Taking the meaning of home delivery to a completely new level…
What if you could literally design the house of your dreams from behind a computer? You draw out the plans, design the interior and pick out the color scheme and after everything is as you always wanted it to be – you press order and 2-3 months down the line you see your dream home coming down your driveway like an Amazon delivery.
Sounds too good or too weird to be true? Well my dear reader, allow me to introduce you to the world of prefabricated homes.
What Are Prefabricated Homes?
The process of prefabrication in home construction refers to housing units that are prebuilt to some degree on an off-site home manufacturing plant to be later delivered to you (your site where you want your home).
The homes are conveniently designed, manufactured, packaged, shipped and assembled where you want the to be for living.
Prefabricated homes have gained massive popularity in the world of tiny home development but have been used to develop more traditional homes.
“Sears,” in as early as the 1900s was already developing prefabricated “mail-order” homes but since then, the concept has been greatly modernized to appeal to the housing desires and needs of today.
The 3 Types Of Prefabricated Homes:
- Component Homes.
- Modular Homes.
- Manufactured homes.
1. Component Homes.
Component homes require the most on-site construction for the housing unit; the properties are built through the connection of interlocking panels that act as the walls and partitions of the home.
From the manufacturing plant, only the different panels and connection tools are built and transported for assembly on site.
The home has a fixed design that is only habitable to the occupant of the property once it is completely constructed.
2. Modular Homes.
Modular homes involve the greater effort of offsite manufacturing than Component Homes. For modular constructed prefabricated homes, the home units are built in complete sections (bedrooms, lounges, kitchens, bathrooms) which are then transported and connected onsite.
Modular homes allow for convenient and greater expansion of the property as modules can be repeatedly stacked, placed side by side, or end to end.
Modular homes are the closest form of prefabricated homes to traditional homes and are often treated as traditional homes in most regards; this stems from the fact that most modular homes are built with similar materials used in the construction of traditional homes.
This also means that modular homes are more difficult to move from plant to site and from site to different site but their modular designs also allow for greater flexibility to renovate the unit.
3. Manufactured homes.
Manufactured homes are completely designed and constructed to completion offsite and then the entire housing unit is transported from plant to site.
Though not entirely classified or restricted in size; manufactured homes are almost entirely limited to tiny homes (300 square feet to 600 square feet range). This often (but not always) restricts manufactured homes to be the least convenient to move and the most permanent of all prefabricated homes.
Manufactured homes, though being the most difficult to move; are also the only prefabricated homes that are completely fixed to being on wheels as they are built into the property.
Considerations For Prefabricated Homes.
The following are general considerations for component, modular and manufactured prefabs.
By far, the most important consideration of investing in any form of prefabricated home (in my opinion) is the specific state ruling on whether or not they are legal in your state and exactly how they are regulated (to which standards they must uphold).
In general, because all the mentioned forms of prefabricated homes in this blog are a new and rare form of real-estate; they are prone to being illegal or in a foggy zone of legality in each state.
Modular and component prefabricated homes are generally easier to identify under the law because by the end of their construction, they are placed on a foundation like traditional real-estate and they have experienced a growth in popularity due to the rise of minimalism and tiny living.
Manufactured homes, on the other hand, are far rarer and prone to legal regulatory hurdles.
Before jumping into any prefabrication investment, it is important to understand how the home will be seen in the eyes of the law.
2. Cost and Financing.
If the form of prefabricated home you want to invest in is in-fact legal, the next step is understanding just how you pay the property.
Generally, component and modular prefabricated homes can be financed through a mortgage like traditional homes because they are generally (where legal); as a form of real-estate. This is not the case with manufactured homes; which are seen as personal property. (I’ll discuss this further below).
manufactured homes can in some states, have additional periodic road-related charges because they are fixed on wheels like a car.
Aside from that classification, if you intend to finance a prefabricated home through a 3rd party (mortgage brokers or banks); you will likely have to pay higher interest rates for the property than if you were to finance a traditional home.
This stems from the fact that prefabricated homes are less understood by most money lenders and thus riskier as well as because most prefabricated homes will be cheaper and require significantly fewer loans than for traditional homes.
Mortgage brokers may not finance prefab home investments if the loan amount is too low and thus individuals would have to rely on higher interest bank loans to finance the property. Unless you decide to self-finance the whole investment.
3. Construction and Delivery.
Now you know if it’s legal and you know how you’re going to pay for it – the next step is knowing how you’re going to get it.
The shared theme with all 3 prefab homes is that unlike traditional homes, they involve the use of an offsite manufacturer who assembles or provides a portion of the end structure of the home. Instead of builders building the walls on-site, the walls come premade and then are just assembled on the home.
Differences arise when it comes to what degree of involvement this manufacturing plant plays in providing the end product of the home.
For Component homes;
The manufacturing plant constructs partial or complete panels of the home; that are delivered on-site to be assembled into a home. Panels in this concept are the walls of the home.
A partial panel is a wall area that is supposed to have another feature that is not immediately provided by the manufacturing company such as a wall that is supposed to have a door or is framed for a window but the door and actual windows are not provided by the manufacturer.
Complete panels are installed finished in that the manufacturer delivers and assembles the entire home to completion; doors, windows, cupboards – essentially everything that is meant to be fixed on the property is delivered in pieces from the manufacturing plant and assembled on site.
Concerning the delivery of the end product (the home); component homes are the most labor-intensive and time-consuming form of prefab homes.
For Modular homes;
The manufacturing plant constructs and delivers complete interlocking rooms to the site to be joined together on site.
Modular home packages will usually comprise of the delivery of a bedroom, lounge, kitchen, and bathroom rooms that are created to completion at the manufacturing plant delivered on-site and placed and connected on the foundation at the property site.
Modular homes take more effort to transport than component homes because larger complete rooms are being delivered instead of more convenient smaller panels.
They will often require less time to assemble but more machinery in the form cranes to place the individual spaces where they will interlock.
For Manufactured Homes;
The manufacturing plant constructs a fully assembled home, less (but sometimes including) full furnishings, and the home is built on wheels to be towed and delivered; ready to use on-site.
Manufactured homes require no further assembly or labor after leaving the lot of the manufacturing plant because the home is delivered complete and is not attached to any foundation on site.
Though manufactured homes are permanently mobile (on wheels); they are also the most inconvenient to move because of their size, weight, and requirements (large vehicles and wide roads).
4. Value and Longevity.
One of the most important considerations to both individuals looking to buy a prefabricated home to live in personally or to invest in through flipping and renting out is that when it comes to value and longevity – not all prefabricated homes are made equal.
An important consideration to analyze when you invest in a prefabricated home is to realize how it is classified in your state; specifically, whether the home will be classified as real estate or personal property.
Why is this important?
Real-Estate; the classification of real-estate, though not guaranteed provides a general assurance that the home will appreciate over time.
Most forms of real estate – houses, apartments, land, commercial properties, etc; will appreciate over time.
Personal property; the classification of personal property, though not guaranteed provides a general assurance that the home will depreciate over time.
Consider how much value your car, TV, phone, etc; lose value over time.
*states classify and as a whole, treat prefabricated homes differently and people will value them differently as well. The common differentiating factor is whether or not the home is placed over a foundation when it gets on site.
For Component Homes – usually real-estate;
Concerning value and longevity, component prefabricated homes are have advanced the most concerning value retention and longevity.
Previously, where component homes were associated with flimsy panel material that was not intended to last for decades; not the properties are using high-end materials that are built to naturally last as traditional homes.
The fact that component homes will typically have to be attached to a permanent foundation on the property; classifies the home as real estate and helps bolster its value.
The reasoning for improved value and longevity of component homes is because component homes are undoubtedly the most popular form of prefabricated homes and have gained momentum in through the rising trend of tiny homes (most tiny homes are prefabricated).
This rise in demand and popularity has led to multiple companies investing and innovating the component prefabricated home market to make modern and luxurious homes that can match and overcome the value of traditional homes.
For Modular Homes – usually real estate;
Modular homes, unlike manufactured and component homes; have an open-ended flexible relationship with value.
With longevity, modular homes are often built through the use of the same materials that are used to build traditional homes and are built over a solid (potentially expanding) foundation; as such, they are expected to be built to last.
When it comes to value; modular homes are flexible in that the homes can; unlike the other forms of prefabricated homes, conveniently and continually expand to house more facilities and amenities that can continually increase the value of the property significantly over time.
In theory, a modular home can start at tiny home size, develop to traditional home size, and potentially reach mansion size (in theory).
For Manufactured Homes – usually personal property;
Manufactured homes though being the most convenient prefabrication homes in that that they are delivered ready-to-live-in and not in pieces that need to be assembled; are also the least convenient to move as well as generally being the least valuable and likely to last.
why is this? Concerning value, manufactured homes are automatically at a disadvantage in that they are permanently suspended on wheels and never held down by a foundation. This will usually result in manufactured homes being classified as personal property and not real estate.
With that in mind, they are more likely to automatically depreciate as soon they leave the lot as well as be prone to more damages over time that the other forms of prefab homes.
Not being on a foundation also puts the homes’ integrity and stability at risk which influences the longevity of the property and thus its value.
Manufactured homes are the least desired form of prefabricated homes.
Self-sufficiency and Interaction to the grid.
The final consideration for prefab homes is the delivery of (typically) essential 3rd party necessities for the home such as water, electricity, and access to a septic system.
Component and modular homes are more viable to being connected to the grid because they are planted on a stable foundation that makes it easier and legal to attach state-provided electrical wires, water lines, and on property septic tanks.
Manufactured homes, on the other hand, are typically entirely self-sufficient through solar, attached septic tanks and water storage facilities.
As a whole, all prefab homes are more viable than traditional homes to be self-sufficient and off the grid. This is because the smaller size makes it more viable to run the home on solar, smaller water tanks and smaller septic tanks that can feasibly be connected to the home.
Which Prefab Home Is The Best?
In my personal opinion, when you’ve gone through everything I’ve mentioned you should consider above and you’re deciding on which type of prefabricated home you should get; the option is only between Component and Modular prefabricated homes.
Why I don’t recommend Manufactured prefabricated homes.
personally, manufactured prefabs are just generally less convenient, less reliable, and less valuable than not only traditional homes but all other forms of prefabs.
Let me explain the points.
1. Less convenient.
Don’t let the fact that manufactured prefabs are the only form of prefab homes that forever live on wheels fool you. The requirements necessary to move this from lot to site can be extensive.
Large vehicles to tow them home, wide enough roads to accommodate the home, and the potential legal permits needed to have the property on the road.
Component and Modular homes are far home convenient to move from manufacturing lot to site and from site to other sites.
2. Less reliable.
Of all the forms of prefabs, manufactured homes are the most prone to damage and damage over time simply because they are not stabilized on top of a foundation and are thus more susceptible to the elements and over time deformations.
3. Less valuable.
Given the lowered reliability concerning property damage, the reduced desirability of the concept given its inconvenience and the fact that the homes are not considered real-estate; all come together to make the manufactured homes less valuable and less likely to appreciate over time.
Between Component and Modular homes.
I wouldn’t necessarily state that there is a clear winner between component and modular homes but I would personally say that both prefabs are viable to anyone who would want a prefab, after all, I’ve stated above but between the 2 they are preferable to different people wanting different things.
Who are Component Homes for?
Component prefabricated homes are the prefab of choice for straight forward modern and luxury tiny home living. Prefabs as a whole have gained popularity through the tiny home market but of all the forms of prefabs; component homes particularly suite tiny home living.
Investors and homeowners who are dedicated to tiny home living are more attuned to component homes. If you want to learn more about my researched take on tiny home living, I wrote out a blog post on it (HERE).
Who are Modular Homes for?
Modular homes are in general, more flexible over time than component homes and would be the option of choice for individuals to want a customizable home that is functional now and can be conveniently expanded later.
This is an especially viable option for individuals who may want to experiment with tiny living for some time and will want or need more space down the line (family expansion).
Prefabricated Homes vs Traditional homes Advantages and Disadvantages.
Now that I’ve evaluated and compared prefabricated homes to one another, I think the final course of action is to compare prefabricated homes to their traditional built on-site cousins.
Prefabs vs Traditional Homes – Table
Advantages of prefab homes over traditional homes.
Advantages of traditional homes over prefab homes.
|Faster to construct.||Accommodation and storage.|
|Mobile (partially).||Easier to finance.|
|Cheaper.||Easier to zone.|
Advantages of prefab homes over traditional homes.
1. Faster to construct.
Because prefabricated homes are essentially manufactured through automated means like cars and by the time an investor buys the home they will only have to wait for the assembly period; they are significantly faster to be ready to live in than traditional homes.
Where traditional homes can take years to complete. prefabricated home; depending on the automation procedures; can be ready to live, in under 3 months.
2. Mobile (technically).
Calling prefabricated homes “mobile” is technically true and some prefabricated homes especially tiny homes and tiny homes on wheels are mobile; the majority of prefabricated homes are designed to last.
When you consider modular and larger component homes; they can be disassembled to relocate but it is often more work than its worth – but it is possible.
Modern-day prefabricated homes can be designed so modernly to be priced similar to more traditional homes, but the entry-level cost of a legally habitable home is far cheaper in prefabricated than in traditional homes.
Because most prefabricated homes are designed offsite and with the thought of mobility in mind, it is common to have prefab homes designed to optimize energy and self-sufficiency through solar, heating, and energy usage and designs that make the most out of natural lighting.
Traditional homes, when not newly developed are often trapped in the foundations of the past that can include multiple inefficient designs and utilities that were put in the past and are expensive to update now.
Advantages of traditional homes over prefab homes.
1. Accommodation and storage.
As a general rule, prefab homes are designed to cap at sizes much smaller than most traditional homes. They can get larger but in general, most homes do not reach the sizes of standard homes.
This leads to prefabricated homes being inconveniently small when it comes to accommodating belongings and people.
Modular homes can expand their facilities over time but the module rooms are often naturally scaled-down options to what you would find in traditional homes.
2. Easier to finance.
Traditional homes have their own dedicated lending companies to assist homeowners in the acquisition and construction of the property through mortgage banks and mortgage loans.
These will offer individuals lending options at significantly lower interest rates than what would be on offer for prefab houses; if they are even approved of funding by mortgage lenders.
Prefabs are cheaper, but most of that money will have to come out of your pocket or at the cost of higher interest rates.
3. Easier to zone.
Whether it is legal to construct a prefabricated home is the first and most important hurdle that potential investors will have to get over when planning to acquire one.
The next hurdle which could potentially be as important as the first is where exactly can you and can’t you build a prefabricated home which can often be as restrictive and confusing as understanding the laws regulating them.
In the same way, homes are zoned to only be built in specific areas, prefabricated homes will also be zoned. The only difference is that all states have clear zoning laws for traditional homes and far less have the same laws for prefabricated homes.
The location you wish to construct your prefab could be a no go zone. This factor is more prevalent for tiny and mobile homes variations of prefabs but will generally affect all prefabs if they need to connect in some way or form; to the state grid for electricity, water, internet, and sewage.
4. Long-term value.
A diminishing yet currently apparent disadvantage of prefabricated homes is their stigma over quality, stability, and value over time.
As it stands, prefabricated homes are making strides in guaranteeing and proving their value and quality but it would be rare to find a prefab house of similar design and structure not being valued lower than a traditional home simply because it was prefabricated.
Conclusion – Are Prefabricated Homes The Future?
Prefabricated homes, especially component and modular homes have only been seeing growth, innovation, and investment (dedicated businesses) that will only lead to more modernized and desirable homes that will genuinely sell and retain wealth over time.
Questions such as “how long do prefabricated homes last?” are becoming less necessary as new prefabricated homes are essentially built to last forever.
With that all in mind, I expect prefabricated homes to be a part of the future along with traditional homes. I do not expect them to necessarily replace traditional homes but to become a very viable option for accommodation for a growing population of people.