Modular Homes: The Sustainable Future for Profitable ...

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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. 

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When you think of traditional modular construction, most people imagine cheap, single- or two-story buildings sat in the playground at school, a post-war prefab, or an out-of-town McDonalds store. But modular construction methodology has come a long way. These days, modular construction involves fabricating a building&#;s core structural components &#; referred to as modules &#; in an off-site factory or facility, then transporting them to the construction site to later stack and assemble on a foundation.

This has transformed construction possibilities for mid- to high-rise buildings. One of modular construction&#;s biggest benefits is that it allows for the foundation work and the construction of the modules to occur at the same time. Off-site work includes construction of some or all or portions of a building and may include some or all finishes and even furniture, while on-site work creates the structural foundation and services/stairwell core. The modules are then delivered and stacked to create the finished building.

Recent notable examples of modular high-rise construction include the tallest prefab modular tower complex in Singapore, Clement Canopy, where high-rise construction and development will be ongoing due to space restrictions and time considerations.

With the urgent need for housing here in the UK, modular construction offers the possibility of a fast solution&#;but delays in the planning process often negate any time savings.

Why Modular Construction?

With increasing property and material costs, as well as ongoing labor shortages in the construction industry, technological advances in mid- and high-rise modular construction are being looked to as the future of the industry. When planned correctly, the benefits are substantial, starting with time savings between 25%-50% due to the concurrent on-site and off-site construction work as well as potential cost savings of up to 25% of a typical construction budget. The modular construction that takes place in off-site factories takes advantage of a controlled environment, where inclement weather is less of a factor and modules can be constructed to exact specifications. There is often improved quality of work, less wasted material, and a higher oversight of worker safety. Developers, Architects and Engineers are continually collaborating to turn modular construction into a process that is a model of efficiency and quality.

Modular Construction Challenges

With any new technological implementation comes logistical hurdles and challenges, and modular construction is no different. Once the developer determines that a modular system will work for the type of project planned, finding the right personnel who specialise in modular construction is most important since they will need to understand the nuances, necessary coordination, and technical specifications for carrying out these projects. A review of the shipping, delivery, and staging of modules will influence the design so that delays can be avoided at time of delivery. Module size limits may occur due to either transportation or access constraints. When delivered from overseas, modules can only be as large as shipping containers. The project&#;s site size and location must allow space for a crane, truck delivery and possibly module storage. The building design, method of delivery, and assembly must be coordinated at the earliest stages of project planning.

For high-rise structures and complex mixed-use developments, the level of technical intricacy for execution can be exponential. Small mistakes can be compounded. Being off by even the tiniest fraction on any module component can compound floor by floor and result in serious structural flaws. While more and more construction professionals are working on mid-rise modular projects and projects in concentrated urban areas, there are not very many teams that have experience working on high-rise projects. When hiring contractors, engineers, and vendors, use an established, experienced team with direct portfolio experience related to your type of project. Secondly, because the building core and modules are being constructed at the same time in different locations a very high level of coordination is necessary between the designers and manufacturer; architectural, structural and mechanical plans must be fully coordinated prior to the start of construction.

The facility used to construct modules and building components must also be well-suited for seamless production output. Problems at the modular construction facility can stall the project, while delays on-site may require completed modules to be stored at the facility or elsewhere. There may also be requirements for on-site inspections from the local authority/building control that should be planned for during the design phase.

Finally, since modular construction has so many upfront costs, with a majority of budget funding spent before the modules are delivered, the lending institution must be on-board with the budget and the allocation of funds for the simultaneous construction of the foundation and floor modules.

Construction Risk Management Considerations

Ultimately, modular construction is a &#;Big Risk, Big Reward&#; investment. While there are more contingencies and risk factors to weigh in project planning, the cost savings and convenience can help expand project options for developers and investors. Optimising a favorable outcome comes down to building an experienced and knowledgeable Construction Risk Management team, who can evaluate all aspects of project budgeting, execution, and personnel prior to the loan disbursement and throughout the course of the project.

During the underwriting process and before loan disbursement a Document and Cost Review (DCR) and Contractor Evaluation (CE) are critical steps to evaluating the viability of the project. A Document and Cost Review is a comprehensive evaluation of all aspects of project planning including (but not limited to) the overall scope of the proposed work, conformance of the scope of work with building regulation and planning approvals, completeness and adequacy of plans, contracts and other construction documents, adequacy of the overall budget, distribution of costs included in the line item construction budget, and the feasibility of the proposed construction schedule. This includes a review of the approval process(es) of local authorities and any outlines of the inspection process.

Contractor Evaluations will aid in verifying the experience, expertise, work load, and prior history not just of the General Contractor and their subcontractors, but also the project architect, designers, engineers, manufacturers, and any other stakeholder involved in any aspect of the project. As discussed, the unique technical challenges and requirements of a modular high-rise project necessitate a sophisticated team with a solid plan.

After the loan has been issued and as construction of the building foundations and modular units proceeds, regular budget and progress evaluations keep projects on track. Construction Progress Monitoring (CPM) includes on-site and off-site facility inspections. This is critical for parts of infrastructure, such as the elevator/service core, that are built on-site, and ensuring that project specifications match up to modular units and that milestones for project completion are being met. Funds Control and Disbursement (FC/FD) is an essential tool, as up to half of all modular costs are spent up front. Budgeting and monitoring funding draws for the remainder of the construction avoids costly delays and mismanagement of project funds.

Modular construction is an exciting industry evolution that, if planned and executed properly, can increase efficiency, lower cost, and provide quality layout and material options for a variety of building types. For residential and hotel developers, as well as portfolio investors, prefab modular technology provides economies of scale that can revolutionize contemporary housing and commercial building needs.

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