You need to know how the lender underwrites a project beyond the typical loan to value ratio in order to maximize financing leverage and reduce your cash contribution.

Listed below are a few underwriting factors to know when choosing a lender that will give you the most leverage with the least amount of upfront cash invested:

. Recognition of "As Is" Land Value as real equity. The lender needs to recognize 'as is' land value in calculating the loan to cost ratio. For example, if a developer purchased a property and rezoned it creating a higher value than the purchase price, then the difference between the purchase price and the "as is" land value should be considered real equity equivalent to cash contributed by the developer. Regardless of when the purchase was made, as long as real value was created in the land, the lender needs to recognize it as real equity.

. Allow "Developer's Overhead" to be contributed as cash equity. A lender that allows the developer to contribute their overhead as equity can reduce the cash required upfront in a deal. However, the developer will have to forego pulling any developer's overhead out of the loan, but at least they would eliminate having to come up with additional cash up front.

. Know how the lender underwrites the take-out loan which dictates the amount of the construction loan. Know what Debt Service Coverage Ratio (DSCR) is used by the lender. The lower the better. What interest rate and amortization will be used in creating the maximum debt service? These are all questions you need to ask and understand before you choose your construction lender. There is much more to maximizing financing leverage than expressed above, however, these are a few of the important issues to understand when choosing a construction lender that is going to be on your side.