Are Modular Homes a Good Investment? Innovative Investing 101

Are you ready to revolutionize the way you approach constructing new properties for your real estate portfolio? If so, let me introduce you to the world of modular homes. 

In recent years, modular homes have skyrocketed in popularity – and for good reason. These homes offer a unique, affordable method to build new homes suited to your needs in a quick and efficient way. 

So, that just leaves the question, are modular homes a good investment?

Well, in order to answer the question 'are modular homes a good investment' you will first need to line up financing that supports your investing strategy. After all, if your financing is not structured to support your plans, there is no such thing as a good investment.

So, if you want to start securing financing that suits your investment strategy, start by booking a strategy call at the link below.

What is Modular Housing? 

Modular homes are essentially house built using pre-constructed segments. Unlike mobile homes which are built in very narrow forms in order to be taken down highways in individual, completed forms, modular houses have different parts and segments built separately in factories and are assembled on-site. This allows for larger, more complex structures to be built. These parts can range from walls to roofing segments. However, occasionally certain segment need to be built on-site in order to properly assemble the structure. 

These structures are built on top of the foundation laid on the property much like you would see with a traditional ‘stick-built’ construction. In fact, from the outside the process of building a house using prefabricated pieces looks nearly indistinguishable to stick-built construction.

However, the questions still stands:

Are modular homes a good investment?

Are Modular Homes a Good Investment VS Traditional Construction

Are modular homes a good investment when compared to the classical stick-built construction method? That all depends on your goals.

Modular housing comes with a variety of unique advantages that make it an attractive strategy compared to traditional home construction. These can range from better costs, improved structures, and faster construction than other means of building new housing.  In order to properly weigh the options, let's take a look at some of the pros and cons of modular homes.

Lower Average Cost 

Building new houses is a costly endeavour, but a necessary one if we plan to tackle the current housing shortage in Canada. So, many developers and investors are looking for methods to build high-quality affordable homes so that they can increase the capacity to build more homes. As a result, many of them find themselves turning towards modular housing. 

In Ontario, the estimated cost to build a traditional, stick-built, fully detached home can range anywhere between $130 to $400 per square foot. Alternatively, the estimated cost for a modular house is $80 to $160. This means that on average you can save approximately $290,000 on the construction of a two thousand square foot home – that means you would be saving approximately 55 per cent on the construction of the house.

So, if you are asking yourself, 'Are modular homes a good investment for an investor on a budget?' The answer would be yes.

Increased Durability 

Are modular homes a good investment because they last longer? Well, let's take a look.

Modular homes need to have their prefabricated segments transported from the factory to the build site, this means that they are required to be built in a more durable way than stick-built houses which do not have to undergo the same transportation due to being constructed on-site. 

While traditional homes are designed to withstand wind speeds of up to 100mph, modular homes can be built to take up to 173mph. This increased durability can make your property much easier to insure in regions that deal with high level winds, saving you money every month. As well, both you and the future inhabitants of the property will not need to worry about the 'dangers of modular homes,' as they are actually incredibly safe.

Faster Construction 

Are modular homes a good investment for investors on a deadline? All of the signs point to yes.

Modular homes are typically much faster to construct than traditional houses. In fact, while the average home can take between nine and twelve months to complete, a modular home can be completed in simply three to four months. 

This increased speed is only possible due to a few key factors that increase the efficiency of the process without compromising the structure of the home. For starters, while most houses cannot begin construction until after the foundation has been properly laid and set, modular homes can begin construction on each piece of the building while the foundation is still being laid. This can save an entire month’s worth of time on the construction. After each segment of the house is built, it is often possible to complete the final assembly in a matter of days or weeks with a team of skilled builders. 

This process allows you to spend less time and money on the construction of the property and start using the property to its full potential much faster. 

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Are Modular Homes a Good Investment From a Mortgage Perspective?

Are modular homes a good investment in the eyes of mortgage lenders? It entirely depends on the lender.

Since building a modular home is a commercial endeavor, the popularity and viability of these investments will vary from lender to lender. After all, commercial financing companies are far more selective with the properties they will fund than residential ones.

So, if you would like to weigh your options and find a lender willing to finance your modular investments, get started by booking your free strategy call at the link below.

Risk Factors of Modular Construction 

Are modular homes a good investment for people who don't want to take risks? Not at all. In fact real estate is the wrong niche for someone who wants to invest without taking a few risks first.

There are a few disadvantages of modular homes that you need to consider before you decide to build one. While many of these are not necessarily deal-breakers, they do detract some investors and buyers from these properties.

Each of these factors may matter in different regards depending on what you plan to do with the properties once you finish them. Are you planning to rent them out? Or are you planning to sell them off?

Negative Stigma

One of the common problems with modular homes is the fact that there is a very serious negative stigma around these properties. Many people look at modular homes as “overly manufactured” or “lazy” and as a result, they refuse to look at these homes. This can not only make these properties slightly harder to rent, but it can also impact their resale value – limiting the number of offers you may receive if you decide to sell the home and creating a modular home nightmare. 

However, this stigma is losing weight each year as more investors and developers turn to them as a strategy to build new, sustainable housing. So, do not let the current public option stop you from asking yourself, 'are modular homes a good investment?'

Limited Design Options

Are modular homes a good investment for people who want to create vibrant and customizable housing? Probably not.

Another major factor taking away from the appeal of modular homes is the belief that modular properties are incredibly limited in their design options. However, while it is true that these properties often come with a limited number of different segments you can use, similar to a box of LEGO bricks they are capable of being combined in a nearly infinite number of ways. As well, despite the main structure consisting of similar key parts, the way these can be styled and decorated are limited only by the imagination of the builder and the abilities of the company they are working with.

However, at the end of the day, the time and effort it takes to customize these properties does add a lot of money to the cost of these properties, so you should keep your budget in mind.

Financing Your Modular Housing Investments

So, are modular homes a good investment? That answer is ultimately up to you, but there are plenty of advantages you can consider if you are looking to make the most of these properties.

Modular housing is a relatively new strategy in the world of real estate. Therefore, many lenders are unfamiliar with how these properties work and may hesitate to finance their construction. That is why at LendCity, we work with a wide network of lenders to help you find a lender who is familiar with your strategy and can provide you with the financing you need in order to get the job done. 

To learn more about how we can get you the mortgage you need in order to build and operate a modular home, give us a call at 519-960-0370 or visit us online at Alternatively, you can book a free strategy call at the link below.

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