A development deal has different layers of capital, and each layer carries a different level of risk.
At the bottom is the construction loan.
The bank or lender provides the debt needed to improve the land and build the project. It is usually the largest and cheapest part of the capital.
The lender also gets paid back first.
At the top is the equity.
That is the capital provided by the developer and investors. Equity gets paid back last, which means it carries more risk.
But with that higher risk comes the potential for higher returns.
How comfortable are you with taking more risk for the chance of earning a higher return?