What a Pro Forma on a New Apartment Building Still in Lease Up Asks a Buyer to Carry
The listing described a brand new 32 unit community on a busy retail corridor in a large Texas metro. Two bedroom, two bath units of about 800 square feet. Strong visibility, freeway access, national retailers nearby, and a cap rate in the mid 6s.
It is the kind of product workforce renters want: new, practical, close to jobs and daily needs.
The fine print changed the conversation. The return was pro forma. The marketing package showed occupancy of about two thirds. A separate listing page reported occupancy in the 90s. The difference was not explained.
A pro forma is a forecast. We buy trailing numbers.
What a pro forma actually is
A pro forma estimates what a property could earn after it is fully leased, at assumed rents and assumed expenses. On a stabilized building with years of history, it can be a useful cross check. On a building still leasing up, it is the entire investment thesis, and every assumption in it belongs to the seller.
Three assumptions matter most on a new building:
- Rent. What will the remaining units actually lease for, and with what concessions?
- Occupancy. How long will it take to fill, and what does the property earn in the meantime?
- Taxes. What will the building pay once it is appraised as a finished, occupied asset?
Working backward from the advertised number
We did not start with the pro forma. We started with the price and asked what would have to be true.
To reach the advertised income at stabilized occupancy, with property taxes assessed near the asking price, rents would need to run meaningfully above what comparable two bedroom units in the submarket appear to achieve today.
At rents consistent with the market, the stabilized return landed in the 4s. At today's reported occupancy, it was far lower. On conventional leverage, neither case covered the debt.
The tax bill hiding inside the forecast
New construction carries a specific trap. A building appraised partway through construction can show an assessed value well below its finished worth. In this case, the current assessment was roughly a third of the asking price.
A pro forma built on that tax bill understates what the owner will pay once the appraisal district values the completed, occupied property. In Texas, where local property taxes commonly run above 2 percent of value, that gap can equal several thousand dollars per unit per year.
The buyer is being asked to pay for the lease up and the tax increase at the same time, at a price that assumes neither will cost anything.
Who should carry lease up risk
Lease up is real work and real risk. Marketing, concessions, turnover in the first year, collections, and the time value of empty units all belong to someone.
Developers are built to carry that risk. They price it into their land basis and construction budget, and they are rewarded for it when the building stabilizes. A permanent hold buyer is built for something different: durable cash flow from a property that already works.
We are not opposed to buying new construction. We are opposed to paying a stabilized price for an unstabilized building. The two ways to close that gap are straightforward:
- Buy after stabilization, on trailing numbers
- Or buy before, at a price that clearly compensates for the lease up and the tax reset
Our rule
Lease up risk belongs to the developer unless the price clearly pays us to take it.
Before we believe a return on a newly built apartment property, we check:
- Trailing twelve months of actual collections, not scheduled rent
- A current rent roll with lease start dates and concessions
- Occupancy history by month since delivery
- Rents compared with genuinely similar new units nearby
- Taxes reassessed at the purchase price, not a construction year appraisal
- Insurance quoted for the finished building
- Any discrepancies between marketing materials, explained in writing
- Debt service coverage of at least 1.25 on the adjusted, trailing numbers
A note for developers
If you build small workforce communities in our target markets, we would like to know you before you list. A permanent hold buyer who understands your product, underwrites quickly on real numbers, and closes cleanly after stabilization can be a better exit than a long marketing period on a forecast.
Bring us the building with real numbers
Draymoor Ventures is seeking stabilized workforce multifamily properties of 4 to 70 units in growing, business friendly markets across the Texas Triangle, the Arizona Sun Corridor, and the Colorado Front Range, with a preference for smaller cities over the anchor metros.
We are especially interested in owners ready to share actual operating history, developers planning post stabilization exits, and sellers open to financing a portion of the sale. We will not ask you to sell us a forecast, and we will not pay for one.
Share an opportunity: Steven@DraymoorVentures.com
Sources
- Deal facts are drawn from a publicly marketed offering reviewed by DV in September 2026 and are intentionally generalized. The property, developer, and broker are not identified.
- Texas Comptroller, Property Tax. Background on the Texas property tax system and the role of local appraisal districts. https://comptroller.texas.gov/taxes/property-tax/