Welcome to an exclusive excerpt from the MODULE™ Developer Playbook! Our goal is to empower developers with the knowledge and insights needed to thrive in the realm of modular construction. The playbook is a comprehensive guide, crafted from our extensive experience, to help developers navigate and succeed using modular construction techniques.
In sharing this excerpt, we aim to demystify the complexities of offsite construction and promote its adoption to meet the ever-growing housing demand across the country.
Below we'll cover the big questions related to costs and financing.
FAQ: What are the benefits of building to the MODULE Standard?
Access to a network of partners and a 40% faster build time.
Up to 20% lower lifecycle cost, streamlined production system and design-build process ensuring quality control.
Repeatable, human-centered designs, 80% more energy efficient than existing homes.
FAQ: How do modular construction costs compare to site-built construction?
Quicker to Occupancy & Opportunity Cost
Well-coordinated and properly sequenced modular projects save significant time. Faster completion reduces loan interest and other carrying costs like insurance and taxes while projecting investors' returns. And many projects are eligible for tax subsidies.
Reduced Design Fees & Labor
Economies of Scale: Our designers handle a high volume of projects, spreading costs over many clients. Standardized assemblies and floor plans further reduce design time and expenses.
Efficiency in Design: Structural and MEP designers benefit from repetitive project types, leading to additional savings.
Modular construction reduces estimating needs, equipment rentals, and overhead for a General Contractor. To optimize these savings, Module works to define a scope of work matrix for each project and offers partners access to Module's Construction Playbook, a collection of resources, videos, and insights to reduce scope confusion and improve the overall experience.
Less Waste
A controlled environment means less rework.
Materials can be pre-cut and pre-fitted.
We can purchase materials in bulk since we can store them at the factory.
FAQ: What non-obvious costs are associated with modular?
Transportation Costs
Delivery: Delivery of a 16’ x 40’ building block or module within a 200 mile radius is included in Module’s pricing. Regardless, delivery of the module is considered part of the total cost in contrast to stick-built where delivery of materials is baked into the sale of the products. Transporting modules, especially over 250 miles, can be costly, ranging from $2,000 to tens of thousands of dollars. Costs vary based on module width, need for police escorts, and state permits.
Crane Rental Costs
In Pittsburgh, PA, a crane can cost between $10,000 and $40,000 per day. Module helps to ensure efficient planning is in place so that this process can happen safely and swiftly.
Staging Site Costs
Temporary Storage: Leasing space to store modules before installation is usually a nominal expense. This can vary with larger projects with many modules or delays in on-site preparation.
Set Crew Costs
Ensuring the set crew has experience with modular homes and understands their scope on set day is crucial.
Insurance Costs
Factories typically carry insurance that covers the modules until they leave the premises, then the transportation company covers them until delivery. After that, builders or developers need additional insurance, typically an add on to a builder's risk policy.
Financing Modular Construction
FAQ: Can modular projects be financed with a construction loan?
Yes, modular projects can be financed with a construction loan. This does not
mean that ALL banks will finance modular construction. In Module’s
experience, we have found that the more forward-looking banks tend to be
more open to it and have a willingness to learn the process as the industry
grows. It is important to ask potential lenders about their experience with
modular. If they easily confuse it with manufactured housing, that may be a
red flag. Below are examples of things we have learned along the way.
Banks may not understand modular or may have a stigma towards modular construction.
There may be a need for educational resources if the bank is unfamiliar with the process. Ideally, a lender who has done modular before can be sourced.
FAQ: What is different about modular as it relates to financing?
Different Draw Schedule
Site-built: Builders generate monthly invoices reimbursed by the bank.
Modular: Factories generate invoices with 2-3 large progress payments. Typically, a 10-20% deposit is required for ordering modules and 80-90% payment upon delivery to the staging site.
Collateral Considerations
Most banks do not view modules as collateral until they are affixed to the foundation, delaying fund release until after installation.
Contract holders must be prepared to finance the module purchase until installation.
Lender Flexibility
Lenders must approve a changed draw schedule for module purchases.
Smaller local banks tend to be more flexible in adjusting their processes compared to larger national banks.
Larger banks with modular construction experience may already have established processes.
Factory Deposits
Factories typically require a 10-20% deposit to reserve a manufacturing spot, with no further payment until module delivery.
At Module, we're committed to helping developers succeed with modular construction and will work with you through this process. Our mission is to create a 21st-century residential development ecosystem that delivers better-designed, quality-built, energy-efficient, attainable housing, all through the power of offsite construction.
Additional insights from the MODULE™ Developer Playbook coming soon.
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