The Ultimate Guide to Buying a Prefab Home in 2021

Thinking about buying a prefab home, tiny home, ADU or backyard office? Use this guide to help you make all the right moves, from selecting a manufacturer to site preparation.

Noyer

Minimaliste

Oban

Summerwood

Cube²

Lofty Pods

Model 146

aux box

Skáli 2 Bedroom Cuboid

Lloyoll

Getting Started with Prefabs

What are prefab homes?

Wikipedia defines a prefab building as "a building that is manufactured and constructed using prefabrication. It consists of factory-made components or units that are transported and assembled on-site to form the complete building." In short, a prefab building is built partially or completely in a factory and transported whole or in parts to be assembled on the build site. Prefab as a term is a bit of a catch-all that encompasses several other building styles.


Modular homes are homes created in rooms or boxes and assembled on-site like Legos. Usually these pieces have to be moved via flatbed truck, meaning historically most modules were constrained to 16 feet in width, but new construction tech is opening up new possibilities making modular homes more customizable than ever.

Panel-built homes are similar to modular homes, but ship in wall and roof panels rather than in pre-made boxes. This allows on-site construction to be leveraged to make more customizable shapes than modular buildings, as well as make shipping a lot more efficient.

Manufactured homes are buildings fully completed in a factory and shipped whole to the land site before being laid on a small dug crawl-space or concrete pad. Often referred to as "mobile homes", manufactured homes have historically aged poorly and were known form maintenance issues, but new construction techniques and the rise of smaller manufactured buildings have made this category much more desirable in recent years.

Glossary of Prefab Terms

Kit
Any building where most of the major parts such as the walls, floor and roof framing are prefabricated and delivered on site to be assembled.

Modular
Any home of building built indoors in a factory-like setting. The finished products are covered and transported to their new locations, where a builder assembles them. A modular home is not a mobile home; it's simply a home that is built off-site.

Pre-Assembled
Any prefab building that it completely built in a factory setting and transported whole to the build site.Site-Built & Stick-BuiltA home or building that is built piece by piece on the property it will inhabit. First, a foundation is built on your land, and then the home is built from the outside-in on top of the foundation.

Panelized Home
Any building where the structural components of a home (walls, roof and floor systems) are constructed in a factory and delivered to the job-site where it is and finished just like a stick-built home.

Settling-in Period
Once erected, prefab buildings will "settle in" to their foundations. During this period, some issues may appear in the building, though these are usually covered by warranty if a reputable contractor was used in the initial set-up. If not covered under warranty, the costs will be borne by the consumer.

Prefab Shell
Typically includes basic excavation, foundation, framing, siding, roofing and the installation of windows and doors in a building before it's delivered. The inside of a prefab shell is typically left unfinished, sub-floor and stud walls, so that remaining stages can be completed by the homeowner at a later time. This differs from a complete or turnkey construction, meaning that it is completely finished both inside and out and ready for occupancy.

SIPs
Structurally insulated panels. These replace the need for traditional framing, insulation, vapour barriers, full exterior sheathing, and electrical conduit and boxes throughout the exterior walls. Most prefab manufacturers favour SIPs to traditional construction.Non-

Structure Costs & Site Costs
All costs incurred in the erection of a prefab building outside the building itself. These vary by location, but most buyers will have to account for permitting, utility hook up, foundation, transport and crane, landscaping, and fencing.

Reasons to choose prefab over traditional stick building

There are many reasons to consider a prefab building, and even a few reasons not to.

Prefabs are affordable
Prefab homes are significantly cheaper than building a house from scratch. Manufacturers will order materials in bulk, and you needn't worry about hiring architects or designers, as prefab homes will be delivered to your designated location with walls, roofing and structural engineering included in the package. Prefab homes are typically priced by square foot, and you can even find them at half the price you would normally spend on building a traditional stick-built home.

Prefabs are reliable
The first and most obvious benefit to prefab buildings is one can take advantage of factory production, which usually provides higher reliability than site-built buildings.

Prefabs are faster to build
Choosing prefab also has speed on it's side. Prefabs can be built in parallel with foundation laying and other site preparation, and construction delays due to poor weather are a non-factor due to the speedy nature of on-site assembly compared with a fresh build.

Depending on its size, a full-sized prefab home can be built in as quickly as three months, saving you time and labour costs, but also headaches.

Prefabs are aesthetic
(Most) prefabs are beautiful. That's why we love them!

Prefabs are environmentally friendly
Going prefab also has environmental benefits, for owners and for their communities. Prefab buildings produce less waste than site-built buildings, and require much less people and vehicle traffic on your build site.

Not only that, but being built in a factory helps manufacturers deal with waste more effectively, and enforce stronger quality-control which helps a building's long-term heat retention and energy efficiency.

Prefabs are mobile
Traditional stick-built homes are permanent. They will stay wherever it was built until someone decides to take it down in the future. The same isn't true for prefab homes - they are literally built to be moved.

This gives you the flexibility to disassemble them even after they have been placed on their current foundation, and can be moved with specialist moving companies from one location to the next.

"Prefab's harness the efficiency of a shop setting. Climate controlled products, no weather delays, less waste, and less traffic and disturbance to your site. Home construction can be run simultaneous to foundation installation, decreasing overall timeline."

- Jonathan Lloy, Founder of Lloyoll

Reasons not to choose prefab over stick-building

Prefabs have building restrictions
The rules for prefab buildings will depend on the type of building you want, and where you want to put it. Consult your local housing and community development administration. It is also a good idea to use a contractor who knows the local zoning rules and requirements for home or accessory dwelling building.

Prefabs are less customizable
The flip-side of pre-construction is that prefabs are often difficult to customize. More and more manufacturers are offering complex customization options at point of sale, but the inflexible nature of prefab buildings makes them more difficult to update down the road.

Prefabs have hidden costs
Not hidden per se, but if you're building a prefab on land, most of the same expenses that apply to a traditional stick-built home will apply to your prefab as well. Building permitting, utility hookup, foundation, transport and crane, landscaping, fences, and additional property taxes are all going to be line items in your budget.

Prefabs are more difficult to sell
For all the reasons above, prefabs are sometimes more difficult to sell. Though many prefab builders are now design focused, the legacy perception of prefabs as mobile homes may affect the judgement of those looking to buy your prefab down the road.

Types of Prefab Buildings

LLOYOLL Skáli Back Country Cuboid

Full-sized Prefab Homes
As the name suggests, full-sized prefab homes are prefabricated replacements for traditional stick-built homes. They feature everything one might expect in a home, except the building was created in a factory - likely in sections or modules - rather than built on-site.

LLOYOLL Skáli Back Country Cuboid

Prefab ADUs and Cottages
Smaller prefab buildings with full plumbing (kitchen, bathroom) and multi-season capabilities. All of these could be the same building, but we describe them differently based on where they're placed. ADU stands for "accessory dwelling unit", which refer to independent units on the same lot as a larger residence, while prefab cottages or guesthouses are independent buildings on a property by themselves.

Prefab ADUs are often used to expand the living space capacity of an existing home. ADUs can provide additional bedrooms, or functional as a stand-alone rental unit for family members or renters. When used as cottages, prefabs allow for greater flexibility in building location and construction speed.

Prefab Bunkies
"Bunkie" is short for bunk house, or a space typically used to help house an overflow of visiting guests and family members and need a place to sleep at the cottage or in your backyard.

Bunkies are usually uninsulated and unplumbed, meaning they're of limited use for colder climates and for longer stays. They're also usually quite small - often under 100 square feet - which allows them to be built without a building permit in many jurisdictions. For these reasons, Bunkies are usually the least expensive prefab option.

Prefab Tiny Homes
Stemming from a movement incited by the ballooning in size of the average American home, prefab tiny homes are mobile homes that pack the core amenities of larger homes into 400 or less square feet. Prefab tiny homes are often compared with RVs, but can be differentiated by their use of traditional building techniques and materials and their aesthetic similarity to larger homes. Though often set up semi-permanently, most prefab tiny homes can be towed like an RV.

Prefab Offices and Studios
As the name suggests, prefab offices and studios are prefab buildings that can be placed adjacent to a residence for use as a work or creative space. Most often leveraged by owners of single-family homes who need additional space, they're a great solution for artists and people who work from home.

Apart from adding usable floorspace to a property, their separation from the primary residence and mobility makes them a handy choice for larger families when quiet is desired. These buildings are usually insulated, but are rarely plumbed.

How much do prefab homes and buildings cost?

In short, it depends. Pricing for prefab homes and buildings can vary widely. The condition of the build site and local market conditions will affect the labour costs required on site, and shipping costs will move depending on the relationship between the build site and the location of the prefab manufacturer.

Without counting the value of the land the build site is on, typical all-in prefab home or ADU build will range from $150 to $600 per square foot.

For reference, higher-end stick-build homes in the San Francisco Bay area can range from $400 to $600 per square foot.Prefab offices and studios are much less expensive due to lack of plumbing, and typically comes in between $100 and $250 per square foot.

Prefab bunkies are usually even lower than that.Prefab homes are not always the least expensive solution, but prefab is typically good value for the quality in expensive areas of the country.

Prefab Site Costs

Any prefab home will come with site costs. For pricing transparency's sake, we always recommend working with a manufacturer that quotes all-in pricing rather than that exclude site costs.

"Focus on all the non structure costs and time; permitting, utilities, foundation, transport and crane, finish landscaping, fences. These end up costing as much or more than the structure."

- Steven Dietz, CEO of United Dwelling

Site costs vary by location, prefab amenities, and building size. Here are our estimates for an all-season, plumbed, and full-sized prefab building on a foundation (prices in USD).

Prefabs for Investors

How do prefabs affect property value?

Prefab builds appraise at similar rates to stick-built homes. Historically, prefab builds often experienced slower appreciation than stick-built homes, but recent improvements in prefab design and construction have more or less equalized prefab and stick-built homes appreciation over time.

Creating a long or short-term rental business with prefabs

Prefab ADUs and cabins can be a great opportunity to monetize unused or underused property. Use this calculator to model out what kind of business you can expect using Airbnb to rent your prefab, and this calculator to help understand your cashflow if you use a prefab for a long term rental arrangement.

Financing a prefab home

Financing a prefab home project is pretty similar to borrowing for any new construction project. Assuming you're not planning to purchase a building with cash, consider the following options:

Construction & Renovation Loans

Short term loan (usually for a term of one year) designed to help finance the building a real estate project. Construction loans are considered relatively risky, which means they often carry higher interest than traditional mortgage loans.

To mitigate high interest, borrowers can either refinance the construction loan into a permanent mortgage after construction has completed, or obtain a new loan to pay off the construction loan (sometimes called the “end loan”).

Temp to Perm Loan

A construction loan that lasts the duration of the construction period before converting into a normal mortgage. Temp to perm loans are often preferable to construction loans due to only managing one mortgage closing rather than two.In most cases, loans for prefab buildings allow you to finance both the purchase of the land, building, and finishing of the building.

Construction  loans are typically “interest only” meaning you only pay interest.Banks take into account you as a borrower and the viability of the project, so the underwriting and approval process on these loans can take longer than sixty days. To help move this process along faster, buyers can pay cash for the project's property, and then claim the land purchase as a credit on their down payment percentage.

Shop around your local financiers and banks for the best rates, as little national infrastructure exists for finance projects like this.

Financing an ADU, Tiny Home, and Backyard Office

Personal Loans, HELOCs, & Lines of Credit

When planning a smaller prefab project, consider going the route of personal loans and lines of credit to avoid the timelines and headache of construction loans.

Many personal lenders allow you to borrow up to $100k with no down payment, making them an attractive option for smaller projects. Personal loans typically amortize over a shorter period than mortgages (up to 12 years), and  they underwrite based on you as a borrower, not the merit of your project borrower.

National bank and online lenders often have the best rates for personal loans, and can help you get approved in as quickly as a couple of days.

Homeowners with sufficient equity in their home (typically at least 15-20%) can usually out a second loan or line of credit to finance a prefab building. These types of loans are preferable for homeowners who want to avoid refinancing their first mortgage at a higher interest rate and instead take out a second, smaller mortgage.

Cash Out Refinance

If you own at least 15% of your home's equity, you may be able to refinance your mortgage to pull cash out and finance your building.

Renovation Loans

Homeowners who do not have enough equity in their home for a cash-out refinance or a home equity loan can consider a renovation loan. Typically, these will come with higher interest rates than mortgage based financing.

Company Rent Share

A number of builders have started offering free or subsidized ADU or guesthouse construction in exchange for a share of the rental income once construction is completed.

Prefab Construction Process

Now that you have land and a prefab building on the way, it's time to start the prefab construction process.

Finding Land for Your Prefab

Land Location
As with all real estate projects, the location of the land you plan to place your prefab is paramount. The location of your land will affect the price, so make sure you're taking into account the expected appreciation or rental income alongside the varying costs of land in different locations.

Regulation & Local Zoning
Be sure to make inquiries to your town or region's building department, providing them with your property address and land parcel number. They should be able to help you understand the zoning and design review process for your area, as well as help you validate that the timing and approval process align with your project plan.

Don't forget to use this opportunity to gather any cost information around permitting, utility hookup, and municipal requirements and services and taxes that you may be subject to.

Regulation & Local Zoning
Be sure to make inquiries to your town or region's building department, providing them with your property address and land parcel number. They should be able to help you understand the zoning and design review process for your area, as well as help you validate that the timing and approval process align with your project plan.

Don't forget to use this opportunity to gather any cost information around permitting, utility hookup, and municipal requirements and services and taxes that you may be subject to.

Selecting a Prefab Building

Defining your prefab requirements
Before researching manufacturers and potential buildings to suit your needs, you need to understand your requirements. How do you plan on using the space? Where will it be? What amenities will you require? How many people must it comfortably fit?

Choosing between custom or predesigned prefab
Predesigned prefabs from reputable manufacturers are almost always going to be less expensive than custom options. For full sized homes, a lot size of +3,500 sqft is plenty big enough to give you many solid predesigned prefab options to choose from.

Some constraints will reduce your options for predesigned prefab homes. For example, integrated garages and very large homes (over 4,000 sqft) will severely limit your predesigned options, as will heavily sloped lots and lots under 3,000 sqft.

Other key criteria decision (beyond basics like the availability of a design in your area, aesthetics, size, and price)

Other prefab selection criteria
Some manufacturers specialize in building highly energy efficient homes, include net-zero homes and buildings meeting the Passive House standard.

Prefab manufacturers usually work on one of three construction models. Either they do construction on location themselves, tap into local builders to construct on their behalf, or require you to hire a builder yourself.

Some prefab manufacturers only build the building's shell (outside of the house), leaving it to the buyer to finish the interior of the building. This can be much more work, but allows for much more customizability should it be desired.

Special weather requirements should also be taken into account. Some homes are specially constructed to be hurricane proof or handle large snow loads. Work with your preferred manufacturer to ensure your weather requirements are met.

Finally, make sure your manufacturer can transport your preferred prefab to your location at a rate that's acceptable to you.

Construction Process


‍Preparing your build site happens in four steps.

Obtain Licensed General Contractor
You'll need help preparing your site, assembling your building, and finishing up construction. It is illegal for the prefab manufacturer to hire a General Contractor on your behalf unless they are also a general contractor, which would lead to the project becoming uninsurable and unfinancable.

Mark the Boundaries of Your Land
Have a surveyor clearly mark the boundaries of your building site with flags. This will let your contractor and his crew know where to work and setup equipment, and help find any potential boundary issues with your municipality or neighbours.

Clear and Level Land
Clearing and levelling must be done to make space for a foundation to be poured. Depending on your skill and the type of clearing that is being done, your contractor may allow you to do some of this work to help offset some labor costs.

Pour the Foundation
This is the point of no return - changes become much more expensive after the foundation is poured. Once land has been cleared, your contractor and his crew will begin digging a hole for the foundation and pour the concrete. Make sure to compare the foundation framework to your building's blueprints to verify that the shape and size is as it should be.

Prep for Delivery
Create a space to unload and stage your prefab's modules and pieces before the crane lifts them into place. This helps avoid the high cost of keeping trucks on standby to deliver pieces as needed. Additional space may need to be cleared and levelled - this is especially true for multi-level prefabs, as pieces cannot be stacked until set on the foundation.

Assemble your prefab
Once pieces are delivered and supplies and team are ready, bring your crane and contracting team together to put together the pieces of your prefab.

Property Finishing

Congrats - you've officially raised a prefab on your property! Just a few more pieces of the puzzle to finish the job

Utility Hookup
Take this time to make sure your power and water lines are properly hooked up and functional before letting your contractor pack up.

Site cleanup
Prefabs are known to be cleaner to raise than stick-built homes, but there will likely still be remnants of the process to deal with before moving forward.

Landscaping
Now is the time to seed/sod, plant gardens, build patios and decking, and put up whatever fencing may be necessary.

Move in
Once the property is ready, feel free to start moving whatever you need into your new prefab!

When You're Prefab is Done

Prefab Maintenance

Like stock-built homes, prefab homes go through a "settling in" period where the home will settle into it's foundation and location. During this period, some drywall cracking may appear, and any incorrectly installed appliances, wiring or plumbing should be repaired, hopefully under warranty.

Make sure to understand your selected manufacturer's warranty and their process for handling issues before you purchase your building.

Prefab buildings require much of the same maintenance as a stick-built home. Clean your drainage systems and HVAC vent filters, and regularly inspect walls, foundation, and roofing for cracking and signs of wear regularly.

Prefab Community

The world of prefabs is difficult to navigate, and knowing who to work with and what move to make can be a daunting task.

To help the next batch of prefab owners make their decision, review your manufacturer and prefab building on PrefabList, and post images to help others see what your prefab looks like once completed.

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