Hey BP community! Curious to hear your thoughts on investing in plots of flat land and using prefab homes to build on rather than BRRRRing. Seems like it can be a higher ROI as long as the land is zones properly and connects to sewer, electric etc..
Lender · San Diego | Phoenix | Miami · Member since 2019 · 39 posts · 65 votes
2y
Pre-Fab homes should not be any more difficult to finance than regular stick-built provided it meets the same requirements. This is not to be confused with "manufactured/mobile homes", those are a different animal. The thing you will need to look out for with pre-fab is the draw/payment schedule from your pre-fab company. Typically they require an initial deposit and then subsequent payments along the way, and most construction loans only disburse when the items are on-site/installed. So you could end up with a cash flow issue, where you need to advance funds to keep the pre-fab process going before you can submit a draw request to get reimbursed from the construction loan.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
2y
Great idea in concept but you nailed it... biggest challenges are going to be zoning and utilities. Also financing. It'll be more challenging to find a lender to finance this type of a development deal.
I've looked into it a good bit and I dream of one day building a prefab home in the forest as a vacation home / possible short term rental. But I don't think it's a viable business plan.
Btw once you start pricing these things out you'll realize that a lot of the time, you'll pay more per square foot for a prefab home compared to a site built home.
This would be an all cash buy with my own capital. But I hear you on time. Still think it could be cheaper than an extensive rehab and the time it takes to find a good BRRRR deal may offset the time.
Lender · San Diego | Phoenix | Miami · Member since 2019 · 39 posts · 65 votes
2y
Pre-Fab homes should not be any more difficult to finance than regular stick-built provided it meets the same requirements. This is not to be confused with "manufactured/mobile homes", those are a different animal. The thing you will need to look out for with pre-fab is the draw/payment schedule from your pre-fab company. Typically they require an initial deposit and then subsequent payments along the way, and most construction loans only disburse when the items are on-site/installed. So you could end up with a cash flow issue, where you need to advance funds to keep the pre-fab process going before you can submit a draw request to get reimbursed from the construction loan.
Lender · San Diego | Phoenix | Miami · Member since 2019 · 39 posts · 65 votes
2y
Pre-Fab homes should not be any more difficult to finance than regular stick-built provided it meets the same requirements. This is not to be confused with "manufactured/mobile homes", those are a different animal. The thing you will need to look out for with pre-fab is the draw/payment schedule from your pre-fab company. Typically they require an initial deposit and then subsequent payments along the way, and most construction loans only disburse when the items are on-site/installed. So you could end up with a cash flow issue, where you need to advance funds to keep the pre-fab process going before you can submit a draw request to get reimbursed from the construction loan.
i am thinking of doing this and on the discussion with the builder since they said they can take care permit. i may think to build one in industrial zone/MF with large lot within the city. On paper it seems straightforward.
I would then just use solar and fence it out. It seems it could breakeven within 2-3 years with cash.
Let me know how you progress ;-) fun times ...
my exit strategy if thing doesnt work, they can take over the unit LOL and I would lose money in improvement/etc.
Great idea in concept but you nailed it... biggest challenges are going to be zoning and utilities. Also financing. It'll be more challenging to find a lender to finance this type of a development deal.
I've looked into it a good bit and I dream of one day building a prefab home in the forest as a vacation home / possible short term rental. But I don't think it's a viable business plan.
Btw once you start pricing these things out you'll realize that a lot of the time, you'll pay more per square foot for a prefab home compared to a site built home.
There's folk doing this in Santa Cruz Mountain, quite beautiful. But whether it's profitable or not I don't know.