Mixed-Use Feasibility Study Case: Colorado Springs, Colorado, SBA 504

Owners who search for a mixed-use feasibility study company or a mixed-use feasibility study consultant usually want one answer: how much debt the building can carry, and what the lender will ask for before it says yes. Feasibility Study Company prepares mixed-use feasibility studies for owners, developers and their lenders. Its parts are a dated market read, a count of the competing supply, a priced project and a coverage test of how much debt the income supports. This page applies them to one hypothetical project: a business that buys the two-story building it already trades from, keeps the ground floor for itself and rents the six apartments above, financed with an SBA 504 loan in Colorado Springs, Colorado. We can run these steps on your own building.

The subject is generic: an existing building of about 5,400 square feet at street level for the owner's business and 4,200 square feet above it for 6 apartments, on a lot in the central commercial core of Colorado Springs, El Paso County, along the Tejon Street corridor. The corridor is a case assumption and no parcel, owner or business is described. The market figures are dated public records, and an input table near the end shows where each model figure starts, a source or the word assumption. The project is filed under our mixed-use practice, the city is in Colorado, and the program rules are summarised on our SBA 7(a) and 504 page.

A mixed-use building sells two kinds of space to two kinds of tenant. The upstairs tenant needs a job and a lease, and the downstairs tenant needs customers. The tables set out the public record for both, starting with the metro economy and ending with the state.

Jobs and wages

The metro added jobs at a modest pace, 0.8% over twelve months to September 2026, with the unemployment rate at 4.5% [1]. County payroll data point the other way for the first quarter: covered employment in El Paso County was 301,647 in March 2026, which is 1.2% fewer jobs than a year before, while the average weekly wage rose 5.0% to $1,437 [3]. The two readings come from different surveys, and the study reads them together: a labor market that is holding its jobs while wages move up. For a landlord the wage growth matters more than the job count, because it is what a tenant pays rent from. The mean hourly wage across all occupations was $34.03 in May 2025 [2], which at full-time hours is the income base for the upstairs tenant.

The metro's economic output was $53,092.641 million in 2023, the last year the research could read, in a series its relay labels discontinued [14]. The study uses it as scale and not as a trend.

Housing and renters

Colorado Springs is a market in which buying is expensive and renting is the alternative. The median listing price in the metro was $484,950 in September 2026, with 4,266 active listings, according to a relay of Realtor.com data [5][6]. A price of that size can keep some households renting longer, which supports the apartment half of the building. Listings sat for a median of 67 days before they sold or were withdrawn [7]. County permitting added supply: 5,707 housing structures were authorized in El Paso County in 2025 [4]. Both housing series are secondary rows, and the study labels them as relays of the original publishers.

The apartment market has its own record. Completions in the first half of 2026 were 369 units, against 840 in the second half of 2025, and net absorption of 1,319 units was well above the completions, which is why occupancy rose to 94.4% [10]. The half year's sales volume for apartment buildings was $82.5 million, up from $22.9 million in the half before [10]. Buyers returned to the asset class. For a small owner that is a double-edged signal: it supports the value of the building and it raises the price of the next one.

Visitors and the storefront

The Pikes Peak region drew 25.6 million visitors in 2025, up 0.3%, who spent $3.1 billion, up 0.4%, and 11.2 million of them stayed overnight [12]. A storefront in the central core draws some of that spending, and the study does not count on it: the release gives no retail or lodging figure, and spending that grows by less than half a percent is not a growth story. The sponsor's own demand case decides whether the ground floor can pay the rent the model charges it.

The state behind the city

Colorado's population reached 6,012,561 on July 1, 2025, a rise of 0.4%, according to the state demographer's summary of Census Bureau estimates, a secondary relay of the federal release [15]. Net domestic migration was negative 12,100, more people leaving the state than arriving, and net international migration of 15,356 more than offset it, leaving a total net gain of 3,256 [15]. A state whose growth depends on arrivals from abroad while its own residents move out is a state in which household formation continues at a slower pace. The apartment demand that Colorado Springs shows in its absorption figures rests on that base, and a landlord should not extrapolate it.

The state's unemployment rate rose from 3.8% a year earlier to 4.1% in September 2026 [16]. The state median listing price of $564,000 is above the Colorado Springs metro figure of $484,950 [19][5], so Colorado Springs is the cheaper of the two markets to buy into, a fact that favors a first-time buyer more than it favors an apartment landlord. The state held 34,082 active listings [20], and its repeat-sales house price index stood at 853.19 in the second quarter [21].

Context from the Census register

The table that follows gives Census Bureau and Bureau of Economic Analysis estimates for El Paso County. Their vintages differ from the figures above, so small gaps are expected.

The county holds 97,958 renter-occupied homes among its 742,999 residents [28], a deep pool of tenants for a six-unit building. The census median gross rent of $1,696 is a survey median across every kind of rented home, and the CBRE average of $1,457 per unit is a broker survey of larger buildings [28][10]. The two are built differently and measure different things, and the study uses them as a bracket, not as a target. The model's rent of $1,250 a month for the apartments sits below both, because they are small, upstairs and in an older building.

The subject site is generic, so this section does not describe a parcel. It lists what the public record says about the setting and sends the rest to the lender conditions. The research found no zoning ordinance for Colorado Springs, no flood zone determination, no utility provider or tap fee schedule and no traffic count for any corridor, and it does not guess at them.

State housing and parking law

Colorado passed a run of housing laws in 2024 and 2026 that bear on a building with apartments. A 2024 act on minimum parking requirements takes effect for covered local governments on June 30, 2025, and it was signed on May 10, 2024 [22]. A 2024 act on housing in transit-oriented communities sets a goal of 40 dwelling units per acre for zoned density in transit-related areas [23]. The research does not say whether Colorado Springs is a covered government or whether the subject lies in a covered area. If it does, the parking and density rules loosen what an owner may add or convert on the lot, and if it does not, the city's own code governs. A zoning verification letter settles it.

Property tax

For tax year 2026 the state sets a 25% assessment rate for commercial property and most other nonresidential property, and its 2024 property tax act limits annual growth in local government property tax revenue to 5.25% [25]. The research holds neither the El Paso County mill levy nor the assessment rate for residential property, so the tax on a building with both uses cannot be computed. The model carries 1.00% of cost as a planning level and the lender condition asks for the county assessor's record and the actual levy.

Flood, drainage and hail

Federal records show the city's drainage work. In September 2026 FEMA announced more than $2.6 million of Public Assistance for water drainage and embankment repairs in Colorado Springs [13]. The same release carried more than $8 million in hazard mitigation money for floodplain restoration on Cottonwood Creek and more than $2.9 million for Monument Creek stabilization [13]. These are single projects and the study does not count them; they show that creek flooding is a live issue in the city, and a flood zone determination for the subject parcel is a lender condition. Statewide, FEMA announced more than $90 million for Colorado communities in the same release [13].

Hail is the insurance issue. A report by the state's Division of Insurance, relayed by a newspaper, attributes 26% to 54% of a homeowner's premium to hail and 0.9% to 24.6% to wildfire, from 20 carriers that hold 80% of the market [26]. Those are homeowner premiums, not commercial rates, and the newspaper is a secondary source. They signal that insurance cost in Colorado is driven by weather; the model's insurance line is an allowance, and a broker quote is a lender condition.

What a site visit must settle

Traffic counts, parking supply, signage rules, the certificate of occupancy for each use and the fire separation between them are all outside the research, and all are on the lender conditions list. A storefront lives on exposure, and the study will not model the ground floor's demand from a traffic count it does not have.

Operating costs are allowances, because the research holds no expense data for small mixed-use buildings or for any building in Colorado Springs. The line items follow what a landlord of a building with a storefront and apartments pays: property tax on cost at 1.00%, insurance at $1.60 per square foot, owner-paid utilities, repairs at $1.75 per square foot, a management and bookkeeping charge of 5.0% of apartment rent even if the owner does the work, legal, advertising and turnover, and a replacement reserve. Costs grow at 3.0% a year while apartment rent is held flat. In the commercial lease the tenant is the owner's own business, so the model treats the rent as modified gross and charges the building with the taxes and insurance.

Operating cost totals $70,796 in Year 1 and $74,076 in Year 3 against revenue of $189,000 and $196,963, leaving net operating income of $118,204, $122,257 and $122,887 in the first three years, a margin of 62.4% in Year 3.

The expense ratio is the reason a small building carries less debt than its rent roll suggests. Taxes, insurance and maintenance do not shrink with the building. The study treats the tax line as the least certain: the state's rates are in the record [25], and the local levy that completes the calculation is not.

Under the 504 program a bank takes the first lien and a certified development company funds the second through an SBA-guaranteed debenture. The program's standard split is Third Party Lender 50%, debenture 40%, borrower 10%; debenture 35% at a 15% contribution and 30% at 20% [31]. The sponsor in this case is an established business and the building is a general-purpose mixed-use structure, so the equity tier is 10% [31]. The tiers rise to 15% for a new business or a special purpose property and 20% for both [31], and a lender should confirm that the owner's business is more than two years old and that no feature of the building makes it special purpose.

The sponsor proposes 10.0% equity. That meets the tier and the debenture limit of $5 million [31], and the proposed debenture of $681,478 is far under the limit. What it fails is coverage: Year 2 net operating income covers the $133,340 of annual debt service only 0.91x, and the program's floor is 1.15x [31]. The engine raises the borrower's contribution until Year 2 coverage reaches the floor. At 28.7% equity the bank lends $851,050, the debenture is $362,547 and annual debt service is $106,219.

Occupancy

The test that decides whether a building fits the program at all is not in the engine. For an existing building the operating borrower must occupy at least 51% of it, and for a new building 60% [31]. The case gives the owner's business the whole ground floor, which is more than half of the building by floor area, and rents the upper floor to third parties. A small shift in the plan moves the share: an extra apartment carved from the ground floor, a ground-floor storage room leased out, or a lease that ends in Year 3 can each pull the occupied share toward the line. The appraisal should state the occupied share, and the application's square footage should match it. The study treats the share as a condition, with the floor plan measured on one basis for the appraisal, the application and the lender's file.

How the program reads rent from apartments in the same building is a question the lender and the certified development company answer under the current edition, SOP 50 10 8.1, effective October 1, 2026 [31]. The mixed-use hub sets out how the earlier edition framed residential space, and a study has to say which reading its lender applies. This page does not decide that question; it makes it a written lender condition.

Rates, term and fees

The 504 debenture is available at maturities of 10, 20 or 25 years [31], and the bank loan carries 7 years for a 10-year debenture, 10 years for a 20- or 25-year debenture as the minimum term [31]. The model takes the longest debenture and amortizes the bank loan over the same term. The bank rate is 7.50%, a planning figure half a point over Prime [33], and the debenture rate is 7.00%, an assumption, because the research holds no debenture pricing. The fiscal year 2027 upfront fee is 0.50% of the debenture and the annual fee is 0.203% [32]. The upfront fee is added to project cost in the model.

Local lenders

The research did not find a list of Colorado Springs banks or certified development companies, so the study cannot name the lenders that would hold the two liens; that is a lender condition. One nonprofit lender, the Colorado Enterprise Fund, reported that it deployed $18,085,922 in 185 loans in its fiscal year ended September 30, 2025, with an average loan of $97,762 [27]. Those are lender-level figures, not state totals, and the loans are far smaller than this project; they show only that small-business credit exists outside the banks.

The determination applies the program's tests to both structures: the equity tier, the debenture limit and the coverage floor in the test year. The first table lists the tests, the second sets the proposal beside the restructured loan, and the third gives the verdict.

What the numbers say

As proposed, the sponsor meets the tier and the debenture limit and fails coverage: 0.91x in Year 2 against 1.15x, with 0.88x in Year 1 and 0.92x in Year 3 [31]. The failure is not close. The building's net operating income of $122,257 in Year 2 supports about $1,213,598 of debt at the assumed rates, not the $1,533,326 the proposal needs.

The restructured loan solves the problem by putting more of the borrower's money in. Equity of 28.7% ($488,503) cuts debt to $1,213,598, debt service falls to $106,219 and coverage reaches 1.15x in Year 2 and 1.15x in Year 3. The engine sets equity at the smallest share that clears the floor, which is why the cushion is thin. A lender sizing the loan with a margin would ask for more equity or a lower price.

Two cautions apply. The first is that the test rests on a modeled internal rent and a price that no research row supports, so the determination is a statement about the structure and not about a particular building. The second is that the quoted floor is a floor: 13 CFR 120.160(b): SBA may require professional appraisals, a survey, or a feasibility study [34], and a lender facing a mixed-use building with owner-occupancy questions may ask for a study before it sizes anything. Feasibility Study Company can prepare that study for your lender.

The grid shows Year 2 coverage on the restructured loan when apartment rent moves two steps down to two steps up from the underwritten level, and the owner's internal rent does the same in smaller steps. Coverage ranges from 0.84x to 1.45x. The center cell is the base case at the floor. A fall of one step in either driver pushes coverage under the floor, and the two together push it toward break-even.

The grid shows which driver the structure leans on. The internal rent is the larger line, so a shortfall there matters more, and it is also the line the study knows least about, because it is a proxy anchored on office rents that fell over the half year [9]. An owner who can show what the business already pays for space has evidence the study does not.

1. The price carries the deal

   The purchase price is a round planning figure with no sale behind it. The building's income of $122,257 in Year 2 supports about $1,213,598 of debt, and every extra dollar of price is a dollar of equity. Apartment-building sales volume rose from $22.9 million to $82.5 million between the last two half years [10], and a seller who has read that headline may price the building as if the market had turned for good.

2. The storefront rent is a proxy

   No source in the research prices ground-floor space in the city. The nearest figure is the office rent of $17.67 per square foot, down 4.3% [9]. If the business can only afford a lower rent, or a lender reads the rent as above market, the largest income line moves and coverage with it.

3. Rents are soft while supply arrives

   Average apartment rent fell 2.6% over the year [10], and 369 units were completed in the first half of 2026 after 840 in the half before [10]. The model holds rent flat and below the average, but a six-unit owner has no scale to absorb a concession war.

4. Weather drives the insurance bill

   The state's insurance report attributes between 26% and 54% of a homeowner's premium to hail [26], and the model's insurance line is an allowance. A hail deductible written as a percentage of building value would change the owner's exposure more than the premium does.

5. Property tax is unresolved

   The assessment rate for most nonresidential property is 25% for tax year 2026 [25], but the levy and the residential rate are not in the record. The model's planning rate of 1.00% of cost could be wrong in either direction.

6. The occupancy share drifts

   The owner's business holds the ground floor, and the occupancy test is a share of floor area. A lease that frees ground-floor space, a unit added on the ground floor or a change to the way floor area is measured can move the share. The appraisal and the application must measure it on one basis.

7. The lender's reading of apartments in the building

   The program edition governs how rent from apartments is treated, and the hub notes that the earlier edition used different language. A lender's reading is a condition of the commitment and cannot be assumed from this page.

8. Flood and drainage

   The city's creeks and drainage systems drew federal money in 2026, including more than $2.6 million of Public Assistance for drainage and embankment repairs [13]. A site near a creek may need flood insurance and a different appraisal. The research holds no flood zone for the subject.

9. The business has to carry its own weight

   The internal rent comes from the owner's business. A loss of customers is a loss of rent, and the apartments alone do not cover the debt. County covered employment was down 1.2% over the year to March 2026 even as wages rose 5.0% [3], and the visitor economy grew only 0.4% in spending [12].

10. Rates and the timing of the debenture

    The bank rate is a planning figure and the debenture rate is an assumption. The debenture is priced when the CDC sells it, which can differ from the rate in the commitment letter. The sensitivity table shows the effect of income moving; it does not show the effect of a rate that comes in higher, and a lender will run that case.