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Guide to Prefab and Modular Homes in San Francisco

Michael Frank

With rising home prices and a growing trend towards sustainable building, prefab home building in the San Francisco Bay Area is growing increasingly popular. Builders based in the area specialize in building beautiful and modern homes with sustainability at the forefront of the design process. Despite the increasing popularity of prefab building, you may still have unanswered questions about building a prefab home in San Francisco - Can I build a prefab on a hill? How much will it cost? How long will it take? to name a few. Throughout this guide to buying a prefab home in San Francisco our goal is to help address the questions you may have as a prospective prefab home buyer based in the Bay Area.

Why Might You to Want to Build a Prefab Home in San Francisco?

  • Faster Build Times - because homes are manufactured off-site and only assembled at the build site, homes can be constructed much quicker than traditional site builds.

  • Cost Controlled - with a highly controlled build process (homes are manufactured in climate-controlled warehouses), unforeseen cost overruns can be better managed leading to reduced overall cost. This is especially important for expensive areas like San Francisco

  • Sustainable & Modern - many prefab builders in San Francisco can build energy efficient, net-zero homes (in-line with California’s 2020 Zero Net Energy “ZNE” mandate). These designs also feature contemporary designs and state of the art technology

Key Decisions to Make:

  • Home Location - while building in an expensive neighborhood might have high up-front costs, a prefab home in such areas can be a sound long-term invest. When buying property you should also be mindful of a few things that could affect your home build:

    • Slope of lot - this is especially true in San Francisco where steep hills can make it difficult to build most pre-designed prefabs

    • Set back requirements

    • Floor area ratio or other zoning protocols that may affect the size of the home

    • Whether or not your neighborhood requires a design review

  • Custom vs. Standard - While most builders offer a set of pre-designed floor plans, some also offer options for partial or total home customization. Other builders may specialize in custom prefab home designs. If you live on a tricky lot (uneven terrain, small-lot size, etc.) you may face a limited offering of standard home designs

  • Modular vs. Kit Home v.s. Panelized - While all three of these construction techniques qualify as prefab home building techniques, there are nuances that you should know when building your own prefab house. These prefab home styles include:

    • Modular - homes are made up of multiple box-like modules. These modules are fully assembled and consist of floor, walls, ceiling, wiring, plumbing, and internal fixtures. These modules are constructed off-site and then later shipped to your desired location. Once on site, they are joined and connected to the foundation. Modular construction is one of the most affordable prefab building techniques.

    • Kit Home - all materials and components necessary for building a home are delivered to the build site. In most cases, an owner builder can assemble the kit home themselves as a cost-saving method.

    • Panelized - the home’s structural components: walls, floor, ceiling, are manufactured off-site and then later constructed at the final site like a traditional build. While somewhat similar to modular construction, panelized building offers more flexibility in the home build process.

  • Architect vs. All-in Company - There are many steps in the prefab home build process. Major steps include land acquisition, home design, manufacturing, and assembly. When selecting a company for your prefab home, you should pay attention to the services your company offers. In some cases the company you choose may only offer a home design your home and therefore sub-contract out the manufacturing process. This leaves you responsible for acquiring land and later finding a builder to assemble the home. Other companies however, may be a one-stop shop and assist you in all stages of the home build process.

  • Financing your home - unless you are planning to pay for your home in cash, you are likely going to need outside financing for your prefab home. The two most common ways of financing a prefab home build are:

      • construction loan - a short term loan that you can refinance once construction is complete

      • temp to perm loan - a construction loan for the duration of construction that converts to a normal mortgage once your house is finished. The advantage of these loans is you only have one mortgage close vs. two with just a construction loan.

    • These methods usually allow you to finance both the land purchase and the construction of your home however, the underwriting and approval process on these loans can be lengthy (60+ days) as the bank is not only underwriting you as a borrower, but also the viability of your building plans. To get land imore quickly, buyers will often pay cash for their building lot and then the lender will credit the land purchase as a down payment percentage on the purchase.

    • Some of the best lenders for these products only operate regionally. Therefore, if you would like assistance we can provide recommendations here.

    • If you’re looking to purchase an ADU (accessory dwelling unit) or tiny home, then you may want to consider a personal loan:

      • Many personal lenders allow you to borrow up to $100k with no down payment

      • These loans are typically amortized over a shorter period than mortgages (up to 12 years)

      • These loans typically don’t underwrite the property and instead underwrite you as a borrower

      • Many of the best personal lenders are online and serve almost the entire country

      • The time to get approved for a personal loan is generally pretty fast (as little as a day to up to a couple weeks)

Common Questions

  • How much will it cost to build a prefab house in the San Francisco Bay Area?

    • While certain variables such as location, builder, and floor plan will affect the total cost of building your home, it is our experience that the final cost of your prefab will range between $300-$500.

  • Is a prefab home a good investment?

    • Yes, in areas where the total cost of building your prefab home (land cost + building costs)  is less than the average dollar per square foot sales price of homes in your neighborhood i.e. you are able to sell your home for more than it cost to build it. In the Bay Area, that includes areas where the average price per square foot is $700 per sq ft or higher. This includes most neighborhoods on the peninsula such as Redwood City, Palo Alto, Los Gatos, Mountain View, downtown San Francisco and other areas such as Mill Valley and Stinson Beach in Marin County. It is important to note that the hardest part of a project in these areas, especially on the Peninsula, is finding land or lots suitable for teardown that will work within the price range and timeframe of your project.

    • Can I finance a prefab home in San Francisco?

    • Yes. The most common way to finance a prefab home is a temp to perm loan. This financing method starts out as a loan for the construction of your home and converts to a mortgage once your home is completed. Another financing option is a construction loan which is a short-term loan that you then refinance once the construction process is finished

  • What do the economics of an investment in a prefab home look like?

Reputable Companies that Serve the San Francisco Area:

If you are interested in alternative housing options in San Francisco, be sure to check out our list of Prefab ADU builders in the Bay Area and Tiny Homes For Sale in California.

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