Story

Talked out of a prefab deal by the guy selling the prefabs

I was looking at putting money behind a small operator who wanted to drop three prefab units on three lots he already controlled in a first-ring suburb. Part of my diligence was sitting in on his call with the manufacturer, because I wanted to hear how the delivered price was built.

The rep walked through the box. Unit price was right around the number everyone quotes, low six figures, and it included the shell, the fixtures, the appliances. Then my operator asked what the total installed number looks like in that county and the rep went silent for a second and said something I didn't expect. He said their delivered price is honest and their customers still average 60 to 90 percent on top of it once you add site work, foundation, utility trenching, crane day, and permits, and that in counties with sloped lots it's worse. He said if the pro forma assumed $130k all in, walk away from his own product.

My operator's model said $145k per unit. Real number looked closer to $210k. The rents in that submarket were around $1,500, which works fine at $145k and does something very different at $210k.

We passed. I've thought about that rep a lot since. He had a commission sitting right there and told us the truth about the part he doesn't sell. I'd fund a deal with him in the loop.

6 replies

jordan_ellis2ActivePRO6

The box price and the installed price are basically two different products, and it took me until now to get that through my head. That crane day line is going in my notes.

megan_doyle15 Get yours

Wait, so the manufacturer's price doesn't include the foundation? What does it sit on when it shows up?

omar_haddadActivePRO11

@rigging usually a stem wall or piers somebody local pours before delivery, and that somebody has to be scheduled around the crane, which is scheduled around the factory. Sable, 60 to 90 percent over is consistent with what I see, and on a sloped lot I've watched site work alone eat six figures.

devon_pierce Get yoursPRO5

The honest rep is the part that surprises me least, actually. The manufacturers get blamed for blown budgets they had nothing to do with, so the good ones front-load the bad news.

joe_delgado5AP4CPRO6

$1,500 rent against $210k all in is a long, long wait. I move too fast for that math but I respect people who'll sit on it.

gregpowell66AG4BPRO8

I've built these. The item people underprice is the utility trench, because it's the one thing where the length is set by where the house happens to sit and not by anything in the drawing set. Two identical units on two identical lots, one costs $9k more in pipe.