Pros and Cons of Buying an Industrial House
If you’re thinking about buying a home, or wondering if you could ever buy a home, chances are you know that the US housing market is currently in the midst of a wild ride. The pandemic has triggered a global housing boom that has seen house prices rise by a mind- boggling 42% . Now prices are finally starting to drop a bit… if only because of the sharp increase in interest rates .
All of this means that buying a traditional home is now an expensive option . The average price of an existing single-family home is currently close to $400,000 , and the average price of a new build is about $450,000 . For many people—even those who thought they were ready just recently—buying a home is not an option right now .
However, there is one option that can make entering the housing market possible even if you have lost the price of traditional houses: industrial houses.
Most of the houses are built on site with the delivery of construction crews, equipment and materials. Manufactured houses are built in the factory either as a single block or as modular pieces, and sent in whole (or in bulk) to the ground where they will sit. If you’ve ever been on the highway and seen a truck hauling what looked like an entire ranch on a platform with an “OVER SIZE LOAD” sign, it was a delivered industrial house.
These homes used to be called mobile homes , and had earned a bad reputation before the advent of modern manufacturing processes. However, modern industrial homes aren’t really designed to be moved more than once, and quality has improved – all industrial homes built after 1976 must meet some stringent quality standards . These days, an industrial home is a legitimate option for anyone looking to buy a home. In fact, buying a prefabricated home, as opposed to a traditionally built home, has several major advantages and a few major drawbacks.
Pros: cost
The number one reason to consider a finished home is cost. The average cost of a finished home is only $128,000. Depending on where you live, this is likely orders of magnitude cheaper than a home built on site. As with many new build homes, you can usually add a lot of upgrades to your finished home, but even if you fork out and buy the biggest and most glamorous industrial home you can find, the price is unlikely to be higher. get a lot more than $250,000. It is significantly cheaper than traditional houses.
Disadvantage: find land to put it.
On the other hand, if you have a beautiful factory built house of your dreams, you have to put it somewhere. Part of the value of a traditional house sale is the land on which the house stands. With a finished house, this is a separate deal, so you will need to find a plot of land that you can purchase (by purchase or as a gift), get all permits and legal documents, run utilities and plumbing to it, and create a foundation if you want, to keep the house permanent.
You can also rent land for your home – although industrial houses are not designed to be permanently moved, they can be moved when needed, so it is possible to rent a space in an area that serves industrial houses and place your house there. . The downside is that you will have to pay rent and other expenses, and the value of your home may depreciate because it is not connected to the land below it.
Good point: you can move them around (sometimes)
However, the fact that your house can be moved (if you haven’t fixed it to the foundation permanently) is an advantage. If you need to move to a completely new area, you may not need to sell a home that you enjoy living in and that is tailored to your needs. While packing an entire home and moving it around can be a complicated and costly operation, it will likely be cheaper than buying a new home and you won’t have to worry about cluttering up real estate photo space.
Disadvantage: harder to fund
If your finished home isn’t attached to a permanent foundation, getting financing for it can be a lot harder than getting a traditional mortgage. If it’s permanent and at least 400 square feet, you can probably get a traditional mortgage, otherwise you’ll have to explore a few other options:
- federal loans. The government offers several loans that can be used to produce houses. M H Advantage only applies to certain homes, but typically requires a down payment of only 3%. The CHOICEHome program is an option if you use a finished home as your primary or secondary residence; this federal loan requires only 5% down. And the Federal Housing Administration (FHA) offers Title I loans that can be used for these homes.
- Loan secured by real estate. If your manufactured home is not on a permanent foundation or otherwise does not qualify for one of the above loans, you will need to get something like a personal property loan, which is very similar to the loan you take out to buy a car. .
- Dealer financing. Some home building companies offer their own financing. This is most likely a personal property loan, and just like with an auto loan, you should look for a better rate if you choose this option, but nothing beats financing from a dealer for convenience.
A final consideration is that industrial homes that are not permanently fixed on land you own will tend to depreciate, just like a car. This means that you may not have much capital, even after you pay off your loan.
Benefits: energy efficiency
Prefabricated homes are built using factory settings, a reproducible design and process, resulting in less construction waste. They can also be built to high energy efficiency standards . Many industrial houses are even Energy Star rated . All of this means you’ll save money on heating and cooling costs, and because these homes tend to be more affordable in the first place, you’ll have more budgetary room to upgrade the energy-efficient aspects of your home.
Cons: limited selection
Industrial homes may offer fewer options than traditionally built homes. Just like buying a home from a builder, you may have a limited menu of design options and features you can choose from because a home is built from a factory to a blueprint, not a custom order.
Then, once you have a home, you may run into zoning restrictions as to where you can install it . Sometimes this means that you can only place a house in certain areas, or you may need to buy more land than you want, or you may find that your only choice is to rent a plot in a designated park area. This can significantly affect the “dream” of owning your dream home.