Case Study · Florida · Multifamily · Agency / Conventional
Multifamily Feasibility Study, Florida — An Agency / Conventional Worked Case
This is how our independent feasibility study company and consultant team analyzed a ground-up, market-rate apartment community underwritten to a conventional bank construction loan and a Fannie Mae / Freddie Mac agency permanent takeout, from primary-market-area absorption through the debt-service coverage the takeout is sized against. It is a representative, anonymized worked example of the methodology — not a specific client deal — set in a high-growth suburban submarket of a major Central Florida metro.
A ground-up apartment community on a growing Florida suburb.
A developer came to our feasibility study company with a ground-up market-rate apartment project and a two-part capital plan: a conventional bank construction loan to build and lease the asset, and a Fannie Mae DUS or Freddie Mac Optigo agency loan to take out that construction debt once the property stabilizes. The construction lender needed the projected lease-up and stabilized cash flow independently tested before it would commit, and the eventual agency execution turns entirely on the same numbers. The subject is a roughly 200-unit, three- and four-story garden and low-rise community on an infill suburban parcel in a fast-growing outer submarket of a major Central Florida metro.
Multifamily is the one asset class that routes through every capital source, and the only one where lenders require a market study rather than a feasibility study — a demand and supply analysis that informs the lender's own underwriting, to which the feasibility model and coverage conclusion are then added.1 The question here is not “what is the finished building worth” but “how fast does it lease, at what effective rent, and does the stabilized net operating income support an agency loan large enough to retire the construction debt.” As an independent multifamily feasibility and market-study team, our scope was the absorption, capture, competition, and debt-service analysis that answers exactly that.
Absorption, capture, and fair share.
The demand read starts with income- and size-qualified renter households in a defined primary market area, not a metro average applied to a submarket. The subject's roughly 15-minute drive-time PMA is adding renter households through in-migration and household formation faster than the standing stock, but a heavy delivery pipeline is competing for the same tenants.
Absorption is derived across four layers, in the sequence NCHMA review expects: demand drivers establish annual rental demand at the subject's rent point; the supply pipeline sets the competitive constraint, including units delivering into the lease-up window; capture- and fair-share analysis allocates that demand between the subject and competing supply; and the resulting monthly schedule sizes the interest and working-capital reserve.1 At the subject's effective rent tier, the PMA supports on the order of 1,600 income-qualified renter households of net annual demand. The subject must lease about 186 of its 200 units to reach a stabilized 93 percent economic occupancy, implying a capture of roughly 12 percent of that annual demand — a figure that sits at or below the subject's fair share of the directly competitive inventory, which is the conservative posture a reviewer looks for rather than a capture rate inflated by an over-broad market area.2
Stabilized garden and mid-rise product typically absorbs twelve to twenty-five units per month; lease-up projected under six months signals aggressive demand assumptions, and beyond eighteen months signals oversupply or mispricing.1 The model carries roughly 15 net units per month — squarely mid-range — for a lease-up of about thirteen months to stabilized occupancy. Critically, the pace is modeled on effective rent net of concessions, not posted asking rent: with concessions near a twelve-year high nationally, forecasting on asking rent is the single most common way an apartment pro forma overstates year-one income.3
| Demand driver | Basis | Supported figure |
|---|---|---|
| PMA renter households | ~15-min drive-time ring, income- and size-qualified at subject rent tier | Rising captive base |
| Annual qualified rental demand | Household formation + in-migration + turnover at the subject's rent point | ≈ 1,600 units/yr |
| Competitive supply in window | Field-verified comps + ~600-unit pipeline delivering into lease-up2 | Fair-share denominator |
| Subject capture rate | 200 units vs. annual qualified demand | ≈ 12% (at/below fair share) |
| Absorption pace | Garden/mid-rise 12–25 units/mo benchmark1 | ≈ 15 units/mo |
| Lease-up to stabilization | 186 units (93% economic occupancy) at ~15/mo | ≈ 13 months |
Demand and capture logic prepared to NCHMA Model Content Standards; absorption benchmarks and concession context per sources 1–3. Figures are illustrative of the engagement type.
The competitive set, and the pipeline it hides.
Five directly competitive communities sit within roughly three miles, and the newest of them are still leasing. But the correct competitive denominator is not today's standing stock — it is the units delivering during the subject's own lease-up window, which is where an undertested absorption forecast quietly breaks.
| Community | Type / vintage | Units | Distance | Eff. rent | Occ. | Concession |
|---|---|---|---|---|---|---|
| Comp A | Garden, 2018 | 288 | 1.2 mi | $1,880 | 94% | ~4 wks free |
| Comp B | Mid-rise wrap, 2022 | 324 | 2.1 mi | $2,020 | 90% (leasing) | ~6 wks free |
| Comp C | Garden, 2015 | 240 | 1.7 mi | $1,795 | 95% | ~2 wks |
| Comp D | Garden, 2024 | 312 | 2.8 mi | $1,940 | 87% (lease-up) | ~8 wks free |
| Comp E | Mid-rise, 2020 | 264 | 3.2 mi | $1,965 | 93% | ~4 wks free |
Competitive set surveyed and field-verified for the engagement; anonymized. Effective rents are net of in-place concessions. Announced and permitted supply was scanned in addition to the standing set. See sources 2 and 3.
The subject is positioned at an effective rent near $1,875 — between the older, cheaper Comp C and the newer, richer Comp A, B, and E — on an asking rent of roughly $1,950 with a concession of about six weeks free during lease-up, burning off toward stabilization as the submarket tightens. The two newest communities (Comp D, delivered 2024, and the 2022 wrap Comp B) are still leasing at eighty-seven to ninety percent occupancy and carrying the deepest concessions, which is exactly the signal a careful study weights: they are the real competition for the subject's first-year tenants, and their concessions set the effective-rent ceiling. Beyond them, roughly 600 units are under construction across two projects expected to deliver into the subject's lease-up window, and those units — not merely the standing set — form the fair-share denominator behind the 12 percent capture rate.2 The read is a demand-supported but supply-watchful submarket: absorption pencils at a defensible mid-range pace, provided the pipeline is counted honestly rather than as a snapshot.
Florida macro: strong demand, real supply and insurance drag.
The state backdrop is a tailwind for suburban rental demand, tempered by a near-term delivery overhang and, decisively for net operating income, the nation's most expensive property insurance. Florida held about 23.4 million residents as of July 2024, pulls hundreds of thousands of new residents a year, and carries no state personal income tax.
The subject's Central Florida metro was among the fastest-growing in the country in 2024–25, adding roughly 76,000 residents in a single year — the rooftop growth a new rental community needs.4 But the same metro is digesting a heavy apartment pipeline, with submarket vacancy in the seven-to-nine percent range and asking rents soft through 2025 and into 2026 as concessions widened.5 The national picture frames it: apartment completions crested in 2024 at the most since 1986, then fell sharply, and construction starts have collapsed to a decade low, so the 2026–27 pipeline is guaranteed thin and most oversupplied Sun Belt metros are expected to inflect as the overhang clears.3 That is the thesis the rent-growth assumption rests on: soft now, recovering as deliveries empty out.
The offsetting reality is cost, and in Florida the sharpest line is insurance. Florida property insurance runs roughly 2.8 times the U.S. average, and premiums rose about 49.5 percent from 2020 to 2025, so a national insurance assumption materially understates Florida NOI.6 The market has stabilized without cheapening: after SB 2-A, signed December 16, 2022, Citizens fell to about 395,144 policies in early 2026 from a roughly 1.42 million peak in October 2023, and the regulator approved an 8.7 percent average Citizens rate cut for 2026 — its first since 2015.7 Our model prices insurance from current Florida carrier quotes and treats the commercial named-storm deductible of 2 to 10 percent of insured value as first-dollar risk, not a rider.8 One recent change cuts the other way: Florida repealed its commercial-rent (business-rent) tax effective in 2025, a modest operating tailwind for mixed-income assets.4
Why the submarket supports the rent.
Renter share, household income, and job access all point the same direction, and the site's position converts that demand into signed leases at the modeled rent.
The PMA carries a median household income comfortably above the level at which the subject's effective rent stays within a sustainable rent-to-income band, and a renter share elevated by the cost of for-sale housing — in most of Florida's large metros, renting still beats owning on a monthly basis, which keeps qualified renter demand deep even as the for-sale market cools.3 Trailing Census counts understate the captive base in a fast-growing outer submarket, a distortion a careful study corrects for rather than extrapolates, and household formation among prime renter age cohorts is the demand engine behind the absorption schedule.4
Location does the rest. The subject occupies an infill parcel near a suburban employment and retail node with direct access to a primary commuter route, inside the drive-time band its target renters already search. A three- and four-story garden and low-rise program on roughly thirteen acres delivers the unit count at a wood-frame, surface-parked cost basis well below structured mid-rise — the format discipline that lets the yield-on-cost clear the agency debt constant, which is what ultimately makes the deal financeable rather than merely leaseable.
Bank construction, agency permanent takeout.
Total development cost lands at $42.0 million, about $210,000 per unit. A conventional bank construction loan funds the build and lease-up at 65 percent of cost with 35 percent equity; the Fannie Mae / Freddie Mac agency loan then refinances the construction debt once the property reaches stabilized occupancy. Pure market-rate apartments are not SBA-eligible, so this is the route.9
| Cost component | Amount |
|---|---|
| Land acquisition & closing | $4.60M |
| Hard costs (building, wood-frame garden/low-rise) | $26.60M |
| Site work, utilities & offsite improvements | $2.90M |
| Architecture, engineering & soft costs | $2.60M |
| Financing costs & construction-period interest reserve | $2.70M |
| Developer fee | $1.60M |
| FF&E, amenities, contingency & lease-up reserve | $1.00M |
| Total development cost | $42.00M |
All-in cost of ~$210,000/unit sits below the $300,000+/unit typical of high-cost structured mid-rise submarkets and above existing-asset trade pricing near $208,000/unit — the cost discipline that protects the development spread. See source 3.
| Item | Figure |
|---|---|
| Bank construction loan (65% LTC) | $27.30M |
| Sponsor / LP equity (35%) | $14.70M |
| Construction terms | Interest-only, ~24-mo + extension; interest reserve funds lease-up |
| Agency permanent loan (Fannie DUS / Freddie Optigo) | $28.85M |
| Permanent terms | ~6.0% fixed, 30-yr amortization; sized to 1.30x DSCR |
| Permanent LTV / annual debt service | ~56% LTV · ≈ $2.08M/yr |
Agency coverage convention ~1.20x–1.25x, up to ~80% LTV; here the loan is DSCR-constrained well below the LTV ceiling. See sources 1 and 10.
The permanent loan is the crux of the deal, and it is sized by coverage, not by value. On stabilized net operating income of about $2.70 million, a 1.30x debt-service coverage target at roughly 6.0 percent over a 30-year amortization supports an agency loan near $28.85 million — a loan-to-value of only about 56 percent against a stabilized value near $51.4 million.10 In other words, coverage binds long before the roughly 65 percent LTV ceiling: the DSCR-constrained takeout is the dominant execution risk on any newly built lease-up asset, and here it is the number the whole study exists to protect.1 The favorable outcome is that $28.85 million of agency proceeds comfortably retires the $27.30 million construction loan and returns roughly $1.55 million of equity at refinance — the reward for building to a stabilized value well above cost. Had the yield-on-cost been thinner, or absorption slower, that same 1.30x coverage test would have sized the loan below the construction balance, leaving an equity gap at conversion instead of a return.
Feasible and financeable, on coverage the agency can size to.
The stabilized model builds effective gross income net of concessions, nets a Florida-weighted operating expense load, and carries a stabilized net operating income margin near 60 percent — the level at which the 1.30x coverage and the agency takeout hold together.
| Line | Basis | Amount |
|---|---|---|
| Gross potential rent | 200 units × ~$1,950/mo × 12 | $4,680,000 |
| Vacancy, concession & credit loss | ~8.0% of GPR (physical vacancy + concession + loss-to-lease)3 | ($374,000) |
| Other income | RUBS, parking, fees | $190,000 |
| Effective gross income (EGI) | Net collected revenue | ≈ $4,496,000 |
| Operating expenses | See breakdown below (~40% of EGI)11 | ($1,798,000) |
| Net operating income (NOI) | EGI less operating expense (~60% margin) | ≈ $2,698,000 |
Operating expenses run 38–55% of revenue for stabilized apartments; the ~40% here reflects a lean suburban garden operation carrying a Florida-elevated insurance line. See sources 3 and 11.
| Expense line | Per unit | Total |
|---|---|---|
| Payroll & administration | $2,200 | $440,000 |
| Property taxes | $2,350 | $470,000 |
| Insurance (Florida-elevated) | $1,450 | $290,000 |
| Utilities & contract services | $930 | $186,000 |
| Repairs, maintenance & turnover | $1,080 | $216,000 |
| Management fee (~3.0% of EGI) | $675 | $135,000 |
| Replacement reserves | $305 | $61,000 |
| Total operating expenses | $8,990 | $1,798,000 |
Insurance at ~$1,450/unit reflects Florida's ~2.8× national multiple; a national assumption near $500–550/unit would understate the load by roughly $180,000/yr. See sources 6 and 8.
| Year | Stage | NOI | Debt-service basis | DSCR |
|---|---|---|---|---|
| Year 1 | Delivery & initial lease-up | ~$1.60M | Interest reserve; perm-equiv ~$2.08M | 0.77 |
| Year 2 | Lease-up to breakeven | ~$2.39M | Perm-equiv ~$2.08M | 1.15 |
| Year 3 | Stabilized | ~$2.70M | Agency perm ~$2.08M | 1.30 |
DSCR shown on the stabilized agency debt-service basis for comparability; construction-period interest is interest-only and funded from the interest reserve until agency conversion at stabilization. Agency minimum ~1.25x per source 10.
The stabilized 1.30x coverage is the figure the agency sizes to, and it clears the roughly 1.25x minimum with headroom.10 The Year 1 figure of 0.77x is intentionally below 1.0 — it is the lease-up year — which is precisely why the construction loan carries an interest reserve: the reserve funds the coverage shortfall while the property leases, and permanent, fully amortizing coverage is only measured once the asset reaches its supportable occupancy at effective rent. Modeling stabilized rents in Year 1, or asking rents in place of effective rents at any point, is the most common way these apartment pro formas fail review; the ramp here is deliberately graded and modeled net of concessions.3
The equity story turns on development margin rather than leverage. The stabilized net operating income of about $2.70 million against $42.0 million of cost is a yield-on-cost near 6.4 percent — roughly 115 basis points above the market's low-to-mid-5-percent stabilized cap rate, which is what creates a stabilized value near $51.4 million against a $42.0 million cost basis.3 That spread, not positive leverage, drives the return: with a 6 percent agency constant sitting above the cap rate, leverage is mildly negative, so the study leans on the build-to-value margin, the roughly $1.55 million of equity returned at the agency refinance, and Florida's expected rent recovery as the pipeline empties. Trending net operating income at roughly 3.5 percent a year and exiting a decade out at a held-flat cap rate, the blended result is an illustrative levered equity IRR in the mid-teens, on the order of 15 percent.
Verdict: financially feasible and financeable. On independently derived absorption, effective rent net of concessions, a stabilized 1.30x DSCR, and a DSCR-constrained agency takeout that still retires the construction loan, the projections support the conventional-to-agency execution — with Florida insurance cost and the near-term supply pipeline as the risks that would compress the return toward the low teens.
Independent absorption, effective rent, and a stressed takeout.
The engagement was scoped the way an agency and a construction credit committee read it. As an independent feasibility consultant, our role is to test the developer's projection against the market, not to restate it — the value of the deliverable is precisely that it carries no stake in the outcome. We built the market study to NCHMA Model Content Standards: a defined primary market area, field-verified rent comparables rather than desktop estimates, capture and fair-share analysis against income- and size-qualified demand, and an absorption schedule benchmarked to a defensible monthly pace. Rent was modeled on an effective basis net of concessions throughout, and the competitive denominator counted the units delivering into the lease-up window, not just the standing set.1
The coverage analysis was then stress-tested where apartment deals actually break. We sized the agency takeout to a 1.30x coverage target and confirmed it retires the construction loan, then stressed absorption pace, effective rent, insurance cost, and exit cap rate — the four variables a Florida lease-up asset is most exposed to — to see where the takeout falls below the construction balance and turns an equity return into an equity gap. Two scope boundaries are worth stating plainly: as the feasibility author we reference, but do not perform, the appraisal that supports collateral value under USPAP, and we reference, but do not perform, the environmental and geotechnical work. That combination — independent absorption, effective rent, competition, and a stressed DSCR-constrained takeout — is what lets both the construction lender and the agency rely on the file.
Underwriting a Florida apartment project? Start with the market read.
Feasibility Study Company prepares independent multifamily feasibility and market studies for conventional bank construction and Fannie Mae / Freddie Mac agency execution, built to the NCHMA standard the reviewer applies. A methodology briefing walks through the absorption, capture, competition, and DSCR-constrained takeout analysis behind a case like this one, calibrated to your metro, submarket, and capital plan.
Request a methodology briefingData sources and dates.
The deal figures are illustrative of the engagement type; the market data that grounds each dimension is real and sourced, drawn from our standing Multifamily, Florida, and Conventional & Institutional analyses and the primary authorities they cite.
- National Council of Housing Market Analysts, Model Content Standards Version 3.1 (September 2025); NCHMA Demand and Capture Rate methodologies; and CBRE Q4 2025 Multifamily Underwriting Survey (agency coverage conventions and the DSCR-constrained takeout), as compiled in the firm's Multifamily and Conventional & Institutional analyses.
- NCHMA capture and fair-share methodology; MMG Real Estate Advisors and Northmarq metro apartment reports (Q1 2026, CoStar-sourced): the pipeline delivering into the lease-up window as the correct competitive denominator.
- RealPage Market Analytics, 4Q 2025 Update and 2025–2026 commentary (completions, starts, net absorption, occupancy, and concessions near a twelve-year high at ~16.9% of units / ~10.9% discount); Yardi Matrix Winter 2026 outlook and CBRE (cap rates in the low-to-mid-5% range, per-unit trade pricing near $208,000, all-in development $300,000+/unit in high-cost submarkets); PwC/ULI Emerging Trends 2026 (construction-starts decline and supply divergence).
- U.S. Census Bureau, Vintage 2024 Population Estimates (Florida population 23,372,215 as of July 1, 2024); Florida Phoenix county population change 2024–2025 (March 2026) and Orlando Economic Partnership metro estimates (Central Florida metro among the fastest-growing, adding ~76,000 residents); Florida HB 7031 (2025) repeal of the commercial-rent tax.
- Largo Capital, Florida multifamily market note citing Q1 2026 South Region data (June 2026); Yardi Matrix Florida metro commentary (March–May 2026): Central Florida submarket vacancy in the ~7–9% range and softening asking rents amid a heavy delivery pipeline.
- Insurance Business America, citing a 2026 LendingTree analysis; Insurify 2026 home-insurance data (Florida property insurance ~2.8× the U.S. average; premiums up ~49.5% from 2020 to 2025).
- Citizens Property Insurance Corporation recommended rate filing and rate-decrease release (December 2025); Florida Office of Insurance Regulation / Florida Realtors Property Insurance Stability Report (January 2026): SB 2-A (signed December 16, 2022); Citizens ~395,144 policies in early 2026 versus a ~1.42 million peak in October 2023; an 8.7% average Citizens rate cut approved for 2026.
- MoneyGeek, Florida hurricane-deductible analysis (2026): commercial named-storm deductibles of 2 to 10 percent of insured value, modeled as first-dollar risk rather than a rider.
- U.S. Small Business Administration owner-occupancy requirements (51% existing / 60% new construction): pure investment apartments are SBA-ineligible, so market-rate multifamily routes through agency, HUD-FHA, life-company, CMBS, conventional bank, or USDA rural channels.
- CBRE Q4 2025 Multifamily Underwriting Survey and Fannie Mae DUS / Freddie Mac Optigo conventions: agency coverage ~1.20x–1.25x up to ~80% LTV, with loans frequently DSCR-constrained below the LTV ceiling in a higher-rate environment; Federal Housing Finance Agency 2026 multifamily loan purchase caps ($176 billion combined).
- NAA Income/Expense IQ (2024 dataset) and IREM Income/Expense Analysis: stabilized apartment operating expenses at 38–55% of revenue, and per-unit expense and property-tax benchmarks. (NAA Income/Expense IQ was discontinued December 31, 2025.)