New Construction: Pre-Fabricated, Modular "Container" Homes

New Construction: Pre-Fabricated, Modular "Container" Homes

Denver, CO · Member since 2017 · 11 posts · 4 votes

I several questions for any investors who have experience with pre-fabricated/modular/shipping-container type of homes. (Single family or Multi-Family).

I'm considering the idea of buying a vacant lot in any given Denver neighborhood, (Curtis Park, Cole, Berkely, University, etc.) and putting in a pre-fabricated home. The thought here would be to try to sell immediately. 

Generally speaking, pre-fab homes come with existing HVAC and Electrical systems, flooring, insulation, etc. and some brands even promise they will meet the specs for the local building codes anywhere on the continental U.S. 

Additionally, some of these homes even have garages, solar panel connections, etc. 

Current estimate I have shows:

I understand they require the use of a crane to erect, and will need to have some form of foundation/slab on grade. 

From all research I've done, everything from academic articles to news articles etc., is that these homes are cheaper, reduce the need for architects, various contractors, and dramatically reduce building time. (10 weeks from start of fabrication to final completion on-site).

  • Price for these homes: $(100k-180k) ~ ($120.00/SF - $150.00/SF)
  • Price for vacant lot: $(100k-300k) ~
  • Misc. permitting, appraisals, brokers, etc. : $(15k-20k) ~

I see a lot of delta here between a potential final asking price and a total project cost.

All in all, I think that there is a market for this type of modern, "environmentally friendly" type of home, and I've seen news-stories on successful storage container homes that were built in Denver.

Should I believe all of the hype, or am I drinking too much kool-aid? Is there any real difference here or is it no different pursuing building a stick-built home?

Please let me know your thoughts, particularly if you have direct experience with this type of home.

Thanks!

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Investor · Denver, CO · Member since 2016 · 10 posts · 6 votes
9y

We've ran every number we can on modular type buildings for both single family and ADU here in Denver and it simply doesn't work out. We have multiple MX-3 zoned lots as well as CU-1 and CU zoned lots and we haven't gotten a single one to pencil out. We've met and spoke with about every modular builder from out of state that could ship something to CO. I'd love to talk to someone who is a true investor who's made it work. The few people who have made it, its been their passion project and made it work as a one off sweat equity standpoint but from a true investment and scalable model, I've yet to see it work.

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  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    9y
    Originally posted by @William Savage:

    I several questions for any investors who have experience with pre-fabricated/modular/shipping-container type of homes. (Single family or Multi-Family).

    I'm considering the idea of buying a vacant lot in any given Denver neighborhood, (Curtis Park, Cole, Berkely, University, etc.) and putting in a pre-fabricated home. The thought here would be to try to sell immediately. 

    Generally speaking, pre-fab homes come with existing HVAC and Electrical systems, flooring, insulation, etc. and some brands even promise they will meet the specs for the local building codes anywhere on the continental U.S. 

    Additionally, some of these homes even have garages, solar panel connections, etc. 

    Current estimate I have shows:

    I understand they require the use of a crane to erect, and will need to have some form of foundation/slab on grade. 

    From all research I've done, everything from academic articles to news articles etc., is that these homes are cheaper, reduce the need for architects, various contractors, and dramatically reduce building time. (10 weeks from start of fabrication to final completion on-site).

    • Price for these homes: $(100k-180k) ~ ($120.00/SF - $150.00/SF)
    • Price for vacant lot: $(100k-300k) ~
    • Misc. permitting, appraisals, brokers, etc. : $(15k-20k) ~

    I see a lot of delta here between a potential final asking price and a total project cost.

    All in all, I think that there is a market for this type of modern, "environmentally friendly" type of home, and I've seen news-stories on successful storage container homes that were built in Denver.

    Should I believe all of the hype, or am I drinking too much kool-aid? Is there any real difference here or is it no different pursuing building a stick-built home?

    Please let me know your thoughts, particularly if you have direct experience with this type of home.

    Thanks!

     William, It's been batted around here a number of times. If you do some searching (located in the upper right hand corner) you can see previous discussions about this. In summary, most zoning folks (Denver) don't like them. Lots in the neighborhoods you mentioned are nowhere near the low end of your price ($100k) for land. I just wholesaled a small lot (3,125 sq ft) in 5 points for over $200,000. Your home prices are going to be on the higher end as well. I don't think building code and energy code will come in at $100K for a house. When it's all said and done there is no margin. In addition who would pay $500,000 for a modular when they can buy a home with character for the same money.

    With regards to container construction, after getting all the misc stuff accounted for, the only real advantage of container construction is speed. 

    Again if you search the previous posts you can get all the nitty-gritty on the why for what I summarized above.

  • Denver, CO · Member since 2017 · 11 posts · 4 votes
    9y

    Bill,

    Thanks for the feedback. Since my post I used the search function and found several forms on the topic, and will continue due diligence. 

    I'm particularly interested in the storage container models, although I am not emotionally attached to this method of investment. 

    Contrary to what you stated for lot prices, I see a lot on Zillow right now in the Cole neighborhood for 125k, so I don't think my estimate is too far off, but I don't know the market as well in Denver - as I've only lived here a year. 

    The home prices I based on manufacturer web-sites, and yes, (depending on manufacturer) they are pre-fitted with electric, hvac, finish flooring, and insulation. I do not know if they include cost of shipping, insurance, etc. and is something I will have to look into. 

    This couple built their own container home in Denver and had it appraised at +$700k in 2016 with roughly $430k in construction. 

    http://www.denverpost.com/2016/04/01/couple-builds...

    This is fairly consistent with market studies on these types of homes that I've seen. 

    Qualitatively, I have little concern about how these homes look or how eco-friendly they are.

    Bill, If you've personally seen these homes in Denver turn out to be disasters then I would have to remain objective and pursue another investment method.


    They seem to save money and time.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    friend of mine is doing this in portlandia.. look at the big developments I think in the netherlands or other parts of Europe they are away ahead of us

    Although my buddy is more of a philanthropist with this particular endeavor he even donated a fully functional one to the collage... although he hopes to some day turn that around and make them viable financing for himself as well.. but i bet he has spent 250k or more on this so far.. all for science / construction lab at the collage

  • Denver, CO · Member since 2017 · 11 posts · 4 votes
    9y

    Thanks Jay,

    I know these types of homes have been thought to be a possible solution to homelessness in the U.S and other parts of the world. For this purpose, they probably won't be the pre-finished variety, but rather ones that need to be completely stripped, re-painted, etc. 

    Architects seem to hate these homes because it interferes with their designing freedom. 

    I studied engineering, so I see things from a nuts/bolts standpoint and from a cost-efficiency stand-point. It just so happens that in addition to time and money savings, they're supposedly good for the environment, and at the minimum, utilizes some of the surplus of containers that are sitting in our bays/harbors.

    I'm interested in finding out about more on the subject, and to hear any recipes for success for installing these.

  • Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    9y

    I was in this home a few years ago. Containers on both ends and connected with stick or steel build in the middle. They took a lot that was not buildable, due to earthquake fault, and with an architect, who worked closely with the city, to be able to build this. The containers gave it the strength to overcome that obstacle. 

    The containers are cut open towards the middle part, so it doesn't feel like narrow containers.

    So, maybe this would be a way to utilize some lots that have problems and get them way below standard cost and make them buildable. 

    https://www.pinterest.com/pin/381750505888733170/

  • Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    The problem I ran into was finding a finished product that would command the price needed to make sense. I spoke to 3 modular builders here in the metro area. 

    Funny thing is that I met a builder tonight that built them before all the local manufacturers went belly up in the crash. He is now going to reach out to his old contacts to see who is around. He mentioned getting through the Cities were a difficult process because they think modular = manufactured(mobile home). I found some land that might make sense for this type of build, so I'm exploring it yet again to see if 2017 brings something new.  

  • Denver, CO · Member since 2017 · 11 posts · 4 votes
    9y
    Originally posted by @Matt M.:

    The problem I ran into was finding a finished product that would command the price needed to make sense. I spoke to 3 modular builders here in the metro area. 

    Funny thing is that I met a builder tonight that built them before all the local manufacturers went belly up in the crash. He is now going to reach out to his old contacts to see who is around. He mentioned getting through the Cities were a difficult process because they think modular = manufactured(mobile home). I found some land that might make sense for this type of build, so I'm exploring it yet again to see if 2017 brings something new.  

    Matt, 

    I spoke with a company yesterday that said they do engineering in-house, and part of their package is coordinating with the customer's local building codes for the MEP, roofing, structural foundation, etc. and obtaining a (Colorado) engineering stamp. The buyer is responsible for obtaining the geo-tech report for the foundation but that's about it. In addition they erect the home for a nominal fee. (Estimated 2 days to erect).

    They're a new company (their grand opening is today actually) and they've made sales in a few U.S. cities thus far. 

    I'm seriously taking into consideration doing this type of project as well if the price is right, and if I can land a deal on a lot of land here in Denver. 

    I can inbox you their info. 

  • Lender · Denver, CO · Member since 2009 · 1k+ posts · 597 votes
    9y

    A couple times a year this discussion comes up on BP.  Some areas of Denver you look around and every lot on a block is new construction. I am actively building town homes in our market and stick to this - if the container construction worked you would see a lot more of it. Construction costs have soared here in the last few years, if there was a cheaper, faster and more profitable way - it would be going up left and right. 

  • Denver, CO · Member since 2017 · 11 posts · 4 votes
    9y

    Travis,

    What kind of town homes? Stick built? Modular? 

    The building method being discussed is still new a concept. Just like anything else, builders like to stick to what they know. Just because something is not popular doesn't necessarily mean it doesn't hold merit. I'm impartial to these types of homes, and if another method is cheaper, than I'd probably go for it. I will say that empirically, the time involved and convenience of building is unmatched by standard methods. For someone working a full-time job (non real-estate), this option is attractive. There are new properties in RiNo that are storage container built, so perhaps the same concept could be applied in an adjacent neighborhood. My thoughts, but still researching...

  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    9y
    Originally posted by @William Savage:

    Travis,

    What kind of town homes? Stick built? Modular? 

    The building method being discussed is still new a concept. Just like anything else, builders like to stick to what they know. Just because something is not popular doesn't necessarily mean it doesn't hold merit. I'm impartial to these types of homes, and if another method is cheaper, than I'd probably go for it. I will say that empirically, the time involved and convenience of building is unmatched by standard methods. For someone working a full-time job (non real-estate), this option is attractive. There are new properties in RiNo that are storage container built, so perhaps the same concept could be applied in an adjacent neighborhood. My thoughts, but still researching...

     Would you mind sharing a few addresses in Denver that are storage container built? I'd love to drive by and also make contact with the folks and see how much it cost.

  • Denver, CO · Member since 2017 · 11 posts · 4 votes
    9y
    Originally posted by @Bill S.:
    Originally posted by @William Savage:

    Travis,

    What kind of town homes? Stick built? Modular? 

    The building method being discussed is still new a concept. Just like anything else, builders like to stick to what they know. Just because something is not popular doesn't necessarily mean it doesn't hold merit. I'm impartial to these types of homes, and if another method is cheaper, than I'd probably go for it. I will say that empirically, the time involved and convenience of building is unmatched by standard methods. For someone working a full-time job (non real-estate), this option is attractive. There are new properties in RiNo that are storage container built, so perhaps the same concept could be applied in an adjacent neighborhood. My thoughts, but still researching...

     Would you mind sharing a few addresses in Denver that are storage container built? I'd love to drive by and also make contact with the folks and see how much it cost.

    You'd probably have to reach out to the developer. Property was made from re-serviced storage containers at the corner of 25th and Larimer. 2500 Larimer is the address.

  • Lender · Denver, CO · Member since 2009 · 1k+ posts · 597 votes
    9y

    @William Savage

    I am building stick built. No question the construction industry is slow and resistant to change - as are the municipalities and buyers. There certainly are people who are interested in this product but it is a small portion of the over all buyers pool. When I am building a project I want to be an option for as many buyers as possible.

    It often comes up and a lower cost option, but I think you would get less units on the same piece of dirt with containers than stick built. 

    There are a few around town and Rino makes sense because it is still almost grungy enough no one cares - but try to build one in LoHi or Jeff park and watch the neighbors go nuts. Get out of the urban setting and the buyers will be few and far between.

    Financing a project like this is a whole different can of worms...

  • Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    The builder I spoke with said the time it took for the paperwork(permits, etc) was the biggest issue. The transport costs (usually from Eastern Nebraska) could fluctuate and push the pricing even more. He said if you can't get it built locally(modular), then don't bother. 

    I'm still going to poke around a bit on it. 

  • Architect · Papillion, NE · Member since 2015 · 1k+ posts · 840 votes
    9y

    @William Savage

    I have done a few pre fab modular trailers for a client approx. 14ft x 70ft double wide style.  Construction trailer type but a little nicer.   I personally hate them because they are cheap construction quality, cheap products used and limited on size and layout.  Houses and rooms are narrow due to 14ft wide limitation.  Its like buying a car... you get what you get.  Transportation cost are expensive due to distances and special permits.  You also have a max height of 14ft before you need special permits.  Construction time on site is reduced greatly but you still need about the same amount of time to build the unit, it just happens in a factory.  "Some" over all time is saved but not as much as people say there is.  There is always a crane issue of "who" is providing this and its best to put this on the modular trailer builder so they can coordinate the timing of delivery vs putting it on the GC.  

    I would look at Clayton Homes if you are going this route as they are Berkshire Hathaway Company.   Now if you want to due pre-fab panel construction, or even "S.I.P." panels then I am all for it.    

    Containers look cool but not sure the common person wants this.  It has the same limitation as modular trailers.  I would pass on this as well.

  • Real Estate Investor · Acton, CA · Member since 2014 · 109 posts · 73 votes
    9y

    @William Savage

    Will, I just built a modular home in Los Angles county and it turned out great. It's a modular, not a manufactured, mobile, etc. The difference is, modular homes, also called factory built homes, are built to the same construction standards as site built. My home has 2x6 walls, large cathedral ceilings, and 2x10 floor joists. They are not trailers, they are delivered in pieces, or modules, and assembled onsite. Ours is 1782 sqf and 27' wide x 66' long so not very narrow. We spent a total of $287,000 for the entire construction project, including all loan costs and site improvements, and $50,000 for the land, so about $340k all in. The home appraised for $450,000 before we even started building, and now the comps put our home at around $515,000. So we had instant equity. Had we been doing this for a profit we would have scored big (it's our personal residence.) From start to finish took about a year, mostly thanks to LA county building department. But once we gave the go ahead to build the home, they had it built in less than three months, and it came out finished inside and out, with appliances. All they had to do once it was set on the foundation was tie it all in together, patch in the roof and the siding, and fix some interior paint and drywall cracks. 

    The other nice thing about modular homes is they are registered with the county as a SFR not a manufactured 433 or mobile, exact same as a site built home, so no worrying about depreciation. We can even do a site built addition like a regular home.

  • Investor · Denver, CO · Member since 2016 · 10 posts · 6 votes
    9y

    We've ran every number we can on modular type buildings for both single family and ADU here in Denver and it simply doesn't work out. We have multiple MX-3 zoned lots as well as CU-1 and CU zoned lots and we haven't gotten a single one to pencil out. We've met and spoke with about every modular builder from out of state that could ship something to CO. I'd love to talk to someone who is a true investor who's made it work. The few people who have made it, its been their passion project and made it work as a one off sweat equity standpoint but from a true investment and scalable model, I've yet to see it work.

  • Real Estate Agent · Rocklin, CA · Member since 2016 · 79 posts · 50 votes
    9y

    I think @Jason Lewis is right on, you could probably make it work and have some sweat equity but you could probably have the same or more equity with an owner built stick frame. I too have looked at alternative builds and ended up thinking myself in a circle right back to stick framing as the numbers worked better and everybody understands it (tradesmen/zoning/inspectors). It also strays from the norm on the sale and in my personal experience people are not as interested or receptive to purchasing a modular/manufactured home as they are to a traditional build.

    @Jay Hinrichs Are you saying European housing is way ahead of the US because they have developments of container homes? I spent some time in Peru and they used anything for a home including trash, but I guess that would be building "green" with recycled materials. Just poking fun because you're from Portland.

  • Denver, CO · Member since 2017 · 11 posts · 4 votes
    9y

    @Jim Adrian Can you specify what you meant by 14ft maximum? I didn't quite understand.

    Do you mean for deliveries? From what I've been told for truck deliveries, I get a 12ft wide max width allowance, otherwise it's an additional $1,200.00 for a wide-load crew to follow. 

    The majority of reasoning I'm getting from a lot of you is as follows... "I know stick built structures, that's what John Doe, Johnny Inspector, Jack the city zoning specialist and I are used to." 

    This is not hard reasoning. 

    Can anyone show me or e-mail me the numbers or estimate packages they've put together comparing the two processes of stick built vs. modular? I'd love to sit down and have someone engage me in real discussion. I studied civil/construction engineering in college and I work for a global Arch/Eng. and I've learned to become borderline obsessive when pricing and putting estimates together. 3+ days and I'm still carefully gathering cost information.  

    The models for container homes I'm looking at are technically "modular" but really deserve their own special category. These homes have 2-3 pieces to attach together, and your done. They're engineered, designed, and built to pass inspections with respect to local and state codes. Also, they can be adjusted if necessary to accomodate VRBO or Air B&B specifications. Proper zoning would need to occur.

    Also, I'm indifferent if it takes two months to build these in a factory. It is NOT the same as two months to build outdoors. 

    Indoors = no noise, no construction traffic, no hazards to public, no run-off, no overhead, no-temp. facilities, no injuries, no supervision, no crews, none of my active participation. 

    The key idea here is that I am a full-time employee, and do not have time.

    All I would need (as far as contractors) for the project that I have in mind is a screw-pile contractor. 

    These pre-fab containers don't need typical foundations, which from my numbers, cut the cost by 50% when compared to foundation slabs with retaining walls/footings. 

    The manufacturer of these models also sends two crew members to make connections, and all of the interior items and finishes are pre-installed, and stand tall against code. This process takes two days and costs $5k.

    For these units, I would need to buy a fridge, and a washer/dryer (maybe). 

    Driveways? For most properties in the neighborhoods I want to build? No.

    Patios/Sidewalks/Site Conditions/Minor-Landscaping? Sweat equity 

    It's silly to argue over appeal, aesthetics, because it is all very subjective in real-estate. Location is far more important (I've clearly read many guru real-estate books)...However, for conversation, I obviously would appeal to a younger demographic (millenniall/gen-x) but if this became a multi-unit rental or VRBO? 

    I would argue that in the right neighborhood this model would be very appealing. I spoke with someone who made an apartment complex out of truck trailers in Phoenix, AZ (these buildings had no facade work done at all) who said he has been overwhelmed with solicitations. It makes since it's so uncommon, and they look exotic. *Google search: "Containers on Grand" if interested.

    These may not maintain their luster forever, but for at-least 5-10 years, I'd wager that they remain fairly relevant since the facade is so generic. 

    Especially if they're placed in a neighborhood adjacent to RiNo. 

    @JimArdrian

  • Architect · Papillion, NE · Member since 2015 · 1k+ posts · 840 votes
    9y

    @William Savage

    If you are building a modular trailer house that is that is delivered by semi truck cab then there are 2 limiting dimensions to consider, height and width.   A 14' wide unit is typically the widest you can go down a highway.  A typical highway lane its 12' wide, city as well.   Typical clearance under a bridge is 14' high which limits how tall of things you can transport.  After you reach a certain height and width you need to get special transportation permits and you have an additional lead/follow car that says "wide load" etc.   The mfr typically takes care of this and is familiar with this process.   You also have to consider the transportation structure as well.  A semi bed is about 4ft tall.  This allows you to add a 10 ft structure on this before you reach the 14ft tall mark. 

    You will need a foundation for any structure.  Local codes dictates the minimum size of a structure that is exempt from needing a foundation which is typically the size of a shed.   Frost depth will also play a part in this as well.   If in Denver I would bet its 5ft deep range. A temporary structure may be exempt from foundations but it must be moved every 180 days per code or on a movable structure like a construction trailer for example.

  • Rental Property Investor · Portland, OR · Member since 2015 · 338 posts · 332 votes
    9y
    Originally posted by @Jay Hinrichs:

    friend of mine is doing this in portlandia.. look at the big developments I think in the netherlands or other parts of Europe they are away ahead of us

    Although my buddy is more of a philanthropist with this particular endeavor he even donated a fully functional one to the collage... although he hopes to some day turn that around and make them viable financing for himself as well.. but i bet he has spent 250k or more on this so far.. all for science / construction lab at the collage

     Is your friend Carl Coffman? I just read an article in the Tribune about his work with containers, and the multifamily he wants to build in St. Helens. 

    My architectural master's thesis was a mid-rise multifamily infill building, initially based on container construction. (I came to many of the same conclusions as the people above did during the design process, and switched to a 12-foot wide non-container module by the end.)

    Anywho, I've been wanting to call Carl up to offer my design or other help, because I might have something to offer, and could also learn about development in the process. Based on the articles I've seen, he seems like a good guy.

    (That multifamily project is here: http://iamdezigner.com.)

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Account Closed  YUP Carl is the one I was speaking about I can certainly give you a personal introduction

    he is very much into it.... I walked the St. Helens site with him. its nice.. not sure he has that locked up yet though.. but I have not talked to him since his Christmas party.

  • Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    9y

    In my experience with niches, you will have fewer buyers/tenants, but they're willing to pay more due to the novelty.

  • Investor · Portland, OR · Member since 2016 · 213 posts · 60 votes
    9y

    @William Savage

    I have built 7 building modular, 1 infill in NE portland 13dekum.com if you know what you are doing you can make it work and in this labor market, I don't know Denver all that well but I have friends that developed in the city and they are having labor issues as well. It can be very cost effective. 

    The person early in the post talked about LA and yes there a quite a few SFR modular builds in LA.

    The shipping container is going to add another component of complexity to the process, design, engineering. All that stuff can be worked out but the financing using shipping containers is the hardest part and I don't know of anyone able to finance shipping containers. Financing means traditional bank local or majors with the uptick in this type of construction maybe it has loosened. 

    They give it a personal property valuation and you and move them that is the hardest part. 

    Modular housing you need some scale 3,5,8 homes at a time. 

    Good luck. 

  • Mike NussPro Member
    Real Estate Entrepreneur · Portland, OR · Member since 2014 · 451 posts · 328 votes
    9y

    @Jay Hinrichs, everytime I read one of your posts I think "I need to take him out to lunch again...", but I never offer. I would love to do a shipping container project in Portlandia. 

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Mike Nuss  well Carl is the expert here.. he has been working with them for a few years now.

    he bought a couple of them and donated them to Clackamas community collage building department then provided funding to retro fit them.. he thinks they have a big future...

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