Should You Invest in Modular Homes? Are They a Good Real Estate Investment?

A beautiful modular home in the City of Detroit.

Should You Invest in Modular Homes? Are They a Good Real Estate Investment?

Ever bought Ikea furniture that you assembled yourself?

Not only does self-assembly furniture perform and look great, but the selling point is the sheer ease of setting it up. Ikea revolutionized the industry by creating a way for customers to quickly assemble furniture with just one piece of equipment (a hexagonal metric tool).

A similar story can be said for modular homes. These are pre-fabricated (prefab), built-on-site homes that are just as good as traditional, site-built homes. But do they make suitable real estate investments? Or are they more similar to mobile homes that get a bad reputation in the market?

Let’s investigate the pros and cons of investing in this type homes to see if it’s good real estate.

What are Modular Homes?

Modular homes are mass, factory-prepared homes that are assembled on-site. They’re designed to be single homes or for “mix and match” construction, prepared to near completion before getting transported and crane-assembled on empty land.

In the past, they were cheap home-building methods that were stigmatized for their low quality. But modern modular homes can be just as luxurious and beautiful as traditional, site-built homes and maybe even better.

A modular home performs just like any conventional home—you can get the same cash flow and equity gains for the short and long term. In fact, in 2020 alone, among 912,000 single-family homes completed nationwide, 28,000 were built using pre-cut construction methods. The market share may seem small, but it continue to make a comeback, inching their way to the pre-2007 era:

A graph that shows the number of modular homes since 1992.
Source: National Association of Home Builders Discusses Economics and Housing Policy

Pros and Cons

Modular homes are increasingly sensible in today’s economy—it’s not a trend or a flaw. Here’s a chart listing the advantages and disadvantages of investing in a modular home:

The greatest selling point of modular homes is their energy efficiency. But while the benefits are considerable, it’s important to understand the challenges that come with investing in modular to make the most of their benefits and lower your utility bills.

The Verdict: Modular Homes Make Good Investments

Just like Ikea furniture, modular homes are easy to assemble, often cheaper than traditional homes, and provide a good level of quality. As long as you know the pros and cons of investing in them, it can be an excellent way to expand your rental property portfolio without breaking the bank (or waiting too long!).

If you need more help, get in touch with our team of expert property managers today. We’re locals in the Metro Detroit area and can help you scout for the best real estate investment opportunities available.

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