Getting approved to finance new construction for an investment rental means you’ll be going through a typical loan approval process. Your credit, income and assets will be verified and the lender will then provide you with a list of documents you’ll need to provide.

When comparing a construction loan finding equity without cashfor an investment property with a primary residence, you may find that your down payment requirement is higher for an investment project compared to a home you will live in. Depending upon a variety of situations including borrower profile and property type, the down payment could be as high as 30 percent or more. Don’t want to tie up that much cash?

Banks as well as private lenders will consider down payment in the form of other assets in addition to a cash down payment. The most common form of equity comes from the lot, which is if you already own the lot. Depending upon the area, the lot may make for as much as 20 percent of the value of the home once completed.

Banks will also compare the loan amount request with the final value. If the cost to build is $200,000 and the home is appraised at an as-completed value of $300,000, then the equity will be in place once the home is completed.

There is also the option of cross-collateralizing other properties in conjunction with the new project. Say that you need an additional $20,000 in equity in order to be approved for the construction funds or to acquire the lot itself. If you own other properties with equity, you may ask the lender to place a lien on additional properties you own that will be equal to the amount of equity you need. Most such cross-collateralization arrangements require the new lien to be in a first, not a subordinate position. If you need down payment funds and don’t want to use cash, get creative and take advantage of equity hidden in other properties.