Overview

The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and notes thereto included elsewhere herein and in our annual report on Form 10-K for the year ended December 31, 2008.

The Company is a real estate investment trust (REIT). The Company's primary business is the ownership and operation of manufactured home communities - leasing manufactured home spaces on a month-to-month basis to private manufactured home owners. The Company also leases homes to residents and, through its taxable REIT subsidiary, UMH Sales and Finance, Inc. (S&F), sells and finances homes to residents and prospective residents of our communities.
The Company owns twenty-eight communities containing approximately 6,800 sites. These communities are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee.

The Company also holds a portfolio of securities of other REITs and home manufacturers with a balance of $30,463,087 at September 30, 2009. The Company invests in these securities on margin from time to time when the Company can achieve an adequate yield spread and when suitable acquisitions of real property cannot be found. At September 30, 2009, the Company's portfolio consisted of 32% preferred stocks, 52% common stocks and 16% debentures. The securities portfolio provides the Company with liquidity and additional income until suitable acquisitions of real property are found.

The Company's revenue primarily consists of rental and related income from the operation of its manufactured home communities. Revenues also include sales of manufactured homes, interest and dividend income and gain on securities transactions, net. Total revenues decreased by approximately 4% from $10,240,058 for the quarter ended September 30, 2008 to $9,856,780 for the quarter ended September 30, 2009. Total revenues decreased by approximately 12% from $29,014,594 for the nine months ended September 30, 2008 to $25,432,007 for the nine months ended September 30, 2009. These decreases were primarily due to a decrease in sales of manufactured homes of $945,019 and $3,030,158 for the quarter and nine months ended September 30, 2009, respectively, partially offset by an increase in rental and related income and interest and dividend income.
There was also an increase in the loss on securities transactions, net of $1,566,825 for nine months ended September 30, 2009.

Sales of manufactured homes decreased by approximately 34% and 41% for the quarter and nine months ended September 30, 2009, respectively, as compared to the quarter and nine months ended September 30, 2008. Over the past several years, the availability of liberal lending terms for conventional housing created a difficult competitive market for sales of manufactured homes. This resulted in a loss of occupancy from approximately 86% in 2005 to approximately 80% currently. Although the conventional home lending environment has returned to more disciplined lending practices, the return to affordability and the recovery of manufactured home communities have been slow. We believe that the general economic issues, rising unemployment

rate, the decline in consumer confidence, the inability of our customers to sell their current homes, and the turmoil in the credit and financial markets have negatively impacted our home sales.

Gain on securities transactions, net amounted to $297,746 and $10,043 for the quarter ended September 30, 2009 and 2008, respectively. Loss on securities transactions, net amounted to $2,152,319 and $585,494 for the nine months ended September 30, 2009 and 2008, respectively. This increase was primarily due to non-cash impairment charges relating to securities which were considered other than temporarily impaired. The Company had unrealized gains of $1,204,632 in its securities portfolio as of September 30, 2009 as compared to unrealized losses of $5,671,361 at December 31, 2008, an improvement of almost $7,000,000.
Historically, REIT share prices were not volatile. Over the past two years, they have been highly volatile with price swings of 5% or more occurring frequently. REIT securities have always represented less than 10% of the market value of our total assets. The dividends received from our securities investments continue to meet our expectations and we anticipate realizing satisfactory returns. It is our intent to hold these securities long-term.

Total expenses decreased by approximately 6% and 10% for the quarter and nine months, respectively, ended September 30, 2009 as compared to the quarter and nine months ended September 30, 2008. This was primarily due to a decrease in cost of sales of manufactured homes and selling expenses.

Net income increased by approximately 12% for the quarter ended September 30, 2009 primarily due to an increase in interest and dividend income and gain on securities transactions, net. Net income decreased by approximately 41% for the nine months ended September 30, 2009. This decrease was due primarily to non-cash impairment charges of $1,893,314 relating to securities which were considered other than temporarily impaired and the decrease in sales of manufactured homes.

Income from community operations (defined as rental and related income less community operating expenses) remained relatively stable for the quarter ended September 30, 2009 as compared to the quarter ended September 30, 2008. Income from community operations increased 7% for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. Occupancy has remained relatively stable. The Company has been increasing rental rates. The Company has also focused on reducing costs.

See PART I, Item 1 - Business in the Company's 2008 annual report on Form 10-K for a more complete discussion of the economic and industry-wide factors relevant to the Company and the opportunities and challenges, and risks on which the Company is focused.

Changes In Results Of Operations

Rental and related income increased 3% from $6,421,211 for the quarter ended September 30, 2008 to $6,620,558 for the quarter ended September 30, 2009.
Rental and related income increased 4% from $19,037,815 for the nine months ended September 30, 2008 to $19,801,587 for the nine months ended September 30, 2009. This was primarily due to rental increases to residents and an increase in home rental income. The Company has been raising rental rates by approximately 3% to 6% annually. Occupancy remained relatively stable at approximately 80% at both December 31, 2008 and September 30, 2009. The Company has faced many challenges in filling vacant homesites.

Interest and dividend income increased 7% from $1,006,084 for the quarter ended September 30, 2008 to $1,075,735 for the quarter ended September 30, 2009.
Interest and dividend income increased 9% from $3,026,990 for the nine months ended September 30, 2008 to $3,309,071 for the nine months ended September 30, 2009. This was primarily as a result of an increase in securities available for sale during 2009 and a higher weighted average yield on these securities.

Gain (loss) on securities transactions, net for the three and nine months ended September 30, 2009 and 2008 consisted of the following:

                                     Three Months                 Nine months
                                 2009          2008             2009           2008

Gain (loss) on sale of          $297,746       $10,043        ($259,005)        $20,994
securities, net
Loss on open and settled             -0-           -0-               -0-      (304,088)
futures contracts
Impairment losses                    -0-           -0-       (1,893,314)      (302,400)
Gain (loss) on securities       $297,746       $10,043      ($2,152,319)     ($585,494)
transactions, net

Gain on securities transactions, net increased from $10,043 for the quarter ended September 30, 2008 to $297,746 for the quarter ended September 30, 2009.
Loss on securities transactions, net increased from $585,494 for the nine months ended September 30, 2008 to $2,152,319 for the nine months ended September 30, 2009. This was due primarily to the non-cash impairment charges relating to securities which were considered other than temporarily impaired.

The Company had unrealized gains of $1,204,632 in its securities portfolio as of September 30, 2009 as compared to unrealized losses of $5,671,361 at December 31, 2008, an improvement of almost $7,000,000. Historically, REIT share prices were not volatile. Over the past two years, they have been highly volatile with price swings of 5% or more occurring frequently. REIT securities have always represented less than 10% of the market value of our total assets. The dividends received from our securities investments continue to meet our expectations and we anticipate realizing satisfactory returns. It is our intent to hold these securities long-term.

During the nine months ended September 30, 2008, the Company also recognized a loss on open and settled futures contracts of $304,088. The Company invested in futures contracts of ten-year treasury notes with the objective of reducing the risks of rolling over its fixed-rate mortgages at higher interest rates and reducing the exposure of the preferred equity and debt securities portfolio to interest rate fluctuations. As of May 15, 2008, we settled our position and no longer invest in these contracts.

Community operating expenses increased 8% from $3,190,263 for the quarter ended September 30, 2008 to $3,450,419 for the quarter ended September 30, 2009, primarily due to an increase in temporary personnel. Community operating expenses remained relatively stable for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. General and administrative expenses remained relatively stable for the quarter ended September 30, 2009 as compared to the quarter ended September 30, 2008. General and administrative expenses decreased 11% from $2,761,851 for the nine months ended September 30, 2008 to $2,466,071 for the nine months ended September 30, 2009. The Company has been focusing on reducing costs, including operating expenses, salaries, employee benefits, professional fees and travel. Interest expense decreased 4% from $1,140,359 for the quarter ended September 30, 2008 to $1,100,227 for the quarter ended September 30, 2009. Interest expense decreased 6% from $3,527,218 for the nine months ended September 30, 2008 to $3,330,521 for the nine months ended September 30, 2009. This was primarily due to the change in fair value of the Company's interest rate swaps which decreased interest expense by $114,523 and $287,267 for the quarter and nine months ended September 30, 2009, respectively, but only decreased increased interest expense by $52,000 for the quarter ended September 30, 2008 and increased interest expense by $82,000 for the nine months ended September 30, 2008. Cash paid for interest during the three and nine months ended September 30, 2009 amounted to $1,611,931 and $3,895,912, respectively. Cash paid for interest during the three and nine months ended September 30, 2008 amounted to $1,274,216 and $3,759,720, respectively. Depreciation expense remained relatively stable for the three and nine months ended September 30, 2009 as compared to the three and nine months ended September 30, 2008. Amortization of financing costs increased 55% from $38,370 for the quarter ended September 30, 2008 to $59,520 for the quarter ended September 30, 2009. Amortization of financing costs increased 41% from $116,185 for the nine months ended September 30, 2008 to $163,360 for the nine months ended September 30, 2009. This was primarily due to amortization of costs associated with the new Weatherly Estates mortgage and the extension of our Sandy Valley mortgage.

Sales of manufactured homes amounted to $1,843,341 and $2,788,360 for the quarters ended September 30, 2009 and 2008, respectively, a decrease of 34%.
Sales of manufactured homes amounted to $4,423,259 and $7,453,417 for the nine months ended September 30, 2009 and 2008, respectively, a decrease of 41%. Cost of sales of manufactured homes amounted to $1,729,002 and $2,383,739 for the quarters ended September 30, 2009 and 2008, respectively. Cost of sales of manufactured homes amounted to $4,157,777 and $6,288,216 for the nine months ended September 30, 2009 and 2008, respectively. Selling expenses amounted to $293,762 and $414,358 for the quarters ended September 30, 2009 and 2008, respectively. Selling expenses amounted to $910,021 and $1,125,535 for the nine months ended September 30, 2009 and 2008, respectively. These decreases are directly attributable to the decrease in sales. Loss from the sales operations

(defined as sales of manufactured homes less cost of sales of manufactured homes less selling expenses) amounted to $179,423, or 10% of total sales, for the quarter ended September 30, 2009 as compared to $9,737, or 0.3% of total sales, for the quarter ended September 30, 2008. Loss from sales operations amounted to $644,539, or 15% of total sales, for the nine months ended September 30, 2009 as compared to income of $39,666, or 1% of total sales, for the nine months ended September 30, 2008. The Company believes that sales of new homes produce new rental revenue and is an investment in the upgrading of the communities.

Income from community operations (defined as rental and related income less community operating expenses) remained relatively stable for the quarter ended September 30, 2009 as compared to the quarter ended September 30, 2008. Income from community operations increased 7% from $9,268,993 for the nine months ended September 30, 2008 to $9,907,856 for the nine months ended September 30, 2009.

Changes in Financial Condition

Net cash provided by operating activities increased 35% from $6,746,619 for the nine months ended September 30, 2008 to $9,111,980 for the nine months ended September 30, 2009. This was primarily due to a decrease in notes and other receivables and the add-back of the non-cash impairment charge for securities which were considered other than temporarily impaired.

Securities available for sale increased 41% or $8,888,015 during the nine months ended September 30, 2009. The increase was due primarily to purchases of $6,190,049 and an increase in the unrealized gain of $6,875,993, partially offset by the write-down in carrying value of securities deemed to be other than temporarily impaired of $1,893,314, and sales of securities with a cost of $2,284,713.

Inventory of manufactured homes decreased 18% or $1,734,025 during the nine months ended September 30, 2009. The decrease was due primarily to sales.

Notes and other receivables decreased 4% or $1,001,217 during the nine months ended September 30, 2009. The decrease was due primarily to a decrease in loans receivable from the financing of sales.

Land development costs increased 16% or $638,902 during the nine months ended September 30, 2009. The increase was due primarily to continual work on expansions in progress.

Mortgages payable increased 4% or $2,467,724 during the nine months ended September 30, 2009. This increase was due to a new $4,000,000 mortgage on Weatherly Estates partially offset by principal repayments of $1,532,276.

Loans payable decreased 10% or $2,442,264 during the nine months ended September 30, 2009. The decrease was primarily due to paydowns on the margin loan and lines of credit.

The Company raised $4,766,142 from the issuance of shares in the DRIP during the nine months ended September 30, 2009, which included dividend reinvestments of $852,665.

Dividends paid on the common stock for the nine months ended September 30, 2009 were $6,079,403 of which $852,665 was reinvested. On October 6, 2009, the Company declared a dividend of $0.18 per common share to be paid December 15, 2009 to common shareholders of record as of November 16, 2009.

The Company uses a variety of sources to fund its cash needs in addition to cash generated through operations. The Company may sell marketable securities, borrow on its line of credit, refinance debt, or raise capital through the DRIP or capital markets.

Liquidity And Capital Resources

The Company's principal liquidity demands have historically been, and are expected to continue to be, distributions to the Company's stockholders, acquisitions, capital improvements, development and expansions of properties, debt service, purchases of manufactured home inventory, investment in debt and equity securities of other REITs and payments of expenses relating to real estate operations. The Company's ability to generate cash adequate to meet these demands is dependent primarily on income from its real estate investments and securities portfolio, the sale of real estate investments and securities, refinancing of mortgage debt, leveraging of real estate investments, availability of bank borrowings, proceeds from the DRIP, and access to the capital markets.

The current economic downturn and the lack of liquidity in the lending environment may impact management's ability to grow by acquiring additional properties or REIT securities. Current economic indicators show the US economy to be improving. The affordability of our homes and the slow-down in site-built homes should enable the Company to perform well despite the challenging economy.
While the recent recession has proven difficult, the manufactured housing industry property type has performed better than other commercial property types.

As of September 30, 2009, the Company had cash and cash equivalents of $3,053,144 and securities available for sale of $30,463,087, subject to margin and bank loans of $9,819,566. These marketable securities provide the Company with additional liquidity. The dividends received from our securities investments continue to meet our expectations. It is our intent to hold these securities long-term and anticipate realizing satisfactory returns.

As of September 30, 2009, the Company has a $5,000,000 unsecured line of credit, all of which was available. The Company also has a $10,000,000 revolving line of credit for the financing of home sales, of which $8,690,000 was outstanding.
The Company owns 28 properties, of which 16 carried mortgages totaling approximately $69,000,000. The Company has one mortgage secured by four properties with a balance of approximately $12,500,000 maturing in November 2009. We are currently in the process of refinancing/extending this mortgage and are optimistic that we will be successful.

The Company has been raising capital through its DRIP. The Company believes that funds generated from operations and the DRIP, together with the ability to finance and refinance its properties will provide sufficient funds to adequately meet its obligations over the next year.

The Company does not have any off-balance sheet arrangements.

Funds From Operations

Funds from Operations (FFO) is defined as net income excluding gains (or losses) from sales of depreciable assets, plus depreciation. FFO should be considered as a supplemental measure of operating performance used by real estate investment trust (REITs). FFO excludes historical cost depreciation as an expense and may facilitate the comparison of REITs which have different cost basis. The items excluded from FFO are significant components in understanding and assessing the Company's financial performance. FFO (1) does not represent cash flow from operations as defined by generally accepted accounting principles; (2) should not be considered as an alternative to net income as a measure of operating performance or to cash flows from operating, investing and financing activities; and (3) is not an alternative to cash flow as a measure of liquidity. FFO, as calculated by the Company, may not be comparable to similarly entitled measures reported by other REITs.

The Company's FFO for the three and nine months ended September 30, 2009 and 2008 is calculated as follows:

                                Three Months               Nine months
                              2009         2008         2009         2008

Net Income                 $1,340,030   $1,201,017   $1,419,756   $2,407,051
 (Gain) Loss on Sales of         (33)      (9,684)       21,947     (30,042)
  Depreciable Assets
Depreciation Expense        1,016,595    1,017,213    3,068,823    3,049,758

FFO                        $2,356,592   $2,208,546   $4,510,526   $5,426,767

The following are the cash flows provided (used) by operating, investing and financing activities for the nine months ended September 30, 2009 and 2008:

                          2009           2008

  Operating Activities  $9,111,980     $6,746,619
  Investing Activities (7,408,895)   (11,168,975)
  Financing Activities (1,433,191)      4,506,587

Safe Harbor Statement

Statements contained in this Form 10-Q, including the documents that are incorporated by reference, that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Also, when we use any of the words "anticipate," "assume," "believe," "estimate," "expect," "intend," or similar expressions, we are making forward-looking statements. These forward-looking statements are not guaranteed. They reflect the Company's current views with respect to future events and financial performance, but are based upon current assumptions regarding the Company's operations, future results and prospects, and are subject to many uncertainties and factors, some of which are beyond our control, relating to the Company's operations and business environment which could cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements.

Such factors include, but are not limited to, the following: changes in the real estate market and general economic climate; increased competition in the geographic areas in which the Company owns and operates manufactured housing communities; changes in government laws and regulations affecting manufactured housing communities; the ability of the Company to continue to identify, negotiate and acquire manufactured housing communities and/or vacant land which may be developed into manufactured housing communities on terms favorable to the Company; the ability to maintain rental rates and occupancy levels; competitive market forces; changes in market rates of interest; our ability to repay debt financing obligations; our ability to comply with certain debt covenants; continued ability to access the debt or equity markets; the availability of other debt and equity financing alternatives; the loss of any member of our management team; our ability to maintain internal controls and processes to ensure all transactions are accounted for properly, all relevant disclosures and filings are timely made in accordance with all rules and regulations, and any potential fraud or embezzlement is thwarted or detected; changes in federal or state tax rules or regulations that could have adverse tax consequences; our ability to qualify as a real estate investment trust for federal income tax purposes; the ability of manufactured home buyers to obtain financing; the level of repossessions by manufactured home lenders; and those risks and uncertainties referenced under the heading "Risk Factors" contained in the Company's Form 10-K and other filings with the Securities and Exchange Commission. You should not place undue reliance on these forward-looking statements, as events described or implied in such statements may not occur. The forward-looking statements contained in this Form 10-Q speak only as of the date hereof and the Company expressly disclaims any obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.