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Very Costly Investment Mistakes of Modular Homes - YouTube
Channel: Kristina Smallhorn
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hello everybody as the supply of homes
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have shrunk all over the united states
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investors are looking for more
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alternative ways to invest in properties
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and some people have actually even
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turned to buying modular homes there's
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been some very costly mistakes that some
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investors have made with modular homes
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and today i'm going to be sharing them
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with you it could save you a lot of
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money if you're thinking about doing
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this as an investment i know many of you
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subscribers have been looking at the
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boxable homes and are using that as an
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investment property and we're going to
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be talking a little bit further about
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that so let's just go ahead and jump
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into it when it comes to the idea of a
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modular home people get it kind of
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twisted between a modular and a
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manufactured home a manufactured home is
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a home that's like basically in two
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pieces or one piece so they have single
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wide double wide triple wide but we're
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talking about modular homes which are
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homes that are built in the factory in a
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manufacturing plant but they're put
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together on site at the location that
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you're planning on putting the house on
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these homes can be really practical
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because they can go up really quickly
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because they are put in pieces and
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they're just directed together like you
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would put together legos the time frame
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for building these is a lot shorter in
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comparison to traditional home building
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so a lot of people have come to the
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conclusion that this would be the best
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way to offset timed restraints so you
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would with traditional home building the
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thing is that recently with home
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construction the way it's been there's
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been time constraints across the board
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whether it be modular manufactured or
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even traditional building there has been
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a supply chain issue in every single
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sector even with manufactured homes that
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come in two pieces many people that i've
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talked to recently investors were
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thinking that this would could shorten
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their time frame and at the beginning of
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2021 it did shorten their time frame
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because they already had some of these
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homes in stock where they were able to
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deliver them on site the problem that
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they were having though is getting the
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people to actually install the homes so
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they're having a delay in contractors
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then later within the year of course
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building supplies shorten up and then
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they had another delay so they would
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order the house and they'd said the
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normal time frame would've been three
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months for them to get it now it's been
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extended to even nine to 12 months out
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so if you were thinking that this was a
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perfect time for you to get into the
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modular because you're going to get it
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done faster it may not be as quick as
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you thought it could actually take maybe
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less time if you were going to go ahead
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and build it the traditional way with a
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traditional builder if you're a novice
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to home building there is advantages to
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getting a modular home because you
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pretty much can pick out what you want
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on a computer screen and they have it
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delivered to your site the thing is
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about modular construction is that you
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still need a home builder to put it
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together this is one of the biggest
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mistakes that most people make when it
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comes to building modular homes they
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think that they can hire anybody and yes
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many general contractors can put
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together a modular construction that
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doesn't mean they know how to put that
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modular construction together not too
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long ago i got a phone call from
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somebody that was putting their modular
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home together the company recommended a
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general contractor in the area he
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started putting together and as they got
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into the project he finally confessed
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that this was the first modular home
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that he had ever put together that is a
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big giant red flag so if you're
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investing into modular construction and
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you're thinking that you can hire any
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general contractor put it together i
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highly suggest you hire somebody that
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actually knows how to put it together
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most modular home companies have a
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general contractor in the area some do
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not and when you are researching modular
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home companies and they do not have a
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general contractor in the area make sure
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double triple quadruple make sure they
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have that experience to put together a
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modular home ask to see examples of
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modular homes they put together in the
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past if they can't come up with any
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examples or they come up with computer
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renderings that does not mean they know
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how to put a modular home together you
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have to have good references from that
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general contractor that's true of any
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construction for that matter there is a
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system that these modular homes need to
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put together and if they don't know that
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system it could be a real mess and it
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can cost you a lot more time putting it
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together and of course time is money now
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let's just say you're an investor and
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you're thinking about putting a bunch of
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tiny little modular homes on a piece of
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property and you were thinking about you
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know putting in boxable as of today i
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still think they're about a year out
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from being able to deliver the boxables
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out on the open market i have not gotten
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an update on the actual date when
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they're gonna actually deliver it to
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people's homes i know that many of you
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been waiting on those boxables i have
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two because i'm ready to see them out in
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the world i've only seen them in a few
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places in like texas you know over there
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by elon musk but i haven't seen them in
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anybody's backyard as of yet so uh
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hopefully another year from now but if
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you're counting on that and you've been
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planning for the piece of property and
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you were planning on putting a bunch of
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these boxables on this piece of property
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you're going to have to check with
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zoning first even though the piece of
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land is there they may only allow so
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many houses on that acre and that's
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another mistake that a lot of people
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make they think because they own this 16
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or 20 or 30 acres they can put as many
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houses as they want on that piece of
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land and even though there's no hoa to
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tell them that they can't they could
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have some local laws that say you can't
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now in my area the lots of people were
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thinking they were going to put up some
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tiny homes on one acre lots and they
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were going to be able to do airbnb this
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is another thing you need to consider if
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you're thinking about doing these kind
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of modular investment homes some areas
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do not allow for any more airbnbs the
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hotel industry has put a big giant
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on that no more airbnbs throughout the
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area especially in new orleans they
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won't even allow it not at all you may
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have to go a little bit further out
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before you be able to do those airbnbs
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and that may not work out because it's
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not close to the area where people will
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be vacationing i know it's a problem
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here so just fyi keep that ahead of time
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before you decide to invest in a big
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piece of land to do that it could save
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you tens of thousands of dollars and
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that's what i want to do i want you to
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save tens of thousands of dollars now if
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you're a new investor and you're really
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excited because you see some of these
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manufactured modular homes that are
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online another big mistake is that you
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only see them online you're not doing
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your due diligence and doing your
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homework on what kind of modular homes
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are actually being built enough they're
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actually being delivered in some cases
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some of these companies that have popped
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up in the last two years they're just
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fundraising money they're not a they're
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just a concept of a house they're not an
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actual home that can be delivered to
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your property right then there and some
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people are really gung-ho because they
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see these like great advertisements and
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they've been all over their facebook
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feed and they're like have you heard of
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this company and i'm like i've heard of
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it but i've yet to have seen a product
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of theirs it's exciting i know and you
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want to invest but who knows when the
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product is actually going to be in your
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hands if you can't go to the factory or
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you can't see one for yourself in person
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that's a big giant red flag so don't get
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sucked into a modular home company that
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hasn't even gone off the ground yet
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they're just collecting you know like
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investors right now so don't be one of
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those investors that can't actually get
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the product be the investor that has the
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property that will give you cash flow
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and cash flow soon that's what you want
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to do if you're investing in a modular
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construction for rentals or airbnbs now
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even though a modular home is built to
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traditional home building standards if
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not higher that doesn't mean that every
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hoa will allow for a modular home
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construction in your neighborhood the
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hoas covenants are extremely important
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so if you have bought a vacant lot in a
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neighborhood that does not mean that
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they're going to allow you to put a
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modular home in there a lot of older
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hoas will have it in their covenants
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that says no modular homes but in some
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cases you can take your plans of your
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modular home to the hoa and show them
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exactly what you're building and the
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building standards that they're built to
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and sometimes they'll make an exception
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for your specific modular home i've seen
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it done we've had even done in our own
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neighborhood no one ever even knew it
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was a modular home it looks just like a
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traditional built home but in other
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cases when you have a very old hoa with
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a bunch of
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flat out no because they think it's
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going to bring down the property value
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now i'm going to tell you this and some
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people will argue with me in the
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comments section but any appraiser will
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tell you a modular constructed home
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appraises identical to a regular
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traditional stick built home there's no
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difference in the building quality if a
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modular home other than it could be
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actually built to a higher standard so
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they appraise exactly the same they're
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in line with the rest of the
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neighborhood there is no difference so
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if you're trying to plead your case with
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an hoa explain that to them and maybe
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even bring an appraiser with you so that
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way they can include your case for you
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too that you know there's nothing wrong
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with your modular home just make sure it
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hits the right kind of square footage
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and everything else for the neighborhood
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and if they can see it on paper and you
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show them actual pictures of a modular
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home and what it would look like for the
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rest of the neighborhood they may just
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give you a pass let's just hope some
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hoas are just ridiculous though we all
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know that everybody knows the housing
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market is hot hot hot and a lot of
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people are looking to flip properties
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right now as quickly as possible and
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investors are not having as much luck as
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they had years previous on buying
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foreclosures or low income properties
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that they could turn around and flip so
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some investors have said okay well we'll
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go ahead and buy some modular homes
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because they think they're going to get
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rich quick so they end up buying a piece
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of land they end up developing that
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piece of land and they end up investing
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into everything that was involved
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including the sewer and all the wiring
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and the cable and everything that goes
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out to a brand new house they have the
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modular home delivered to the area and
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some of these investors are ending up
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breaking even because of the delays and
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construction unforeseen things that
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happened with the piece of property when
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they were developing the raw land the
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cost of building materials like cement
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had gone up exponentially they didn't
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count on labor not showing up when they
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were supposed to during the pandemic
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they held onto this property forever and
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it didn't really make them that nervous
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because the property values were going
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up throughout the area but when
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everything was said and done and they
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went to put the for sale sign up with
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all the money they invested with
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everything that needed to be done they
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ended up breaking even now if they held
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on to that piece of property and turn it
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into a rental unit then yes they would
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have made money and it would have been a
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income earning property but their whole
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scheme their whole idea with doing this
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was they were going to build these
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houses for cheap and they were going to
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sell them for a high end and it didn't
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really work out that way if you're
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planning to get into this to make a ton
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of money right away from building
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modular homes modular homes to build
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sometimes are just as expensive if not
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more than traditional construction it
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all depends on the company that you work
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with i know that a lot of people think
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modular homes they're going to be
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cheaper per square foot but you still
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have to develop the land in everything
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else that's involved with the house some
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people get in way over their head before
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they even start so always make out a
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good plan work with somebody who's done
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this before they can work with you on
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this plan and don't buy a piece of raw
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land that you don't know anything about
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if you can find a lot that's already
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developed that already has your
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utilities attached to it that's going to
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be the best piece of land that you
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invest in when putting in a modular home
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or any home for that matter that brings
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me to another point and it doesn't even
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matter if you're building modular
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manufactured or a traditional built home
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and you're doing it yourself and you're
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hiring your own contractors the cheapest
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doesn't always mean it's the best but
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also the most expensive doesn't mean
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it's the best i always say go in the
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middle of the road that's always been my
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way of doing things and that even goes
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for something as simple as painting
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because i've gone cheap once and that
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like i said i did it one time i got a
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cheap painter and i regretted it because
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i was up at four o'clock the morning
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painting walls so just know that always
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get references another thing to be
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looking for if you're considering a
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modular home company in some cases the
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roof of the building does not come with
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the modular home like for instance
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boxables homes are just that it's just a
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box and it's up to you as a homeowner to
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go ahead and put any type of roof you
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want on there they have what they call
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as a flat roof but in here in louisiana
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that wouldn't fly you would need a high
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pitched roof and in some other areas
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that they were going to require to have
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a roof so make sure you budget for that
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another thing to think about if you're
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doing those types of homes even though
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the boxable home is 50 000 and the
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outside of that again is just an outside
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shell now you can leave it like that
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it's perfectly fine to leave it like
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that and if you like the look of that
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you can but if you're someone like me
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you want the extra like so you're going
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to have to budget for siding or brick
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veneer that kind of thing so you're
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going to want to price that out as well
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just something to think about if you're
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looking in a product like boxable that
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doesn't have those on it when it's
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delivered to your location does anybody
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know what time it is
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do you know what time do you want most
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people to forget that things take time
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and some people when they think about
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investing in modular homes they think
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it's going to be a short time span but
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some things just like anything when it
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comes to real estate takes a lot longer
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well if you're looking at this as an
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investment property that you plan on
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keeping for a period of time do not
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think that you're going to flip it fast
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it's a long investment especially if
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you're going to do it brand new and have
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it turn over with rentals and make sure
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you plan that out ahead of time because
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it can take a little bit longer than
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you're expecting sometimes it takes a
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lot longer than you're expecting just
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like anything in real estate do not buy
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it in a crummy area in some cases that
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could work out for you i'm one of these
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people that has to look and make sure
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that has progressed every single year
[779]
that it's going up in value now a real
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estate agent in the area is going to be
[783]
able to help you with that but make sure
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you find a real estate agent that is
[786]
proficient in that area when it comes to
[789]
investment properties they're going to
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know the best areas when it comes to
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people wanting to rent them and they'll
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also be able to tell you which lots are
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available in the area that you can put a
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modular home on the ones that know about
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investing they're going to be different
[802]
than the ones that do traditional real
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estate transactions and if you can find
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one that is proficient in modular
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construction
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and investment properties boy you've won
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the lottery there isn't a lot of those
[812]
but if you have find one of those well
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give them my name because i haven't met
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many
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christina wants to talk though i want to
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put him on a video christina says yes
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right now it's very trendy to buy small
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modular homes and put them on a piece of
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property but make sure you have the
[827]
right permits in place and that you're
[829]
going to be able to do what you want to
[830]
do with those pieces of property and the
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modular homes i would hate for you to be
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in a bed situation where you can't do
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what you want to do plan plan plan i
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can't tell you enough to plan and budget
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everything out and if you've never done
[844]
anything like this maybe consider
[846]
working with somebody that is
[847]
experienced in investing in these types
[850]
of homes and you guys could partner up
[852]
and then you can learn everything you
[853]
need to know from that original partner
[855]
so when you go on your own you already
[857]
have the skill set to do it on your own
[860]
that is a smart way of investing if
[862]
you're new at investing in any home
[864]
whether it's modular traditional
[866]
flipping doesn't matter it's always
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better to learn by somebody else's
[869]
mistakes first so that you don't make
[871]
those mistakes and speaking of some
[872]
mistakes that people make you may want
[874]
to check out this video right here my
[876]
name is christina smallhorn your real
[878]
estate whisperer and i tell you all this
[880]
because good real estate information
[882]
matters
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