Investing in flat land and prefab homes?

Question

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..

Thanks for your feedback

Adam Windham · Answer

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.

Adam Windham · Answer

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.

Carlos Ptriawan · Answer

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.

Sol Naim · Answer

I wouldn’t be getting any financing or lending. I would be paying all cash

Scott E. · Answer

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.

Sol Naim · Answer

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.

Investing in flat land and prefab homes?

Most Popular Reply