All Forum Posts by: David Edwards

@Branden Bestgen

Agree Brandon.

There are some individuals across threads that have it in their minds that modular = low quality, end of story.

I figure it comes from one of three places, either they confuse modular with manufactured/mobile home or the have had experience with a poor builder and likley an older build, or they are involved in the stick build construction process and take joy in denigrating competing processes.

Research is out there on how modular homes stand up better to extreme weather, are built in great quality due to control we manufacturing processes, and can (not always but can) come in cheaper due to efficiencies of scale and lower operating costs as well as shorter build times that lead to lower bank payments.

@Weng L.

1 story buildings are cheaper to build and maintain, part of this is due to lower insurance costs, building lower is easier and safer. However, 2 stories shine if you have little space, some people appreciate the 2 story design over the 1 story as well.

Here is something else to take into consideration, if you have room for a 1 story duplex you may have room for two 2 story duplexes allowing you to have a quad on the same lot, assuming you are zoned to allow it.

If you build out the first duplex you can prove out the rent and building costs and have much of the costs associated with the lot front loaded. Then you can either go to a bank to build out the second duplex or given that you have the first one built to act as a proof point you may be able to find a private money investor to help fund the second assuming you are tight on cash. Given that the lot and much of the driveway and some utilities are run for the first unit the second may actually be cheaper to build out than the first. Especially if you get a volume discount from your contractors.

@Pedro Rodrigues

To be clear, I am not saying that you can definitely beat the pricing your research has led you to this far, mearly providing information on a possible middle ground between a stick built quadplex and a prefab log cabin idea, something that is working for me given my personal goals, situation, and market.

The modular duplex might be something that makes more sense but unless you call around and do some research you won't really know but I would be interested to hear how you do.

Here is another link to a modular builders duplex selection. I don't know or endorse the builder, I just googled "modular duplex upstate NY"

https://impresamodular.com/browse-plans/?zip=12201&fwp_categories=multi-family

@Pedro Rodrigues

Take a look at modular duplex.

Good site on info, sort of a consumer reports for the modular industry. Point to note that they go into with quite some detail: modular is not the same as a mobile home.

Not covered so well is that just as the quality of contractors varies a lot so does the quality of a modular home builder. Some build crap, other build solid.

https://www.modulartoday.com/

Deeper in the site is a US map where you can click on NY to see the modular builders in the state, my home state FYI, I am from the Syracuse area.

https://www.modulartoday.com/modular-directory.html

I am building modular duplexes for buy and hold rental units in the Houston Texas area. I am getting upgraded units at about $100 cost per square foot.

Upgrades include luxury vinyl flooring, granite counters, many extra windows, sliding patio door, and a bit more. However I have a lower sloped roof which won't work for you in NY due to snow, you need a higher pitch so that will affect pricing.

You may also need a foundation other than slab which will affect pricing.

If you can pull it off with the available land try to stick to 1 story homes, you save on build costs when you keep things one story,but based on your land constraints you may need to go higher.

FYI, Based on current projections we expect to nearly BRRRR a 5 duplex (10 unit) new construction build getting much of our cash out on the refinance once stabilized due to the variance between the build cost and the expected (fingers crossed I didn't mess anything up) NOI and given the prevailing cP rates, so I can say I believe new builds can be viable.

I reviewed over a dozen modular companies to find 1 that had the capabilities I wanted, the price needed, and provided a great level of service. It is essential that you do due diligence here and call up some current and past customers. I found some that are absolutely horrendous at actually delivering on promises and the stories those people told, I feel for them.

@Joe Kelly

I guess another way of doing this is simply asking you which if these modular units on this site are low quality?

https://www.dwell.com/prefab-homes

@Joe Kelly

We can agree that there are variant quality of builders across the spectrum of housing types yes?

Can we agree that it is therefore possible even likely that you encountered a low quality builder?

Modular homes can cost 15-20% less than a comparable site built home with the exact same quality and finishes. In some cases you may find you can go modular at an even lower pricepoint

Why?

Well, shorter construction time. A modular can be built and placed in 1-3 months depending on the builder's queue and building complexity. This shorter construction time effects loan costs.

Modular manufacturers benefit from purchasing scale. You will often find that modulars use similar finishings across designs but even excepting custom finishings the savings due to bulk purchases of wood and drywall etc leads to lower costs.

Then you have labor. In some areas labor may be more expensive, it is possible to purchase a modular home that is built in an area with lower labor costs.

Also, permits. Permitting costs can be reduced for facilities with multiple buildings ongoing as they can negotiate discounts and use a third party to permit that is certified by the state.

Now, you do need to transport the home, but here distance is a factor, sure if you are going to ship 100's of miles this can add up but in general there is a service area for delivery at nominal cost.

Those designs over 1 story will cost more as you need to rent a crane but that is another area you can manage cost.

In the end I am pushing back against a blanket statement that "modulars cost as much and are built to poor quality" because frankly that is wrong. Are there bad quality builders? Yes sure, but there are great builders and it is irresponsible to make such a statement.

The modular duplexes I am going with provide higher quality insulation and finishes and structure than you find in local stick builds.

There have been studies showing modulars are sturdier than stick builds, and you can certainly achieve price efficiencies for the reasons stated above.

For an investor with a volume goal (such as my 100 units in 3 years goal) in an area with low or expensive inventory or high competition, or for investors in an area with a lot of ongoing construction leading to high labor costs, or somebody that wants to run a strategy that churns money fast then modulars are a great development platform.

@Joe Kelly

Joe, please look in to difference between modular and manufactured (mobile) housing.

Are you sure your area has modular and not manufactured housing?

@Lynnette E.

The company I am working with modularoftexas.com builds the foundation and will grade the land as needed.

What they put in is a hybrid Slab & Pier foundation. The slab is sloped towards a hole with a sump pump in case any water gets in however it won't have much get in as they put in the piers on top of the slab and then put in walls and seal the whole thing. This provides a great foundation with a crawlspace which makes it easy to effect plumbing or other repairs, string cable/internet lines, etc.

You can see how this works if you look at the pictures on their site.

The team is really great and connected me with a lender they have used. They have experience with investors as well and owner occupants.

The team is happy to make minor revisions to plans or even work with buyers to develop new plans within reason.

One thing to note is, in texas there does not appear to be a single modular company that does more than one story. From what I understand there is not enough interest to warrant the investment the builders would need to make in approvals.

Included in the pricing is builders insurance as well as inspections and permitting for the home itself. They also help as mentioned with any city politics red tape.

If anybody does reach out let them know you got their reference from me if you could, please and thank you!

@Nathan W.

I just took a look at your deal calculator.

Few things. You have the cost of the unit, but I am not seeing the land prep costs, is this built into your $195K? I am thinking things such as:

-Sewer & water lines to public or the installation of a well / septic system. Keep in mind if on well/septic there are likely acreage requirements

-Site Engineer, does your area require a site engineer to draw up plans, pull permits, determine right of ways et with fire/utilities. This can be pretty pricey, other than the land and home it is my biggest expense

-Permits, all kinds

-Electrical installation

-Any landscaping. In my areas if you cut down certain trees during your build you must replace them and new trees are $200+ for decent ones plus the cost of labor, that can add up. Then you have grass and anything else you want to do to pretty up the place a little such as privacy fences.. you will WANT privacy fencing for your duplex. And if no garage then you will want each unit to have a 8x8 or so shed for lawn mowers and such.. unless your land won't have lawns, I've seen that. Just decks or even NO yard at all, I wouldn't recommend that kind of design for you with a 3/2 your likely going to have family with kids.. they need outdoor space.

Also did you verify the area has good internet? renters at least in my areas won't want to pay decent rents if the internet is just not good.

Trash service becomes a thing you need to figure out on occasion. In my area up to 4 units will be serviced by the city but as soon as I go over 4 now I need a dumpster and a private trash company which is an added headache around site design / cost management /security

Costs/requirements for driveways parking. In my areas they require concrete or asphalt driveways & parking and each unit requires 2 parking spots, that is 4 spots per duplex, that's 800 square feet of land for parking per duplex.

All of this adds up, but it works out, least for us it has.

Also... I see you have 5% vacancy, I'd bump that up to 10% for your first one. Assume it takes a month or a little more to get in your first tenants if you are going to hunt for GOOD ones. I know it's a new build and so you expect little repair/capex costs but I'd do 10% there as well. You want to build up the reserves for when you do need that new roof/appliances down the line and you can't be sure you won't get a bad tenant in that trashes the place so better to start saving that.

Ohh another Tip on the duplex design that I got from a member.. in your design have the entry doors for each side as far from each other as you can. The point is to let each tenant haver this though in their mind that they live in THEIR house not a shared house. the less they have to see each other the better.

-Dave

Hi @Nathan W.,

Like you I've gotten into the mindset of modular homes and I am working on the development of a Duplex community consisting of 5 duplexes on 1 acre. All of these duplexes are modular.

Some things I have learned:

1) Modular homes absolutely appreciate the same as a standard stick especially if you highlight to your lender the performance improvements such as:

-Higher R value insulation. Our duplexes come with R20 ceilings and R14 exterior walls this provides a level of insulation much higher than is standard and results in lower energy costs and is an element that can be taken into consideration in appraisal

-Seek home improvements above stock plan to close the deal with your modular dealer. I am getting 6 extra windows at no cost including 2 transom windows in the bathrooms that really provide an higher quality feel and increase one of the main areas that tenants and potential buyers really care about (Bathrooms & Kitchens). You are better off getting those extra windows or a kitchen island improvement than you are with an improved appliance package as they provide a material impact to the home design.

-A higher pitch roof has a higher cost and should be considered if your duplex will be infill into an area where there are other homes with the roof pitch, but failing that we have not found that it has a real impact on appraisal (we are in an area of lower pitched homes however so take this with a grain of salt depending on your market) and a lower pitch roof means lower maintenance and capex costs. You have lower labor costs for repairs as contractors are not concerned about falling off and a lower pitch means less area which equates to fewer shingles and material costs.

-You can have decks built into the home plan. Ours has a 5 foot deck with roof built into the plan so that is easy peasy from your perspective and the presentation of the home lends to appraisal.

-I really like modular because we will be building several of these communities, that is the plan anyway, and it will be dead simple for future comps because we can literally point to the exact same home / community design.

-Repeated modular homes with the same floorplan also allows for operational simplicity. You will know exactly what is in each house, what the measurements are, etc. this means that if you have many you can have a standard depreciation schedule for them, it also means you can track statistics on repairs (a quote for a single home is completely applicable to any other property), how long appliances last, etc. This information can then assist you in future decisions and maybe help you predict failure of appliances so you can have a replacement geared up.

-The repeated design also means you can create extremely high quality marketing collateral at a cost you would not generally want if you were say BRRRR'ing various homes without a standard floorplan. and then you can use this material again and again. For example we'll be staging a unit and then doing high quality 3d floorplan pictures and creating a website on the units and other collateral because we know we can use those assets again and again for years and the costs will be worth it.

-A good dealer will help you push past any political red tape somebody that is confusing modular with mobile is throwing up.

Now, My duplexes come in at $88 a sqft base. We are upgrading with Luxury Vinyl Plank (LVP) flooring, this is an appraisal point and they last longer than the standard flooring, The extras windows (free), granite countertops because once again it helps with appraisal but also last a long time and they check a box for renters, and a few layout modifications that i believe add more value and let the units work better given the site layout. These addons get us to a $100'ish sqft price. Ohh the cost also includes foundation, delivery, button up. Also includes all appliances except clothes washer & dryer on both sides as well as air conditioners/furnace as you'd expect.  This cost per sqft works for me as the average low-mid new build in the area is at $150 sqft.

lastly.. Financing...

With modular I'll have fewer draw. My biggest draws are at the back end where the draw for the home itself is taken DAY OF DELIVERY. this means that I am not paying interest on a loan for the home itself until after the thing is finished. This is markedly different from a stick build where you'll have many draws throughout the process and you'll be paying interest on those draws as the build stretches to 6 months or so.. That said you'll want a lender that works on modulars, some seem to have a hard time with this.

Long story short.. Modulars Rock! Do feel free to connect with me for more discussions. I will be happy to share my journey and ongoing findings with you and also very happy to learn from you as well.

@Kevin Wasserman