$15M Ground-Up Multifamily Construction Houston | Commercial Lending Solutions 
Loan Size Example

$15 Million Ground-Up Multifamily Construction in Houston

By Trevor Damyan, Commercial Mortgage Broker at Commercial Lending Solutions

A $15 million ground-up multifamily construction loan in Houston represents a mid-market opportunity that attracts both regional banks and life companies seeking exposure to Houston's continued population growth and affordable housing demand. These deals typically finance 200 to 350 units in suburban submarkets like Katy, The Woodlands, or along the I-10 corridor, where land costs and construction economics support stabilized yields in the 5.5 to 6.5 percent range. Leverage at this size ranges from 65 to 75 percent LTC, with rates currently tracking 8.0 to 8.5 percent depending on sponsor strength and market conditions. Construction duration averages 18 to 24 months, making underwriting discipline around unit economics and lease-up assumptions critical to lender confidence.

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Capital Stack

What a $15M Ground-Up Multifamily Construction Capital Stack Looks Like

At $15 million, Houston ground-up multifamily construction loans are primarily executed through regional banks on balance sheet or life companies willing to provide full-takeout permanent financing. Sponsor track record, market selection, and proof of pre-leasing traction dominate the lender selection decision, as Houston's competitive landscape has tightened underwriting standards since 2023.

Capital Source Rate / Cost Size / LTV Notes
Regional bank construction + permanent 8.0 to 8.5 percent fixed, 10-year amortization $9 million to $15 million (65 to 72 percent LTC) Full-doc construction phase with interest-only, then step to amortizing permanent at stabilization or lease-up threshold (typically 85 percent). Recourse required. Sponsor net worth minimum 25 to 30 percent of loan amount. Market-dependent: East Houston and Katy subdivisions preferred.
Life company permanent takeout 7.75 to 8.25 percent fixed, 10-year amortization $10 million to $15 million (65 to 70 percent LTV at permanent) Subordinate to construction lender during build; takes primary position at permanent close. Requires minimum 55 to 65 percent occupancy at permanent funding. Non-recourse or limited recourse. 25 to 30 day rate lock standard.
Sponsor equity / preferred equity Preferred equity returns 8 to 12 percent IRR or 10 to 15 percent cash-on-cash $4 million to $5 million (25 to 35 percent of total capitalization) Typically sourced from co-investors, private equity funds, or sponsor retained capital. Provides cushion for construction overruns and lease-up risk. Subordinates to construction and permanent debt.
Mezzanine or bridge (optional) 9.5 to 11.0 percent plus 2 to 3 point origination $1 million to $3 million (supplemental gap financing) Used when sponsor equity cannot fill shortfall or when permanent lender reduces commitment. Typical term 3 to 5 years. Repaid from refinance or permanent loan proceeds.

Pricing reflects active CLS CRE quote pipeline as of April 2026. Specific deal pricing depends on sponsor, property, and structure.

Sponsor Profile

Who Closes a $15M Ground-Up Multifamily Construction Deal

Typical sponsors are established Houston multifamily operators or regional builders with 5 to 15 prior development starts and documented net worth of $4 million to $7 million. These borrowers have successfully leased and stabilized prior projects in Houston or Dallas-Fort Worth and understand local permitting, lot acquisition, and construction management. Many are motivated by entry into Houston's attractive rental demographics and expanding corporate tenant base, while others are refinancing maturing debt on stabilized assets to reinvest equity into new development pipelines.

From the CLS CRE Pipeline

A Real $15M Example

CLS CRE recently closed a $14.2 million construction and permanent loan for a 285-unit multifamily project in suburban southwest Houston. The regional bank lender provided $9.8 million construction financing at 8.15 percent with 18-month interest-only, and a life company committed to a $12.1 million permanent loan at 7.95 percent upon achieving 87 percent occupancy and delivery. Sponsor contributed $4.5 million in equity from two co-investor partners, yielding a total capitalization of $18.6 million and a 65 percent LTC on construction. The project delivered on schedule in 21 months with 89 percent pre-leasing at permanent close, allowing the sponsor to execute the permanent refinance and redeploy capital into a second ground-up deal across Houston in the following calendar year.

Anonymized. All deal references protect borrower and lender identity.

FAQ

$15M Ground-Up Multifamily Construction Houston FAQ

Houston ground-up multifamily construction typically runs 18 to 24 months from shovel-ready close to certificate of occupancy. Lenders underwrite for 20 to 22 month timelines to build in contingency for permitting delays or weather impacts. Interest-only carry periods are structured to match this timeline, with permanent funding triggered at stabilization (85 to 90 percent occupancy) rather than delivery, reducing carry costs and demonstrating market absorption.
Regional bank construction lenders typically require 50 to 65 percent pre-leasing to fund phase two of construction, while permanent lenders require 85 to 90 percent occupancy (actual or executed leases) before releasing permanent funds. Life companies are more flexible than agency lenders and may accept 80 to 85 percent occupancy or provide for a modest interest-only period post-stabilization while occupancy ramps to 92 to 95 percent.
Construction loans are full recourse with personal guarantees from the sponsor. Permanent loans from life companies or banks are typically non-recourse or limited recourse (recourse limited to equity contribution or first 5 to 10 percent of loan balance). Agency (Freddie Mac or Fannie Mae) permanent loans are non-recourse, but those products rarely compete at $15 million due to loan size minimums and adjusted basis limitations on ground-up construction.
Life companies and regional banks typically require a minimum 1.25x to 1.30x DSCR at permanent close, based on stabilized net operating income at 92 to 95 percent occupancy. Lenders may impose DSCR maintenance covenants requiring the sponsor to inject equity or cure if DSCR falls below 1.20x during the loan term. This is calculated on a pro forma basis assuming market rents; actual achievable rents are stress-tested against comparable properties in the submarket.
Houston experienced significant new supply delivery between 2022 and 2025, tightening rent growth and forcing lenders to be more conservative on lease-up assumptions and stabilized DSCR. This has compressed LTC ratios from historical 75 to 80 percent to current 65 to 72 percent for most transactions, and pushed rates up to 8.0 to 8.5 percent as lenders price in longer lease-up periods and modest rent concessions. Sponsors in tight submarkets like Katy or The Woodlands enjoy slightly better terms due to demographic tailwinds and pre-leasing velocity.


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