Guides
Mobile Home Park Investing
A manufactured housing community, commonly called a mobile home park, typically operates under a land-lease model where the owner leases individual home sites, including utility connections and common infrastructure, while residents own or lease the manufactured homes themselves. Since the Tax Cuts and Jobs Act of 2017 limited Section 1031 to real property, the land, infrastructure, and any park-owned structures that qualify as real property remain eligible for exchange treatment, but manufactured homes owned by the park and treated as personal property, such as rental units not permanently affixed, generally no longer qualify. This distinction between the real property and personal property components of a park is central to structuring a compliant exchange involving this asset class.
What You Get
Key Outcomes
A clear separation of the park's real property components from any personal property components
An understanding of how park-owned rental homes are treated differently than the land and infrastructure
A realistic assessment of which portion of a park's value is exchange-eligible
Deliverables
What We Deliver
- A real property versus personal property allocation for the specific park under consideration
- A written summary of the 1031 eligibility implications of that allocation
- Guidance on structuring the transaction to isolate the eligible real property component
Process
Execution Timeline
Day 0: Review the park's site plan, ownership structure of homes on site, and infrastructure
Day 7: Deliver a real property allocation and eligibility assessment
Day 14: Discuss transaction structuring with your qualified intermediary and tax advisor
Common Questions
Frequently Asked
Does the entire value of a mobile home park qualify for a 1031 exchange?
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Not necessarily. The land, utility infrastructure, roads, and any permanently affixed improvements generally qualify as real property and are eligible. However, individual manufactured homes owned by the park operator and rented out to residents, if they are not permanently affixed to the land in a manner that makes them part of the real property under applicable state law, are typically treated as personal property, and personal property has not qualified for 1031 treatment since the 2017 tax law change.
How is a manufactured home determined to be real property versus personal property?
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This generally depends on state and local law regarding permanent affixation, including whether the home is set on a permanent foundation, has its wheels and axles removed, and is titled as real property rather than as a vehicle or personal property under Washington's titling system. A home titled and taxed as personal property typically remains personal property for federal tax purposes regardless of how long it has been on site, unless the title has been formally converted.
What is the most common ownership model for parks in the Puget Sound region?
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Many parks in the region primarily lease land to residents who own their own manufactured homes, which simplifies the 1031 analysis since the park's income comes from land rent rather than from renting out park-owned homes. Parks that also own and rent out a portion of the homes on site introduce the personal property allocation issue described above and require more careful structuring for exchange purposes.
Is demand for manufactured housing communities growing in Washington?
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Manufactured housing communities have drawn increasing investor interest nationally as a source of relatively affordable housing with lower per-unit development costs than conventional multifamily, and this interest extends to select submarkets in Washington, though available parks trade infrequently compared to more common asset types. Local zoning restrictions in many jurisdictions limit new park development, which supports value at existing, well-located parks.
How should I structure a purchase to preserve 1031 eligibility for the real property portion?
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Work with your qualified intermediary and tax advisor before closing to properly allocate the purchase price between the real property components, which are exchange-eligible, and any personal property components, such as park-owned homes, which are not. This allocation should be documented in the purchase agreement and consistent with how the assets are valued, since an inconsistent or unsupported allocation can create problems if the exchange is ever examined.
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