In many cases, merchant builders looking to maximize their IRR also need to maximize leverage, as the cost of equity is often more expensive than non-recourse debt. In other situations, merchant builders simply need more leverage to keep liquidity available for other opportunities. When looking to build your capital stack, your first option should be mezzanine financing and preferred equity. Although multifamily and commercial mezzanine lenders often prefer to have a recorded second mortgage as security, a pledge of stock is also an option for securing your mezzanine financing; this is commonly referred to as preferred equity. Although there usually isn't any true equity or waterfall requirement, the security itself is considered equity. 

Sample Mezzanine Financing Loan Terms For Multifamily and Commercial Property Loans as of January, 2019

Amount:                     $3 million and up

Term:                          Coterminous with first

Interest Rates:           9% - 16% interest only

Fees:                          3% - 6%

Maximum LTC:            85%