Most investments like this are structured as pass through entities (LLCs taxed as partnerships). The investors are taxed as if the income were "passed through" to them. It retains the same "character" (ordinary/capital) as it has in the hands of the business. Developers are in the business of developing, not in the investing business, although this is pretty complicated and everyone always tries very hard to turn ordinary income into capital gains so there are many rules to try to prevent that or make it difficult.
Were you to sell your interest in the entity at a gain, that gain would be a capital a gain.
For example see this attorney's article:
https://www.fletchertilton.com/1C2194/assets/files/News/Real%20Estate%20Investor%20or%20Dealer.pdf
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