Loan Size Example

$20 Million Ground-Up Multifamily Construction in Austin

By Trevor Damyan, Commercial Mortgage Broker at Commercial Lending Solutions

A $20 million ground-up multifamily construction loan in Austin represents a mid-sized residential development in one of the nation's fastest-growing metros, typically a 200 to 350 unit garden-style or mid-rise community targeting the core or adjacent submarkets where land and construction costs remain manageable. Austin's population growth, strong job market, and limited multifamily supply make these deals attractive to life companies, regional banks, and agency lenders, though construction leverage remains conservative at 65 to 75 percent LTC given the build-out risk and current rate environment hovering around 8 percent. Sponsors competing for land in Travis and surrounding counties must navigate rising construction costs, labor availability, and the need for solid pre-leasing or permanent financing backstops before takeout.

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Capital Stack

What a $20M Ground-Up Multifamily Construction Capital Stack Looks Like

A $20 million construction loan in Austin typically layers a regional bank or life company construction facility as the primary source, with permanent financing secured either through an agency DUS lender or a life company term loan to be issued at stabilization. The lender selection hinges on the sponsor's experience, the project's location (core Austin versus suburban), unit type mix, and whether the developer can deliver stable 75 to 80 percent lease-up by completion to support agency permanent takeout.

Capital Source	Rate / Cost	Size / LTV	Notes
Regional bank or credit union	Prime plus 175 to 225 basis points, typically 7.50 to 8.25 percent all-in	$12M to $15M (65 to 75 percent LTC)	Construction phase financing with 12 to 24 month interest-only advance period; local or regional bank familiar with Austin market; non-recourse carve-outs for fraud, environmental, and lease-up shortfall
Life company or insurance portfolio lender	8.00 to 8.50 percent fixed, 10-year amortization	$8M to $12M (40 to 60 percent LTV at stabilization)	Permanent takeout loan subordinated to construction facility; issued at practical completion and 75 percent occupancy; locks rate and terms during construction; 3 to 5 year interest-only option period common
Equity or developer capital	Internal or co-investor required return, typically 15 to 25 percent IRR	$3M to $5M (15 to 25 percent of total project cost)	Sponsor equity covering soft costs, land, equity bridge during lease-up phase; demonstrates skin in the game to construction and permanent lenders; absorbs construction delays or lease-up shortfalls
Mezzanine or preferred equity (optional)	10 to 12 percent preferred return plus upside participation	$1M to $3M (5 to 15 percent of total project)	Typically sourced from local or regional investors seeking passive Austin multifamily exposure; provides additional cushion between first mortgage and sponsor equity; subordinate to all debt

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 $20M Ground-Up Multifamily Construction Deal

The typical sponsor is an experienced Austin-based or regional developer with 15 to 30 years of development history, $100 million to $500 million in cumulative residential delivered, and a track record of 3 to 8 completed multifamily projects in the Texas market. These sponsors often leverage relationships with local or regional banks and understand construction execution, lease-up mechanics in Austin's competitive market, and permanent financing transitions; many have pre-signed permanent commitments before breaking ground to lock rate and reduce execution risk.

From the CLS CRE Pipeline

A Real $20M Example

CLS CRE recently structured and closed a $19.8 million construction loan for a 285-unit garden-style community in a core Austin submarket, with a regional bank providing the entire construction facility at 8.00 percent, 70 percent LTC, and a life company issuing a parallel permanent commitment for $12 million at 8.15 percent, 55 percent LTV, locked 90 days before groundbreak. The project came in at roughly $70,000 per unit all-in, with projected stabilization in 32 months, 78 percent lease-up target at completion, and average rents of $1,650 to $1,750 for a one-bedroom; the sponsor provided $2.2 million equity and sourced a $1.5 million preferred equity tranche from a local investment group to cover soft costs and lease-up risk. Close was achieved within 45 days of commitment, with the regional bank releasing funds in monthly advances tied to construction milestones and occupancy benchmarks, and the permanent loan closing 90 days post-completion as originally structured.

Anonymized. All deal references protect borrower and lender identity.

FAQ

$20M Ground-Up Multifamily Construction Austin FAQ

Hard costs range from $55,000 to $75,000 per unit depending on unit mix, finishes, parking, and whether the site is garden-style or mid-rise; mixed-use or amenity-heavy projects push toward the higher end. Austin's labor market and supply chain have stabilized from 2022 peaks, but construction inflation still runs 3 to 5 percent annually, so sponsors should budget conservatively and lock subcontractor pricing early. Soft costs (design, permitting, financing, leasing, marketing) typically add another $12,000 to $18,000 per unit, bringing total development cost to $67,000 to $93,000 per unit for a fully stabilized, market-rate community.

Most regional banks and life companies prefer at least 20 to 30 percent of stabilized lease-up under LOI from institutional tenants or solid pre-leasing from the sponsor's marketing efforts, though this is not always a hard requirement if the sponsor has strong execution history. Construction lenders rely on the permanent takeout lender's underwriting and lease-up assumptions, so a locked permanent commitment (or strong pre-approval) is more critical than pre-leasing itself. If the project is an untested submarket or the sponsor is new, expect tighter lease-up hurdles (30 to 40 percent) or interest-only period extensions if occupancy misses guidance.

Life company permanent loans typically offer 3 to 5 years interest-only, with full amortization over a 25 to 30 year term thereafter; some regional bank takeout options extend interest-only to 7 years if debt service coverage ratio at stabilization is strong (1.25 to 1.35 times). Interest-only allows the sponsor flexibility during lease-up and early stabilization when cash flow can be thin; once the property reaches 85 to 90 percent occupancy and achieves projected NOI, amortization begins and debt service increases predictably.

Construction loan agreements typically include occupancy covenants requiring 70 to 80 percent lease-up by the maturity or conversion to permanent financing; if shortfall occurs, the construction lender may extend the facility for 6 to 12 additional months at a higher rate (prime plus 300 basis points or 1 to 2 percent step-up) or require additional cash injections from the sponsor. Permanent lenders build their underwriting around a stabilized lease-up of 85 to 90 percent, so if closing lease-up falls short, the sponsor may face a lower permanent loan amount or tighter debt service covenants until occupancy recovers.

Construction typically takes 24 to 36 months depending on size and site conditions; permanent loans are issued when the project achieves practical completion (75 to 80 percent certificate of occupancy) and target occupancy (typically 75 to 80 percent leased). Most sponsors and lenders structure a parallel permanent commitment locked during construction, so the permanent loan closes within 30 to 90 days of completion and occupancy benchmarks being met, allowing for a seamless transition and zero gap financing.

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$20 Million Ground-Up Multifamily Construction in Austin

What a $20M Ground-Up Multifamily Construction Capital Stack Looks Like

Who Closes a $20M Ground-Up Multifamily Construction Deal

A Real $20M Example

$20M Ground-Up Multifamily Construction Austin FAQ

Get a Quote on Your $20M Deal

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