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The Truth About Prefab Homes

January 13, 2025

The Truth About Prefab Homes: 6 Things You Need to Know Before You Invest

white and grey concrete building near swimming pool under clear sky during daytime

Three years ago, I called out prefab homes on YouTube. Financing was a mess, permitting felt impossible, and appraisals? Don’t even get me started. And don’t forget the many shady prefab suppliers.

The prefab community was not thrilled with my take. Fortunately, a lot has changed for the better since then. Prefab and modular homes have shown exponential improvements in quality. I’ve moved from a prefab skeptic to a cautious believer.

Are prefabs a good investment in 2025? Let’s revisit prefab homes and explore the quirks, perks and hard truths.

Prefab vs. Modular vs. Manufactured—What’s the Difference?

First things first, let’s get some jargon out of the way.

Prefab homes (short for prefabricated): Built off-site in a factory, then shipped and assembled on-site. Think of prefab as the umbrella term for homes constructed in pieces and assembled elsewhere.
Modular homes - A type of prefab. These are built in sections (aka "modules") and put together on-site like LEGO bricks. Modular homes take customization to the next level.
Manufactured homes - A manufactured home is built entirely off-site and typically delivered to you in one piece.

We’re focusing on prefab and modular homes. They're the ones making big waves in real estate right now.

6 Things They Don’t Tell You About Prefab Homes

Like all financial investments, you need to do your research before you buy a prefab or modular home. Here are 6 things to consider before you seal the deal.

1. Prefab Homes Are Not Always Cheap (But They’re Getting There)

Prefab modern homes have a reputation for being a low-budget property option. I always thought this was half-true. If you want a quality prefab home, you’re going to pay more than you think.

Premium prefab models come with premium price tags. Sure, you can find a basic home for $40K. But once you add some tech features, high-end finishes, and maybe a solar roof, you’re suddenly looking at $360,000 for a 400 sq. ft. home.

The good news? Innovation is driving modular home costs down. Companies like ICON are 3D-printing affordable, stylish homes that could change the game forever.

2. Speed Is The Prefabs Superpower

Building a traditional home takes 9 -14 months. That’s if everything goes according to plan. Prefabs? Try 2–10 months, depending on the company and order size.

For short-term rental investors, this speed is gold. Imagine having your Airbnb ready to book while your competitors are still waiting on their drywall and permits.

But wait, there is a caveat. Many "new" prefab companies out there with stunning images have never actually built a house. With an inexperienced company, your “quick build” can stretch from 3 months to 3 years.

3. Prefabs are Perfect for Remote Locations

Secluded off-grid homes sound like paradise on paper, but they can be a real pain to build. Hauling construction crews to your off-grid location will cost you time and a small fortune.

Prefabs and off-grid remote locations are a match made in heaven. The home is built in a factory, shipped to your land, and craned into place.

Whether it’s a lakeside getaway or a glamping site, prefabs make building in hard-to-reach areas easier (and cheaper). I love this idea so much that I’m planning to use 15 prefabs for my own glamping project. Watch this space!

4. Modular Homes are Fully Customizable

brown wooden table and chairs on brown wooden parquet floor

Remember when buying a prefab home meant buying the same cookie-cutter home as everyone else? Not anymore. Modern modular homes let you customize layouts, finishes, and features. You name it.

Customization means you can go green too. Prefab homes are leading the way in green living. From solar roofs to off-grid well-water and septic systems, your custom home can be built with sustainability and freedom in mind.

Unlimited customization is a game changer for STR investors. A modular home lets you create a unique space that will stand out against other listings.

5. Prefabs Promise Consistent Quality

Are prefabs low quality? If you’re not choosing your supplier wisely, the answer is yes.

But what you might not realize is that buying a new modular home can give you more power to control quality. Wait, that doesn't sound right… Let’s break it down.

Factory builds mean no rain and weather delays and no construction errors or surprises. Everything is crafted in a controlled environment, which leads to higher quality control and fewer hiccups.

Do you hate construction drama? Then you’re going to LOVE modular homes.

6. Financing Prefabs Can Be Tricky

Banks love traditional homes. Prefabs, not so much. Financing options are improving, but you should expect higher interest rates and a few extra hoops to jump through when you apply for finance.

Pro tip: Set your prefab on a permanent foundation and get a real estate permit. That extra effort will make financing much smoother.

Are prefabs an asset or liability? You decide.

A prefab home plopped on bare land is a depreciating asset. Like a fancy car in your driveway. But what if you go the extra mile to get it permitted, placed on a foundation, and tied to the land? Then it becomes a true piece of real estate that grows in value.

So what is the difference between a cash-flowing prefab and a prefab that’s a costly liability? Your strategy.

Are you buying cheap and not investing in the foundation and finishes? Or, are you researching options, finding good suppliers, and doing the paperwork? Think long-term and invest in a home that will stand the test of time.