesome show. Let me regroup you one last time: affordable housing isn't simply about having a lower cost place to live. It's about creating stability and furthering opportunity for others.

Corwyn: When responsible real estate investment helps create better housing, stronger communities and opportunities for families to build wealth, real estate becomes more than an investment. It becomes a vehicle for legacy building. Thank you all for tuning in. You know what I say: first, I love you. I love you. I love you. And we'll see you out there.