Built Better, Built Stronger, Built Faster – An Investor’s edge in New Home construction

By Larry Haines, President of BP Institute and founder of MyPropertyLeads.com

Typically, real estate investors are looking for a good deal. But ask 100 investors what a good deal is and get 100 different answers. The modular home industry is helping to define what a good deal is when considering new construction as an investment strategy.

First let’s do a little myth busting. Modular homes are not mobile homes. Modular homes are built to a different building standard than mobile homes. (HUD vs. IRC as well as complying with any additional local regulations where the house is being delivered). Some of the names for modular housing include “Industrialized Housing” or “System Built Housing”.

Another myth to bust is one that quality of materials or building standards are somehow less in a factory built home. On the contrary, houses assembled in the factory and sent to the job site need to be built to withstand the rigors of transportation.

Craig Calkans, General Manager of Champion Homes of Texas, Burleson, TX recently said; “These homes not only have to withstand the wind pressure of a 70 mile an hour truck going down the road, but for every 100 miles of road traveled, these homes withstand the same stress a stick built house goes through in a 17 second earthquake with a 6.2 magnitude rating and our average delivery exceeds 500 miles from out plant. Now that’s Tough!”

Author’s comment: Having been through a 6+ magnitude earthquake in California’s Bay Area, I had to agree that was impressive.

Modular homes are built in a controlled factory environment where the quality control can far exceed that of a stick built home. The modular home can be up to 90% complete prior to shipping with all the walls, flooring, ceilings, carpeting, electrical, plumbing, appliances and fixtures already installed, inspected and ready for use.

A modular home manufacturer typically has millions of dollars in inventory staged along the factory floor ready for the order to be initiated. The order is released and the construction process starts; first with the construction of the frame and axles, then the sub-floor, and as the unit is moved along the production line, is completed in as few as 3-10 days, depending on the size and features installed in the unit. In many instances, a typical 2,500 square foot home can be constructed in a factory in under a week.

Some of the benefits of a modular home include:
Lower cost of construction (typical savings of up to 20% vs. stick built)
Shorter build time of (30-90 days versus 4-9 months) reduces:
exposure to weather damage
exposure to vandalism and theft (which has become a 4 billion dollar problem nationwide)
carrying costs for taxes, insurance, and interest expense
Able to withstand 140 mile an hour winds (category 4 hurricane)
Same features, options and upgrades available as in a stick built house

Speaking of features, let’s bust another myth. The perception of a modular home is that it looks like a mobile home. Since a picture is worth a thousand words, here is a picture of a “the Cottage”, a modular home built by Genesis Homes, a Champion Enterprises company. This home won the “Production Home Over 1400 Square Feet award” at the 2003 National Congress & Expo.

Looks nothing like a mobile home!

This high performance Energy Star home includes an open floor plan, multi story, lap siding, wide front porch, dormer windows, transom front doors with sidelights, crown moldings, media center and ceramic tiled kitchen and baths to name but a few features.

As an industry, modular builders are delivering over 42,000 homes a year and growing rapidly. Along the Gulf Coast, since hurricanes Katrina and Rita swept through in 2005, modular home alternatives are seen as a way to get affordable housing in place much faster than stick built houses. Labor and material shortages, theft of materials, and construction delays are a reason that many active investors are considering the modular alternative.

Written by Larry Haines, President of BP Institute and founder of MyPropertyLeads.com
Copyright 2006