Is non-recourse lending for new modular construction possible?

Question

Hello BP,

I'm highly considering building a new 4-unit MF property on a piece of land I have and I found a great deal for the project with a modular construction company. My question; any recommendations on a lender for non-recourse debt? Appreciate any and all feedback!

-Scott

Account Closed · Answer

Thank you both! I'm making good headway with a local CU. Terms seem fair and they're being very responsive with me.

@Pedro - you mentioned the manufacturer should warrant for a period of time. What do you think is fair? Also, in terms of modular construction, is there anything you recommend me paying special attention to throughout the process? What was your biggest 'learning lesson' when dealing with modular?

Account Closed · Answer

I only got a year on the warranty, so anything longer than that sounds good to me.

Without knowing what you're building it's hard to say what to pay special attention to. Turns out I needed to pay special attention to everything. One easy example being my drawings showing where the oven hood exhaust vent would come in the soffit at the roof and instead they just ran it straight out of the wall. This beautiful wall they painted black and they put this stupid plastic white exhaust hood outlet in the center of it...

I ripped it off as soon as the trucks arrived on site so it wouldn't show up in any photos and put it up later after I spray painted it black.

Account Closed · Answer

I had a number of banks drop out of my 3-unit build because I was going modular. I don't know if you're doing custom modular or not but I was. If you're doing some off-the-shelf product from a manufacturer you might have an easier time. The lender I wound up using was a smaller community bank so I'd suggest starting there first. One of the more difficult aspects of a modular home build for lenders to swallow is that the manufacturers will typically require 100% payment before the mods leave their lot, which leaves you with little leverage for shortages in workmanship or other issues. The manufacturer should warrant the product for a period of time, though. Your mileage may vary. I was looking for a pretty large loan at $1.8M

If you're going to be an owner-occupant of one of these 4 units you'll probably have an easier time. As far as I know FHA loans and most Freddie and Fannie products are pretty familiar with modular builds by now.

Justin Kane · Answer

honestly when it comes to money you just have to shop it like crazy, start local then start calling outward, if you have great credibility i dont see why not