Why Active Investors Are Turning to Passive Investing in Manufactured Housing Communities

For many real estate investors, the journey begins with hands-on ownership. Managing tenants, handling maintenance calls, negotiating with contractors, and navigating local regulations can be rewarding, but it can also be exhausting. Over time, many active investors reach a point where they begin looking for a way to keep their capital working while reducing the day-to-day burden: this is where passive investing comes in.

The Shift from Active to Passive

Active investing requires constant attention and involvement. Whether it’s a duplex, a small apartment building, or a portfolio of rentals, the responsibility of overseeing every detail can eventually outweigh the benefits. The grind of tenant management and the constant need for reinvestment can leave investors searching for an easier path.

That’s where the shift to passive investing takes hold. Instead of running every aspect of a property, investors can leverage experienced operators who specialize in managing communities at scale. This allows investors to maintain ownership and enjoy the financial benefits of real estate while stepping away from the headaches of daily management.

The Role of the 1031 Exchange

One of the biggest questions for active investors ready to make the shift is how to transition existing equity without triggering a large tax bill. The 1031 exchange provides a solution. By selling an actively managed property and reinvesting the proceeds into another qualifying property, investors can defer capital gains taxes and preserve more capital for growth.

But what if the new investment is much larger than what an individual can purchase outright? That is where a Tenancy-in-Common (TIC) structure comes into play.

Using a TIC to Invest in Privately Syndicated Real Estate

A TIC allows multiple investors to co-own a property, each holding an undivided interest. This structure qualifies for 1031 exchange treatment, meaning an active investor can sell a property they managed themselves and roll the proceeds into a fractional interest in a larger community.

For example, instead of taking on another rental building that requires constant attention, an investor can exchange into a TIC interest in a professionally operated MHC. The investor retains all the tax advantages of real estate ownership, but the responsibility for day-to-day operations is handled by an experienced operator.

Why MHCs Make Sense for TIC Structures

MHCs offer unique advantages for those looking to step back from active management:

• Stable demand: Affordable housing remains one of the greatest needs in the U.S.
• Resilient model: Residents own their homes, reducing turnover and maintenance exposure.
• Long-term appreciation: With rents in many markets still well below replacement housing costs, there is room for thoughtful, strategic growth.
• Operational efficiency: Professional operators can manage infrastructure, collections, and improvements at scale, leaving investors free from day-to-day involvement.

A Path Forward

For active investors who have spent years handling the challenges of property management, passive investing in privately syndicated real estate offers a way to keep building wealth without the constant phone calls and tenant issues. By leveraging a 1031 exchange into a TIC structure, they can transition smoothly into high-quality properties managed by seasoned operators, while continuing to participate in the financial and tax benefits of real estate ownership.