Case Study · New York · Multifamily · Agency / Conventional
Multifamily Feasibility Study, New York — An Agency / Conventional Worked Case
This is how our independent feasibility study company and consultant team analyzed a new-build market-rate apartment project underwritten to a conventional bank construction loan and a Fannie Mae / Freddie Mac agency permanent takeout, from renter demand and lease-up absorption through the debt-service coverage a lender must document. It is a representative, anonymized worked example of the methodology — not a specific client deal — set in a growing suburban submarket of a major New York metro.
A ground-up apartment mid-rise on the growing suburban ring.
A sponsor came to our feasibility study company with a ground-up market-rate apartment project and a two-part capital stack — a conventional bank construction loan taking out to a Fannie Mae / Freddie Mac agency permanent loan — that needed the projected cash flow independently tested before either lender would commit. The subject is a 150-unit market-rate mid-rise on roughly three acres in a growing suburban submarket of a major New York metro, a downstate ring where multifamily reads undersupplied-to-balanced.4 The build program is structured parking, an amenity deck, and a market-rate unit mix at a blended stabilized rent near $2,600 a month.
Because pure market-rate apartments are not SBA-eligible — both the 7(a) and 504 programs require owner-occupancy — the deal routes through conventional and agency capital rather than a government-guaranteed loan.9 Agency and bank reviewers require a market study rather than a feasibility study, meaning a demand-and-supply analysis that informs the lender's own underwriting; as an independent feasibility consultant we prepare both, aligned to the standard that will judge the file.7 The lender's question is not what the dirt is worth but whether this specific site can lease at the underwritten rents and absorption to reach the stabilized net operating income the agency takeout is sized against.
Representative and anonymized. Every figure below is illustrative of a typical engagement of this type; the site, submarket, and parties are composited, not a real named borrower, address, or completed transaction.
Renter demand, capture, and a benchmarked absorption pace.
The demand read starts with income- and size-qualified renter households, not a rent multiplied by an occupancy assumption. The primary market area supports roughly 1,250 qualified renter households a year at the subject's rent tier, growing on household formation and a renter cohort priced out of for-sale housing.
Absorption is the variable a credit committee scrutinizes most, and the one an apartment study most often overstates. Stabilized garden and mid-rise product typically leases twelve to twenty-five units a month; a lease-up projected under six months signals aggressive demand assumptions, and one beyond eighteen months signals oversupply or mispricing — either way the pace sizes the interest and working-capital reserve.8 We underwrote the subject at roughly fifteen to eighteen units a month, inside that benchmark, for a lease-up of about ten to twelve months to stabilized occupancy — well short of the eighteen-month oversupply flag and consistent with a downstate suburban submarket that reads undersupplied to balanced.4 The capture rate follows the NCHMA definition: subject units divided by income- and size-qualified demand. At 150 units against roughly 1,250 qualified renter households a year, capture is near twelve percent, and the subject holds about a thirty-eight percent fair share of the new competitive supply delivering into its lease-up window — defensible for the newest product in the submarket rather than the over-broad, single-digit-capture illusion that inflates a market area.8 Critically, the demand and rent are modeled on effective, not asking, rents: with concessions near a twelve-year high nationally, a pro forma built on posted rents overstates year-one revenue by the concession value plus loss-to-lease.3
| Demand driver | Basis | Supported figure |
|---|---|---|
| Primary market area renters | Suburban NY submarket, household formation + in-migration | Rising qualified base |
| Annual qualified demand | Income- and size-qualified at ~$2,400–2,900/mo tier | ≈ 1,250 households/yr |
| Competitive supply in lease-up window | Subject 150 units + ~250 pipeline units8 | ≈ 400 units |
| Capture rate | 150 subject units ÷ ~1,250 qualified demand | ≈ 12% |
| Absorption pace | 12–25 units/mo benchmark; subject ~15–18/mo8 | ≈ 10–12-mo lease-up |
| Stabilized occupancy | Effective-rent basis, net of concession3 | ≈ 95% |
Absorption and capture logic grounded in NCHMA Model Content Standards and the firm's multifamily absorption benchmarks; see sources 3 and 8. Figures are illustrative of the engagement type.
A constrained pipeline as rooftops outrun new permits.
The competitive set holds a mix of stabilized comps and a thin, permit-gated pipeline. The correct competitive denominator is not today's standing supply — it is the units delivering during the subject's lease-up window, which in a New York submarket is throttled by 485-x construction-wage floors and Local Law 97 retrofit economics.
| Property | Vintage / status | Units | Effective rent | Occupancy | Distance |
|---|---|---|---|---|---|
| Comp A | 2018 mid-rise | 240 | ~$2,520 | 96% | 1.1 mi |
| Comp B | 2022 mid-rise | 185 | ~$2,700 | 93% | 1.9 mi |
| Comp C | Pipeline (under construction) | ~160 | — | Delivering ~2027 | 1.6 mi |
| Comp D | 2014 garden | 300 | ~$2,340 | 97% | 2.7 mi |
| Comp E | Pipeline (proposed / entitlement) | ~130 | — | Timing uncertain | 3.0 mi |
Competitive set surveyed for the engagement; anonymized. Announced and permitted supply was scanned, not just the standing set, consistent with NCHMA field-verification practice.
The closest stabilized competitor (Comp A) is a 2018 mid-rise leasing near $2,520 at ninety-six percent occupancy — a genuine benchmark, but seven years older than the subject and without its amenity program. The 2022 delivery (Comp B) still carries some concession burn at ninety-three percent, which is exactly why the model underwrites the subject to effective rents.3 The two pipeline projects matter more than the standing set: a rigorous study scans announced and permitted supply so the capture forecast is not quietly overstated by units the trailing data cannot yet see.8 Both pipeline projects are exposed to New York's 485-x construction-wage floors — up to $72.45 an hour in Manhattan's Zone A, indexed 2.5 percent a year — and to Local Law 97 decarbonization costs, the overlays that keep downstate free-market supply structurally scarce and lengthen the odds that either project delivers on schedule into the subject's window.10 The read is a submarket where rooftops and renter demand are outrunning permitted supply, and the subject fills the gap rather than splitting a saturated pool.
New York: one state, two housing economies.
The state backdrop is a tailwind for well-located suburban rental, but only if the New York-specific overlays are priced. New York exhibits the most extreme intra-state divergence in the country, so no blended state vacancy or rent figure describes an actual submarket.
New York City reached 8,585,000 residents in July 2025 and posted a net rental vacancy of just 1.41 percent in the 2023 Housing and Vacancy Survey, the lowest reading since 1968 and down from 4.54 percent in 2021; at the lowest rent quartile vacancy was 0.39 percent.1 Roughly half of the city's apartments are rent-stabilized, and the 2019 Housing Stability and Tenant Protection Act permanently capped stabilized increases and closed most deregulation paths, which is why passive stabilized-heavy stock is financing-impaired and why new supply concentrates in free-market product.9 Yardi Matrix, in January 2026, named New York City among the strongest advertised-rent markets late in 2025 and among the largest 2026 delivery pipelines in the Northeast — demand strength and a supply response arriving together.4 The firm's standing New York read carries the same signal at the submarket level: downstate suburban rental is undersupplied on Long Island and balanced in the Hudson Valley, against a national apartment market that has passed its supply peak and is tightening in gateway metros.4
The offsetting reality is cost and regulation. Free-market construction is gated by 485-x construction-wage floors and Local Law 97 retrofit costs, and absent a tax abatement, property taxes can consume roughly thirty percent of rental income — a first-order variable a national template misses entirely.10 All-in development in a high-cost New York submarket runs $300,000 per unit or more, well above the roughly $208,000 per unit at which existing product trades, which puts a floor under in-place values and a structural brake on new starts.11 For the permanent financing, the agencies are well capitalized: the combined Fannie Mae and Freddie Mac 2026 purchase caps rose about twenty percent to $176 billion, positioning them as the dependable takeout for stabilized market-rate product like the subject.6
Why the submarket supports the rent.
Household income, renter share, and household formation all point the same direction, and the site's location converts that demand into signed leases at the underwritten rent.
The primary market area carries a median household income near $105,000 — a high-income suburban New York profile — and a deep renter cohort held in place by for-sale affordability. Renting now beats owning in all fifty of the fifty largest U.S. metros on a monthly-cost basis, and the gap is widest in high-price coastal markets, so the move-up renter who would historically have bought a starter home instead stays in professionally managed rental.12 That is the demand engine a new mid-rise needs: not raw population, but qualified renter households forming faster than the submarket is delivering competitive product.
Location does the rest. The subject sits within a short commute of a regional employment node and a commuter-rail connection to the urban core, with walkable retail and a school district that supports family and professional renters alike. At a blended stabilized rent near $2,600 a month, the subject slots between the older, lower-rent garden comp (~$2,340) and the newest concession-burning delivery (~$2,700) — a defensible position for new product with structured parking and a full amenity deck, and one the effective-rent comparables support rather than an aspirational asking-rent reach.3 The rent is set where the market clears, which is what lets the absorption forecast hold.
The construction-to-agency structure.
Total development cost lands at $45.0 million. A conventional bank funds construction at 65 percent loan-to-cost with the sponsor carrying 35 percent equity, and a Fannie/Freddie agency permanent loan takes out the construction facility once the asset reaches stabilized coverage.
| Cost component | Amount |
|---|---|
| Land (~3-acre suburban parcel) | $6.0M |
| Hard costs (building, structured parking, site work) | $30.0M |
| Soft costs (A&E, permits, legal, marketing, contingency) | $5.0M |
| Construction financing & interest reserve | $3.0M |
| Lease-up & operating reserve | $1.0M |
| Total development cost | $45.0M |
All-in cost of ~$300,000 per unit is consistent with high-cost New York submarket development, above the ~$208,000 per unit at which existing product trades. See sources 10 and 11.
| Item | Figure |
|---|---|
| Bank construction loan (65% LTC) | $29.25M |
| Sponsor equity (35%) | $15.75M |
| Agency permanent takeout (illustrative) | ~$29.0M |
| Perm rate / amortization | ~6.0% / 30-year |
| Agency minimum DSCR | ~1.25x, up to ~80% LTV |
| Stabilized annual perm debt service | ≈ $2.09M |
Construction terms per conventional bank convention (1.20x–1.40x with a takeout test); agency permanent per Fannie DUS / Freddie Optigo (~1.20x–1.25x, up to ~80% LTV). See sources 5 and 7.
The structure's decisive risk sits at the takeout, not the construction draw. In a higher-rate environment the permanent agency loan is sized by debt-service coverage rather than loan-to-value: at a 1.25x coverage minimum on the stabilized net operating income of about $2.75 million, the loan sizes to roughly $2.20 million of supportable annual debt service, which at approximately 6 percent over a 30-year amortization funds an agency loan near $29.0 million.5 That figure nearly retires the $29.25 million construction loan — a manageable gap here — but only because the underwritten rents and absorption hold. Against a stabilized value near $52 million the loan-to-value runs close to 55 percent, so coverage, not leverage, binds first; had rates been higher or the lease-up slower, the coverage-constrained takeout would fall short of the construction balance and require additional equity at refinance, which is the dominant execution risk on newly built lease-up assets.5 The study exists to support exactly that judgment: the stabilized coverage the agency must document, tested against an independent read of demand rather than the sponsor's own projection.
Feasible on the coverage the agency takeout can document.
The stabilized model builds effective gross income from a market-rate rent roll, nets a new-construction operating expense load, and carries coverage from a lease-up shortfall to a stabilized 1.32x — above the agency minimum.
| Line | Basis | Amount |
|---|---|---|
| Gross potential rent | 150 units × ~$2,600/mo × 12 | ≈ $4.68M |
| Vacancy loss (~5%) | Stabilized ~95% occupancy | ≈ ($0.23M) |
| Concessions & loss-to-lease (~2%) | Effective-vs-asking-rent discipline3 | ≈ ($0.10M) |
| Effective gross rent | Collected rental revenue | ≈ $4.35M |
| Other income | Parking, storage, fees, RUBS | ≈ $0.09M |
| Effective gross income (EGI) | Rental revenue + other income | ≈ $4.44M |
| Operating expenses (~38% of EGI) | Taxes, insurance, payroll, R&M, management, G&A11 | ≈ ($1.69M) |
| Net operating income (NOI) | EGI less operating expense; ~62% margin | ≈ $2.75M |
Operating expenses run 38 to 55 percent of revenue in multifamily; the ~38% ratio reflects new construction with a full tax load and no deferred maintenance. See source 11.
| Year | Stage | NOI | Debt-service basis | DSCR |
|---|---|---|---|---|
| Year 1 | Lease-up (construction loan / interest reserve) | ~$1.55M | Stabilized-equivalent ~$2.09M | 0.74 |
| Year 2 | Approaching stabilization | ~$2.40M | Agency perm ~$2.09M | 1.15 |
| Year 3 | Stabilized | ~$2.75M | Agency perm ~$2.09M | 1.32 |
Coverage shown against the stabilized agency debt service for comparability; in Year 1 the asset is carried by the construction loan's interest reserve, not the amortizing agency loan. DSCR computed as NOI divided by the period debt-service obligation. See sources 5 and 7.
The stabilized 1.32x coverage is the figure the agency documents, and it clears the roughly 1.25x minimum with real headroom.7 By Year 2 the project already covers the fully amortizing agency debt service at 1.15x. The Year 1 figure of 0.74x is intentionally below 1.0 — it is the lease-up year — which is exactly why the construction loan carries an interest reserve through stabilization: the reserve funds the ramp shortfall, and permanent coverage is measured only once the asset reaches supportable occupancy. Modeling stabilized rents on day one, or ignoring the concession burn that a new lease-up carries, is one of the most common ways these pro formas fail review; the ramp here is deliberately graded on effective rents.3
On the equity side, the $15.75 million injection earns growing levered free cash flow — the shortfall in the lease-up year is covered by the interest reserve, building to roughly $0.66 million a year of cash flow after debt service once stabilized. The exit is valued on a market cap rate: capitalizing a Year-10 stabilized NOI, grown at a disciplined mid-single-digit pace, at a stabilized rate in the low-to-mid five percent range — where core and stabilized multifamily has been trading — implies a going-out value well above cost and, net of selling costs and the outstanding agency balance, a healthy equity residual.5 Holding rent growth disciplined and preserving the effective-rent haircut rather than assuming concessions burn off immediately, the blended result is an illustrative levered equity IRR of about 15 percent over a 10-year hold.3
Verdict: financially feasible at the underwritten absorption. On independently derived demand, a stabilized 1.32x DSCR, and a ~15% levered equity IRR, the projections support the agency takeout — with concession and lease-up-pace risk flagged as the variables that would move the coverage-constrained loan.
Independent demand, capture, effective rent, and a coverage stress.
The engagement was scoped the way a credit committee reads it. As an independent feasibility consultant, our role is to test the sponsor'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 defined a disciplined primary market area rather than an over-broad one, derived qualified renter demand from household formation and income tiers, and set the capture rate and absorption pace against benchmarked ranges rather than an aggressive lease-up. Rents were underwritten on an effective basis, net of the concessions the comparable set is actually granting, not on posted asking rents.
The coverage analysis was then stress-tested. We ran the stabilized debt-service coverage against the two variables the takeout is most exposed to — a slower absorption pace and a deeper effective-rent concession — to confirm the agency loan still sizes to retire the construction balance when demand softens. One scope boundary is worth stating plainly: as the feasibility consultant we reference, but do not perform, the appraisal that supports the agency's value conclusion; the market study is a distinct instrument, not an appraisal, and is built to NCHMA Model Content Standards rather than under USPAP.8 That combination — independent demand, capture, effective rent, and a stressed coverage — is what lets the lender rely on the file.
Representative engagement
This is an anonymized, illustrative worked example of our methodology, built on market data current to 2026; figures are representative of a typical engagement of this type and do not depict a specific client, site, or completed transaction. Deal-level figures — unit count, rent, cost, and coverage — are illustrative and internally consistent; the market data that grounds each dimension is real and sourced below.
Underwriting a New York apartment project for agency or bank capital? Start with the market study.
Feasibility Study Company prepares independent multifamily feasibility and market studies for agency, HUD-FHA, life-company, CMBS, and conventional bank construction credits, built to the coverage standard your lender must document. A methodology briefing walks through the demand, absorption, capture, and DSCR analysis behind a case like this one, calibrated to your submarket and capital stack.
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 New York, Multifamily, and Conventional & Institutional analyses and the primary authorities they cite.
- U.S. Census Bureau, Vintage 2025 Population Estimates (New York City ~8,585,000 residents as of July 1, 2025); NYC Department of Housing Preservation and Development, 2023 New York City Housing and Vacancy Survey (net rental vacancy 1.41%, the lowest since 1968, down from 4.54% in 2021; lowest rent quartile vacancy 0.39%), as compiled in the firm's New York market analysis.
- RealPage Market Analytics, 4Q 2025 Update and 2025–2026 commentary: national apartment completions ~608,000 units in 2024 (most since 1986), falling ~30% to near 500,000 in 2025 with 2026 lower still; construction starts down ~60% from the 2022 peak; national stabilized same-store occupancy near 95.4%.
- RealPage Market Analytics, concession and effective-rent data (first half 2026): roughly 16.9% of stabilized units offering concessions averaging a 10.9% discount (~six weeks free on a twelve-month lease), the highest concession level since mid-2014; effective-vs-asking-rent haircut of three to five percent before vacancy in deep-concession markets.
- Yardi Matrix (January 2026): New York City among the strongest advertised-rent markets late in 2025 and among the largest 2026 delivery pipelines in the Northeast; firm's New York multifamily read of a supply-constrained, tightening market (~3.1% vacancy, ~+3.3% YoY rent), with Long Island undersupplied and the Hudson Valley balanced, per the firm's New York market analysis.
- CBRE, Q4 2025 Multifamily Underwriting Survey and 2025 investment data: going-in cap rates near 4.75% on core assets, stabilized product broadly in the low-to-mid 5% range; agency coverage conventions of ~1.20x–1.25x and an ~80% LTV ceiling; the DSCR-constrained (rather than LTV-constrained) takeout as the dominant 2026 execution risk on lease-up assets.
- Federal Housing Finance Agency (November 24, 2025): 2026 Fannie Mae and Freddie Mac multifamily loan purchase caps of $88 billion per Enterprise ($176 billion combined, up ~20% year over year), positioning the agencies as refinance and takeout backstops against roughly $90 billion of maturing multifamily debt.
- Fannie Mae DUS and Freddie Mac Optigo program materials, as summarized in the firm's Conventional & Institutional analysis: agency permanent execution requires an NCHMA-compliant market study; coverage convention ~1.20x–1.25x on stabilized net operating income, up to ~80% LTV; conventional bank construction underwritten to 1.20x–1.40x with a takeout test.
- National Council of Housing Market Analysts (NCHMA) Model Content Standards, Version 3.1 (September 2025): primary market area definition, capture and penetration rates, and absorption, with field verification of comparable properties; stabilized garden and mid-rise product typically absorbs 12–25 units per month, with lease-up under six months signaling aggressive demand and beyond eighteen months signaling oversupply.
- New York State Housing Stability and Tenant Protection Act of 2019; NYC Rent Guidelines Board and NYC Independent Budget Office: roughly half of NYC apartments are rent-stabilized and HSTPA permanently capped stabilized increases and closed most deregulation paths; U.S. Small Business Administration SOP 50 10 8 owner-occupancy rules (51% existing, 60% new construction) render pure investment apartments SBA-ineligible.
- New York City Local Law 97 (Climate Mobilization Act) decarbonization penalties and the 485-x construction-wage floors (up to $72.45 per hour in Manhattan Zone A, indexed 2.5% annually), as compiled in the firm's New York market analysis; absent a tax abatement, property taxes can consume roughly 30% of rental income.
- Multifamily per-unit economics as compiled in the firm's Multifamily analysis: existing product trading near $208,000 per unit against all-in development of $300,000 per unit or more in high-cost submarkets; multifamily operating expenses running 38 to 55 percent of revenue depending on tax basis, insurance, and management.
- National Apartment Association and John Burns Research and Consulting, 2026 Apartment Outlook: renting is cheaper than owning on a monthly-cost basis in all 50 of the 50 largest U.S. metros, sustaining renter demand among households priced out of for-sale housing.