Real Estate Development & New Home Construction

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Lowell Bailey
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Modular/prefab Home vs. Custom building options?

Lowell Bailey
Posted Oct 25 2022, 03:27

Hi All,

My wife and I are planning to subdivide a property in Chittenden County, VT which will result in a 1.5-acre building lot.  Upon some initial research, it seems like a modular home might be the right option for us if we can achieve a high-enough quality and energy-efficiency standard.  Our goal is to build something that is energy-efficient but that we could sell in a few years for a profit.  Are their any recommendations on new construction practices and/or modular/prefab builders that find the balance between energy-efficiency and value?  Specifically, we would want to be able to list the home for sale in 2-3 years and have it appreciate in value so that our basis is less than our sales price (less real estate commission)?  I have heard that it's hard to make a profit on new builds so I'm wondering if anyone has experience in this area and would be willing to share their thoughts.

Thanks in advance.

-LB

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Allan Smith
  • Rental Property Investor
  • Nashville, TN
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Allan Smith
  • Rental Property Investor
  • Nashville, TN
Replied Oct 25 2022, 05:23

The exit value is going to depend way more on the neighborhood and location than the building method.

you should be able to find a modular builder that can design it so there's tons of insulation and all that.

I looked into modular once and while their products look fine, they cost as much as site built. In hindsight,  they would have been WAY more consistent with budget and timeline than most builders.

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Lowell Bailey
Replied Oct 25 2022, 08:02

Thanks Allan,

I'm going to look into panelized construction, with the thought that I could have some control and customization of design, but would benefit from the economies and efficiencies of offsight building.  It would still require a GC and site crew but definitely less time on-site than a classic site-built home.  Thanks for the feedback... super helpful. 

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Christopher Liu
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Christopher Liu
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Replied Oct 27 2022, 23:45

I'm looking into this myself right now. I agree with @Allan Smith on all his points which I think are spot on. I'm quickly coming to the conclusion that prefab construction may be the way to go primarily for the following :

1. Much better visibility and control on both time and budget.

2. Pre-fab construction quality will be superior given that construction is happening under controlled conditions and not subject to weather. This will directly affect improved energy-efficiency as this is a function of not just the design and spec but the quality of construction.

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Paul Sofia
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Paul Sofia
  • Lender
  • Charlotte, NC
Replied Nov 4 2022, 07:03

This is my wheelhouse.  I do modular, manufactured and stick built homes.  What is your level of experience?  I can share some advice with you if you wish.

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Replied Nov 5 2022, 22:06
Quote from @Christopher Liu:

I'm looking into this myself right now. I agree with @Allan Smith on all his points which I think are spot on. I'm quickly coming to the conclusion that prefab construction may be the way to go primarily for the following :

1. Much better visibility and control on both time and budget.

2. Pre-fab construction quality will be superior given that construction is happening under controlled conditions and not subject to weather. This will directly affect improved energy-efficiency as this is a function of not just the design and spec but the quality of construction.


 Not sure if that's 100% correct. I worked in a manufactured home company when i was young for a very short time. The quality in craftsmanship was terrible. The materials were sub-par and the employees were less than skilled in their proper trades. That's not say that there aren't better companies that have much higher standards. 

Also, I did work with a huge company that built everything "off-ste" and shipped all f the walls to the job, labeled with a diagram for placement. the roof was built on the ground and hoisted up and set on the structure; pretty awesome to see first hand; fascinating at least. 

It just depends on the type of company you are hiring. 

Either way, there is no comparison to the quality of craftsmanship and control of energy efficiency you will get from a good home builder; or a green home builder. 

If the company is slapping walls together and attempting to seal each interlocking corner so that it will be "sealed" for inspection, and , they are working under production type conditions to stay competitive,(which is what happens when you are doing production style builds, like modular), the risks of overlooking little details becomes greatly increased and often times overlooked because the need for meeting production. Just first hand observations from a union carpenter for several years; project management for several years, and owner developer since 2017. 

If you're moving in 2-3 years; You'll be fine with a good quality modular home. They make really nice ones that are hard to tell they are modular. 

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Lowell Bailey
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Lowell Bailey
Replied Nov 6 2022, 02:29

Thanks all for your thoughts on this.  It certainly seems like there's plenty of pros and cons to each. I've been talking with a builder out of Vermont, that does modular with a wide array of different build-types - wall assemblies range from standard 2x6 assemblies to double-stud R41 walls.  The appeal for me is the fact that when I can look on a website, pick out a design (or close to the design I want), have a call, and come out the other side of that process with a decent build budget and a timeline of less than a year until finished.  Perhaps I'm naive, but I can't seem to find a similar type of process with site built companies.  The timelines seem longer and less definitive, as in, "Yeah, I can build a house but subs are hard to get right now and I'm booked out until next year so I won't be able to start until then."  To be honest, I would rather go with a custom design, but I think the timelines and budgets are not going to be comparable.

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Chris Seveney
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  • Northern Virginia
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Chris Seveney
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Replied Nov 6 2022, 05:18

@Lowell Bailey

If you are going to sell you will not recoup the costs you spent on things like spray foam insulation, upgraded hvac equipment or really efficient windows.

As mentioned peopke but based off location, size and finishes.

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Lowell Bailey
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Lowell Bailey
Replied Nov 17 2022, 02:36
Quote from @Chris Seveney:

@Lowell Bailey

If you are going to sell you will not recoup the costs you spent on things like spray foam insulation, upgraded hvac equipment or really efficient windows.

As mentioned peopke but based off location, size and finishes.

Thanks for the input Chris! Does that mean you're advocating for a a cheaper or modular build or that you're advocating that building out a lot is never going to be as profitable as buying and selling (and renovating) existing homes.

-LB

-LB

Thanks for the input. Does that mean you're advocating for a a cheaper or modular build or that you're advocating that building out a lot is never going to be as profitable as buying and selling (and renovating) existing homes.

-LB

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Replied Nov 30 2022, 11:35

I have read the posts and will add my 2 cents 

I am not sure where you are at in the process of building a home, or if you have scrapped the idea all together.  

All of the comments here have been right inline with what I have found in my experience as well. I will attempt to bullet point out a couple of things that may help you.

first rule of real estate is Location. And neighborhood. (Don't over build, don't under build) 

second, building a home for yourself vs one that you would sell for profit are two very different thought processes.   

On your own home, build and make it energy efficient as you like and as your heart desires, after all you will be the one reaping the benefits of it for years to come.

build for profit, make sure you know what is going on in your market and build just above that level... 

Make sure you have a view, and take advantage of it when positioning and placing your home. 

Natural lighting is HUGE,  

Floor coverings are a place to either make or break your budget... After a certain grade and pad... Your not getting a return on the money invested. 

Kitchens  are where you can make a lot of money in your homes, or lose your rear... 

Landscaping is also key, and helps with curb appeal. 

light fixtures don't need to be super expensive and they can eat your profit. 

Custom built for profit is a challenging and fun adventure. It can be done successfully and profitably. 

If you are looking at modular. Take a look at Champion Skyline homes as they have a good product and their newer lines are very attractive 

If you are looking at panelized homes. Let me know, we have a facility that can help you out today. And more coming online to make access to SIP construction easy and affordable.