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Developing Factory-Built Subdivisions: Three Rules For Success

By Craig E. White, ACM

With all of the advantages of the factory-built construction process, including better quality control, decreased building costs, and more reliable workforce, it’s no surprise that the development of subdivisions using a range of factory-built homes (both manufactured and modular) represents an excellent market opportunity for the industry. Like never before, builders and developers across the country are searching for newer, faster, and better ways to deliver high quality homes in a cost-effective manner. By employing the highest level of automation to the construction process possible, manufacturers are able to deliver quality constructed homes at a reduced cost in half the time. This new opportunity does not come without its difficulties and challenges, however, as the industry enters this relatively new arena.

The industry has had much success over the years in the scattered site rural/suburban home development, and this remains the most consistent and core use of factory-built homes. Individual homebuilders and consumers have effectively been developing single lots using the efficiencies of the factory-built process. The suburban/urban subdivision, however, is the emerging market for the industry. These are settings that are traditionally more difficult to develop due to land-use regulations, and the sheer number of homes that are placed in these developments can make developing a subdivision daunting to many.

The following are three short and simple rules that should be followed before you approach any factory-built subdivision project.

1. “Determine your market before you determine your product.”

My company, Windover Communities, LLC, is a Midwestern-based development company. We saw an opportunity to develop subdivisions in small, growing communities seeking an answer to affordable housing. However after nearly forty years primarily in the land-lease portion of the industry, we knew that for the project we wanted to achieve the land-lease business model wouldn’t work. After we determined that we wanted to develop subdivisions using modular homes, we were amazed when the first two jurisdictions that we started with welcomed us with open arms. This was new ground for someone who spent their career fighting local government for access to land. The reason for their acceptance was found in the fact that the architecture of our homes was similar, if not superior, to what was in their cities. The second reason was that by using modular homes, we were consistent with their local building code.

For the time being we have decided to continue to use a modular product. The first reason was that the cities treat modular homes the same as site-built homes due to the code equivalency. The second reason is that, again for the time being, in the financing of our homes we do not have any issues in the appraisal of our homes relative to site-built competition, and we have access to all of the financing terms available for conventional single family homes.

I am not advocating one type of home over the other. However part of determining your market is figuring out financing, zoning, and demand, all of which may encourage one type of building product over another.


2. “Find the manufacturer that is right for you.”

Finding a suitable manufacturer proved to be more difficult than we expected. At the end of the day, I believe that our experience is similar to most builder/developers becoming involved in our business. The learning curve in working with this business model occurs at both ends, with the builder/developer and the manufacturer sometimes working in unfamiliar territory.

There were several characteristics present in the manufacturer that we selected, and these characteristics would be wise for any manufacturer looking to this segment of the industry to emulate:

Home Exterior Design:
A common thread that must be present throughout all the manufacturers who want to be qualified to participate in this industry segment is the employment of design people capable of creating attractive exterior designs. Too often in both the factory-built and site-built sectors homes built without regard to nearby homes, neighborhoods, or even the region of the country. Also make sure there are several designs available in order to meet different lot configurations.

Dedicated Sales Personnel:
This part of the business involves new and different challenges. Assistance is needed in home preparations for garages, foundation specifications, and other site-installed items. Since the financing of the home is typically through a construction loan, construction drawings are needed for lenders and local regulatory personnel.
Having sales personnel dedicated to dealing specifically with this new business should be an important consideration. Factory sales personnel need to be familiar with all of the aspects of your business demands including the unique issues relating to installation.

Installation Assistance:
Manufacturer involvement assures fewer problems in the set and finish of the homes and will lower manufacturer warranty costs in the long run. Currently fewer manufacturers set and finish their homes than those who do. However, we were surprised that the manufacturers were not better prepared to advise us on satisfactory subcontractors to assist in the overall installation of the modular home.

3. “You build a factory-built home, you don’t install it.”

For many people entering this new segment of the industry, they approach it thinking that it is something like installing a multi-section home in a land-lease community. Nothing could be further from the truth. Noted industry developer and immediate past MHI Chairman Dan Rolfes likes to say, “Manufactured housing is a process, not a product.” The process of building a factory-built home is significantly less complicated than building a site-built home, but it still involves the selection and coordination of a significant number of contractors. These include plumbing, electrical, foundations, garage-building, mechanical installations, concrete flat-work and landscaping contractors. There is opportunity for subcontractors to do a myriad of tasks in the finishing of these homes, thereby providing the added benefit of creating jobs locally.

The opportunities that exist for entire subdivisions of factory-built homes to be developed is a bright spot for the industry. At the same time, a significant amount of work and due diligence must be exercised in order to successfully take advantage of this opportunity.

About the Author
Craig White is Chief Executive Officer of Windover Communities, LLC, a Midwest developer of factory-built homes subdivisions, and a recognized authority in the manufactured and modular housing industry with over thirty years of experience in all phases of the business. He authored the Manufactured Housing Land Development Guide, and more recently coauthor of Renewing Your Manufactured Home Community. He has served as a senior executive for a major financial institution involved with the financing of manufactured homes, and also a senior executive for one of the largest owners of manufactured homes communities, where he directed acquisition and operation. He can be contacted via email at cwhiteacm@kc.rr.com


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