What is the best way that you have found to tell them that you need labor & materials separate, so at tax time you can send them a 1099 for labor?

Agreed the biggest issue will be labor especially on the west coast and say Texas were Hispanic labor makes up HUGE portions of the manual labor force and Agricultural.. your not going to get born and breed US citizens to work in the fields picking fruit ..

Reason being HML's are typically short term loans that are interest only.

Freddie Mac only offers financing for single properties they do not offer 'Portfolio loans" meaning bundle them all into one loan.

Quote from @Sri Reddy: We are a team who are venturing in to constructing a multifamily unit from groundup.We don't have any prior experience in construction and are looking for financing loan options.

The Note/Mortgage for each loan states the dollar amount invested & the % of the total loan by name, for each investor. 

I'm hesitant to give up my conventional loans on the next cash out refinance for DSCR loans.

I have spreadsheets filled with material lists for every phase of the build that includes pricing for materials as well as labor, and sources that I use for them.

More on DSCR loans: DSCR loans won't use your income to underwrite the loan. 

Contrary to most business lending, the REI industry has a lot of "non-bank" lenders that provide attractive loans that can lower your cost of capital and improve your profit/cash flow.