As housing affordability becomes a growing concern for millions of Americans, some investors are turning to prefab homes as a solution. Investors trying to break into this niche may be confused at the difference between modular versus manufactured homes and which makes the better long-term real estate investment. This article will explain the difference between these two types of pre-built homes, pros and cons of each, and how to determine which property type may work best for you.
What is a modular home?
A modular home is prefabricated housing built in a factory and then assembled at the homesite. Because of the construction methods and standards of building, it's generally of a higher quality than a mobile home. Modular home building materials are like that of any other standard construction, making them easy to repair and very durable.
This style of home can be built on- and off-frame, as well as with or without a steel chassis. By building it without the steel frame, you can attach it to the permanent foundation, making it look just like other standard-built homes.
A modular home is built to meet local building code and meets or even exceeds the standards. Thus, you can put a modular home on any residential lot, and the city will view it as equivalent to a stick-built home, meaning there are no special zoning requirements. This also works in favor of the homebuyer, because you can obtain a normal construction loan for it and carry standard homeowners insurance.
The building material and construction for modular housing can be comparable to a traditional home if a quality manufacturer is selected. The layout is a lot more flexible for a modular home, and you would never know the difference once in place. If elected for in the design process, these homes can also have superb energy efficiency and are incredibly wind-resistant, sometimes even better than a traditional site-built home.
What is a manufactured home?
A manufactured home is the industry term for what many people now commonly refer to as a mobile home. This is another form of manufactured housing in which the manufactured home is built at a factory and transported to the homesite on a permanent chassis with a trailer hitch.
The homes only come in single- or double-wide floor plans for transportation purposes. Upon arrival, they are connected together. The home can optionally be placed on a permanent foundation and is elevated by the trailer underneath, which essentially acts as a crawl space.
Manufactured housing follows Housing and Urban Development (HUD) code for its construction standards rather than local codes, meaning builders may require additional work to meet stringent local code standards and make obtaining loans and property insurance more expensive or difficult. For this reason, many urban development committees will restrict today’s manufactured homes to specific areas for ease of zoning.
Although modern manufactured homes have come a long way in building material and standards, they typically have a distinctive look that doesn't allow for much customization, like with a modular home or stick-built home, and don't typically last as long. Features like a porch, garage, or other things would have to be built on after the fact.
A manufactured house also utilizes nonstandard lumber, rafters, studs, and joists. This isn't an issue initially but can make repairs down the line a bit more troublesome.