Who Is Actually Lending on Ground-Up Modular Construction?

Question

Looking for some help from the BP network.

I’m a mortgage lender myself, and I have a development project involving modular construction that needs a hard money/private lending solution.

The important part: I need someone who actually understands modular.

The modular manufacturer requires a draw/payment schedule that doesn't fit neatly into a traditional ground-up construction lending structure. So I'm looking for a lender comfortable working with manufacturer deposits/progress payments + the onsite construction draws.

Ideally, I want to find someone who can become a long-term referral partner for these projects, not just solve this one deal.

If you lend on modular development projects, or have personally closed one with a lender you'd recommend, please DM me or drop their name below.

Muyees Ayilara · Answer

@Trevor Higgins — this is exactly why 90% of "ground-up" private lenders pass on modular — I get it — I'm lender side too — Boynton Beach referral partner for private/hard money — not retail mortgage — so I see the gap daily.

Why traditional construction doesn't fit modular:

Traditional: Land -> Foundation -> Framing draws — all onsite — lender inspects, releases.

Modular: Manufacturer wants 10-20% deposit to enter queue, 30-40% at start of build in factory, 30% before ship, balance on delivery — 60-70% of cost is OFF-SITE before anything hits your lot — lender has no lien on sticks in a factory in PA/VA — plus deposit is non-refundable.

Most lenders hear that and say no — because they can't secure deposit with real property — only with factory contract.

How we structure it when we do it:

Bifurcate the loan:

Part A — Manufacturer Deposits — secured by land + factory Purchase Agreement + performance bond / factory insurance — we require factory is certified — HUD or state modular stamp — and factory allows 3rd party inspection — not just photos.

Part B — Onsite — traditional draws — foundation, set, button-up, CO — inspected.

Docs we require upfront — beyond normal ground-up:

Manufacturer agreement with draw schedule — exact % and triggers

Factory cert + warranty + delivery insurance

GC contract separate — who does set / crane / utility / button-up — GC must be licensed for modular set in NC

Off-site deposit coverage — borrower must have 20-30% skin in deposit — we won't fund 100% of off-site deposit — too much risk if factory delays.

LTV reality: We underwrite ARV — but fund manufacturer deposits at lower advance — typically 70% of total project cost — not 80-85% like stick — and we hold last 10% till CO.

We closed one similar — not modular but panelized — same issue — $295k + $50k rehab Monarch Lakes 33446 — appraisal $600k ARV — we did exterior-only + factory docs — same logic — lender needed factory inspection — borrower paid appraisal $500+ upfront — third party quoted — then lock 15 days — underwrite 24-72h.

Long-term referral — yes: I don't lend direct — I place with private capital partners — including JCREIG network — ground-up modular we vet case-by-case — but I keep referral — if your client has land under contract, factory under contract, GC set crew ready — I can run it — Stage 1: application + entity docs + EIN letter + ID front/back + bank statements showing deposit reserves + factory agreement.

If your project is NC/SC — land owned? Factory selected? What is deposit schedule %? I can tell you in 1 call if fundable — or if needs more borrower liquidity for off-site.

DM me deposit schedule + factory name — I won't waste your time if not fit — modular is niche — needs lender who actually understands manufacturer payment schedule is so important — like you said.

Luis Ochoa · Answer

Hi @Trevor Higgins I like your post, I think modular is the future of real estate.

Its cheaper and faster to build and I expect more private lenders will start funding these projects. The tricky part for lenders is the process: most of the build happens in a factory, so the draw schedule has to adapt. My firm funds once the structure is set on the site. How did your previous lender handle draws on modular? I’d like to learn how it was done.

Erik Estrada · Answer

Hey Trevor,

Modular and Manufactured Home developments are tough to finance and may require a ton of research and local outreach. Most of my clients buy the land and build with a HELOC or cash and then refi with a DSCR loan.

Adrea Johnson · Answer

Trevor, I’m Adrea with EquityNest Capital. The factory-payment schedule is the key issue here, especially if a lender must fund deposits or progress payments before the modules are delivered and attached to the site. If you share the project location, land status, total cost, as-completed value, manufacturer agreement and payment milestones, site-work budget, borrower liquidity, and exit, I can review whether any of our construction or private-capital channels may fit. I’ll be candid if the off-site advance requirement is outside the box.

Luis Ochoa · Answer

Hi @Trevor Higgins, Good question, because modular breaks the usual draw model. A standard construction loan releases funds against work completed on site, which the lender can inspect and secure.

With modular, a large share of the cost is paid to the manufacturer off site before anything is on the land. When you approach lenders, bring the manufacturer contract and payment schedule, how deposits are protected, the site work budget and schedule, and the plan for setting, finishing and certificate of occupancy.

Ask each lender directly whether they fund factory progress payments or only reimburse at delivery.

Marc Del Priore · Answer

Hi Trevor - the modular draw problem is real: most ground-up construction lenders release on work-in-place inspections, while manufacturers want deposits and progress payments before the units are even on site, so the two schedules rarely line up without a lender who has done modular before. The lenders who will play there usually want the manufacturer contract, the payment milestones, total project cost versus as-complete value, and a clear take-out or sale exit documented up front. I am Marc with Royal Partners - if you want, DM me the project size, location, and the manufacturer's payment schedule and I will tell you honestly whether it fits the construction lenders I work with.

Nick Belsky · Answer

@Trevor Higgins

We've successfully done quite a few of these... I guess I don't understand why you've seen or are having trouble with private or hard money construction lenders. All of our deals have been handled just like any other GUC... the only real difference is the borrower has to pay those "off-site" fees out of pocket and won't get reimbursed for them until the foundation is done and/or shell is up. Only being able to draw on completed work is the norm, but in this case, that first draw is delayed a bit longer. That first draw point part varies from lender to lender, but the only real difference we've seen is the borrower's qualifying liquidity needs to be higher so they can carry the costs until the foundation or shell is up and the first draw can then be taken. After that, if follows the same patterns as any other GUC loan.

Cheers!

Trevor Higgins · Answer

Correct - the draw schedule does not work for modular manufactures as they want a significant portion of the funds before the "kits" leave the factory. My 1xClose has a custom draw schedule for Modular's but my ground up "hard money" options don't. So I'm looking for one that does.

Noah Wright · Answer

Wanting a repeat partner instead of a one-off fix is the right way to think about modular, since the hard part is finding someone who already knows the payment schedule. One place people skip is the factory itself. Ask the manufacturer which lenders their last few builders closed with in your state. They know who has actually funded their units, which is more than any directory will tell you. When I shop these, one detail comes up early, which is when title to the modules passes to the buyer, at the factory or on delivery. Get that in writing before the first lender call. A lender gets comfortable with money it can't inspect when the paperwork shows who owns what at each step. Do you already own the land outright? That decides how much equity is there to carry the factory payments before the first draw.

Diana Khan · Answer

@Trevor Higgins, I don't have a specific modular construction lender to recommend, but I can see why finding one who understands the manufacturer's payment schedule is so important. I'd also want to make sure the manufacturer agreement and loan terms work together, especially when it comes to deposits, delivery delays, and when payments are due.

I'm a real estate attorney and investor based in Maryland, and I work with clients on contracts and property transactions. I've seen how important it is to have clear agreements when several parties are involved in a project, especially when payment schedules and responsibilities need to line up.

I appreciate you bringing this up, @Trevor Higgins. It's an interesting financing challenge, and I hope you find the right lending partner. Happy to stay connected!

Who Is Actually Lending on Ground-Up Modular Construction?

Who Is Actually Lending on Ground-Up Modular Construction?

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