Should You Invest in MHP REITS?

Should You Invest in MHP REITS?
Ferd Niemann
The MHP Lawyer

REITs Explained

As an advocate and expert in mobile home park investing, I’m often approached by individuals potentially interested in investing in MHPs but may not have the time, experience, or expertise to prospect, buy, and manage their park.
This is a common question lobbed my way, “Since I’m busy and don’t have the time, should I invest in a manufacturing housing REIT? I then go on to explain how REITs work – explaining both pros and cons and letting the individual make up their minds.
REITs are definitely an option for investing in manufactured home parks (i.e., mobile home parks), and here’s how they work. Real Estate Investment Trusts (REITs) are the most popular form of CRE investing because of their accessibility and liquidity.
What are REITs? REITs are creatures of the tax code (Internal Revenue Code or IRC) that offer significant tax benefits, including exemption from federal and state taxes at the corporate level if certain requirements are met. Although they can be both private and public, the majority of REITs are publicly traded companies.

The principal requirements for qualifying as a REIT are:

  • Must invest at least 75% of total assets in real estate, cash, or U.S. Treasuries.
  • Must derive at least 75% of gross income from rents, interest on mortgages that finance real property, or real estate sales.
  • Must pay a minimum of 90% of taxable income in the form of shareholder dividends each year.

Pros of Investing in MHP REITs. Public REITs can be invested in with as little as the price of one share of stock. The low barrier to entry, liquidity, and convenience of public REIT investing allows time-constrained investors to participate in a solid asset class without the headaches – all with the swipe of a phone screen.