REITs are enjoying a revival in 2026, but evidently Sun Communities wasn’t invited to the party: The shares of this residential real estate investment trust are flat for the year to date. Sun owns manufactured housing and recreational vehicle communities, and its underperforming transient business is overshadowing the strong growth elsewhere in its portfolio. We think this REIT and its 3.6% yield look attractive today: The shares are trading 19% below our $148 fair value estimate. The company recently announced a $1 billion stock-repurchase program, which we view as a shareholder-friendly move, given the discount at which shares are trading hands. Sun Communities was one of Morningstar Chief US Market Strategist Dave Sekera’s stock picks on a recent episode of The Morning Filter podcast, 4 Undervalued Stocks to Buy for Income.
Sun Communities mainly collects rental income. Its tenants own their own manufactured homes and RVs but then pay Sun for the right to place their home or park their vehicle in the community. The rental income is consistent throughout the year for the manufactured housing portfolio and RV properties with annual memberships, but there is significant seasonality to the transient RV properties. Sun also collects revenue from the sale of manufactured homes and provides services to the communities, though these activities represent a much smaller portion of the company’s total EBITDA.
Key Morningstar Metrics for Sun Communities
- : $148Fair Value Estimate
- : 4 StarsStar Rating
- : NoneEconomic Moat Rating
- : MediumUncertainty Rating
Economic Moat Rating
We use an adjusted return on invested capital calculation to determine if a company has historically shown, or is forecast to have, the characteristics of an economic moat. Sun Communities has high-quality assets positioned in desirable second-home locations and vacation spots. However, the initial rents and rent increases that it achieves on these properties, compared with the initial capital invested, produce returns on invested capital that are below its weighted average cost of capital.
Read more about Sun Communities’ moat rating.
Fair Value Estimate for Sun Communities Stock
Our $148 fair value estimate implies a 5.2% cap rate on our forward four-quarter net operating income forecast, a 21 times multiple on our forward four-quarter funds from operations estimate, and a 2.8% dividend yield, based on a $4.06 annualized payout. Our rent, occupancy, and margin assumptions drive total company annual same-store net operating income growth averaging 4.0% across our 10-year forecast. We project $400 million of acquisitions per year at 5.5% cap rates. We estimate Sun’s net asset value to be approximately $147 per share.
Read more about Sun Communities’ fair value estimate.
Risk and Uncertainty
An aging population, lack of affordable single-family homes for purchase, and a desire to travel domestically during the pandemic all helped support rent growth and same-store NOI growth above inflation. The reversal of these trends would hurt Sun. If permanent residences near Sun’s portfolio become more affordable, that will limit the company’s ability to sell its communities as a significantly cheaper alternative. As growth in the recently retired population decelerates, lower demand growth will make it hard for Sun to maintain its above-average rental rate increases.
Read more about Sun Communities’ risk and uncertainty.
Sun Communities Bulls Say
- An aging population supports rent and NOI growth at a spread above inflation.
- Supply growth for the sector has been flat and should remain so in the near future. There is little risk of new competing properties that would limit the company’s ability to raise rents.
- Only a very small percentage of residents have a mortgage on a manufactured home in the portfolio, so they are able to continue to afford the low relative rental cost during recessions. This keeps occupancies and same-store NOI consistent through a full economic cycle.
Sun Communities Bears Say
- Demand for the sector has already peaked and will flatten out as the target demographic turns 80, which will cause many to sell their residences as they move to senior housing facilities.
- High rent growth could drive residents to other properties—either nearby manufactured home communities or other residential options—for vacations.
- Operating expense growth is expected to outpace revenue growth for the next several quarters, limiting same-store NOI growth.
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This article was compiled by Susan Dziubinski and Sylvia Hauser. Data as of Aug. 18, 2026, close unless otherwise noted.
