Modular Homes: The Sustainable Future for Profitable Investments

Thinking about investing in modular homes? Learn how you can save on costs and time with modular home construction.

Last Updated
May 9, 2023
Modular Homes: The Sustainable Future for Profitable Investments

This guest post was contributed by NextModular.

Sustainable real estate investing has piqued your interest. You may have heard that it can generate a high return while being good for the environment at the same time. And it will also align with government regulations and incentives. Although this sounds too good to be true, it’s real — investments have evolved.

Eco-friendly or “green” investments are not a fad — they are the way of the future. But are you wondering if sustainable investments will take long to fetch returns? Here’s one way to make a sustainable investment and reap ROI (and additional benefits) quickly: invest in modular homes.

Modular homes vs. mobile homes: Key differences

First let’s define what modular homes are. Modular homes, also known as prefabricated homes, are built in parts in controlled indoor environments in factory-like settings and need to adhere to strict state and federal building codes. 

During construction, modular homes undergo rigorous inspections. In fact, these homes undergo even more stringent quality control inspections than traditional stick-built homes. The parts, or modules, are then transported to the building site and assembled there on a permanent foundation. 

While the construction process has shorter timelines and is better for the environment, it does not mean a compromise on the aesthetics and features. Modular houses look just like conventional houses (or even better!). 

In the case of modular homes, you can consult the manufacturer for financing options. The loan application process is similar to the one for traditional homes, although modular homes are more affordable. 

Modular homes differ significantly from mobile homes. Mobile homes, also known as manufactured homes or trailer homes, are built off-site in a factory and then assembled on a permanent chassis rather than a permanent foundation. Financing and insuring mobile homes is generally more complicated than modular or stick-built (aka traditional on-site construction) homes. And, importantly for real estate investors, mobile homes that are considered personal property actually depreciate in value over time, similar to the way cars lose their value over time. 

A cheaper way to invest with faster returns

Once assembled, modular homes look just like stick-built traditional homes. While a modular home is being built in the factory, its foundation can be made ready at the building site. This makes the whole construction process relatively quick compared to traditional houses. As soon as it is assembled, a modular home is ready for occupancy. This means that your property is ready for being rented out immediately. Your investment is ready to bear returns right away, and will appreciate in value just like a traditional home. 

Did you know that modular homes can also save you around 20% on construction as compared to conventional homes? Tax credits are also possible due to green methods of construction.

Sustainable future of modular construction

The construction of modular homes is more sustainable than traditional construction in the following ways:

  • Modular homes have shorter construction timelines, as there are no production delays due to bad weather conditions and other factors. Longer construction means extended machine work with corresponding air pollution and additional release of biohazardous waste. In the case of modular homes, shorter construction time means fewer carbon emissions, less water use, and a minimized environmental impact.
  • During construction, modular homes require fewer natural resources as factory-built settings provide more efficiencies. The construction waste is also minimized, as modular homes are planned to the last detail and raw material orders are very precise. As much as possible, non-toxic and low-VOC materials are utilized for modular construction.
  • Modular home construction also facilitates the recycling of scrap materials. Even at the end of the life of a modular home, it is easier to disassemble and clear the site as compared to a traditional stick-built house.
  • Modular homes are constructed with the latest technology and greener features, which results in increased energy efficiency. This helps tenants save money on utilities, and also attracts tenants who prefer a sustainable way of living.

Why is modular housing ideal for real estate investing?

In addition to shorter construction timelines, the following benefits offered by the modular housing industry make it ideal for build-to-rent real estate investors. 

  1. This industry offers a high level of standardization and quality, as most of these houses are designed using AutoCAD construction software. It makes the most of modern-day fabrication and technology. You can choose from a wide variety of modular home designs, with customizations to make them suitable for your rental needs.
  2. Even after the initial assembly, customization and modifications to a modular property are still possible. For instance, owners can add a room or two to the house quickly and easily. That means if landlords want to retain their current tenants, they can scale up the modular home as the renters’ needs change. Or when looking for new tenants, landlords can increase the square footage of their modular home in order to charge a higher rent price.
  3. Modular houses have improved structural integrity because the construction takes place indoors so the materials are protected from external environmental factors. Modular houses offer stability and resilience that is at par with traditional houses.
  4. The construction cost is lower than stick-built houses, as the modular housing industry is in a better position to take advantage of economies of scale with the bulk sourcing of input materials. Modular homes also offer the benefit of reduced labor costs. Together, these cost savings trickle down and lower the purchase price of modular homes compared to stick-built.
    The modular housing industry accelerates the speed of the market, due to its construction techniques.
  5. Although construction costs are less in the modular home industry, the houses are appraised later, just like stick-built houses. Their value rises with time, just like traditionally constructed houses. 

Invest in a rental property for approximately half the price

Modular homes are constructed by professionals with expertise and experience in the industry. This translates to a reduction in production costs and excellent quality of the final results.

The price of a modular home depends on the number of rooms, the plan, the features, and the customization requirements. HomeAdvisor reports that an 1,800-square-foot modular home typically costs between $180,000 and $360,000, or $270,000 on average. By comparison, the cost to build a custom home runs from $350,000 to more than $1 million.

Consider modular homes to maximize your real estate portfolio

Modular homes offer a unique investment opportunity with additional benefits, even though the price is approximately half the cost of traditional stick-built construction. 

Investing in a modular home means building a new rental property at a lower cost, while still appreciating in value to earn a profit at the time of resale. It is possible to move into a new modular home within two to six months, which means you can start collecting rent faster. In case you want to speed things up even more, you can suggest tenants hire a professional New York mover to guarantee a safer and speedier move and, as a result, quicker rent. 

If you are interested in making sustainable and profitable real estate investments, then it is time to consider modular homes as a worthwhile option. 

Important Note: This post is for informational and educational purposes only. It should not be taken as legal, accounting, or tax advice, nor should it be used as a substitute for such services. Always consult your own legal, accounting, or tax counsel before taking any action based on this information.

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