As I discuss the many advantages of using modular/off site construction techniques, one subject comes up frequently.  The comment usually goes like this” so what you are saying is it is faster so I save some interest carry at the bank?”

Well, yes, that is what I am saying and in many cases that is a true statement, however, there is more to the speed issue than just interest savings.

You also have the opportunity to generate cash inflows rather than ongoing cash outflows.  There is the opportunity to get to the occupancy rates required for permanent financing requirements and of course being able to get to the permanent loan and off the construction loan faster.  These factors all play a part in the overall IRR of a project, which is how you should determine the feasibility of using modular.

A new advantage to modular/offsite construction has surfaced.  Beating the market.

There have been articles written, of late, that are predicting the possibility of an overbuilding in the multi-family sector of the market.  I am speaking primarily of the Pac NW. What modular/offsite construction can then offer in addition to the above mentioned “speed” comments, is the possibility of having your project finished, rented and cash flowing while others continue site building and may be lagging behind you in the market.

I have heard this referred to as the “musical chairs” part of development.  When the music stops do you have a chair to sit in?

There is more to the “speed” issue than simply savings on the interest carry at your lender.


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