From Groundbreaking to Lease-Up: What Ground-Up Multifamily Development Actually Looks Like

Most multifamily investors cut their teeth on value-add deals: they acquire a property that already has tenants, income, and a track record, then improve it from there. Ground-up multifamily development demands a different kind of patience. No rent roll waits on day one, no tenants occupy the units yet, and sometimes not even a building stands on the site. Instead, developers move through a defined sequence of phases, each carrying its own risk and its own reason capital flows the way it does. Hangar on Stuebner, our 345-unit Class A community under construction in North Houston, offers a useful lens for walking through what that sequence really involves.

The Three Phases of Ground-Up Multifamily Development

Ground-up multifamily development moves through three distinct phases before a single resident signs a lease: entitlement and pre-development, vertical construction, and lease-up through stabilization. Each phase carries a different kind of risk, consumes capital differently, and demands a different kind of patience from the people funding it.

Phase One: Entitlement and Pre-Development

Before crews pour a single foundation, a development team must clear the parts of the process that stay invisible to everyone but the sponsor. Site control, zoning and permitting, engineering and design, and the capital stack itself all have to lock into place first. For Hangar on Stuebner, that process included closing a HUD 221(d)(4) loan: non-recourse, fixed-rate, long-amortizing debt that lenders had to underwrite and approve before construction could begin.

This phase absorbs the least visible capital and carries the most avoidable risk, although its outward calm can be deceiving. A site that won’t entitle cleanly can end a project before it ever breaks ground. So can a design that can’t pencil against rising costs, or a financing package that collapses at the last minute. Pre-development also runs longer than its visible progress suggests. From the sidewalk, nothing seems to be happening; inside the process, the team is locking in every decision that determines whether the rest of the project succeeds.

Phase Two: Vertical Construction

Once financing closes and permits arrive, construction begins in earnest. A garden-style or mid-rise community in the 300-to-400-unit range typically takes a year and a half to two years to build. The exact timeline depends on product type, site conditions, and how crews phase the work.

From here, the risk profile shifts from regulatory to operational: cost overruns, labor and material shortages, weather delays, and the sheer complexity of managing a large construction project all threaten the schedule. Locking in fixed-rate, non-recourse debt before the lending window closes matters most during this phase, because it keeps the capital stack steady while the building rises around it. Sponsors who didn’t secure financing before construction lenders retreated now face a far more expensive version of this same phase.

Phase Three: Lease-Up and Stabilization

Units typically deliver in stages rather than all at once, so leasing usually begins before construction wraps up entirely. Lenders and investors generally don’t consider a project stabilized until it sustains occupancy in the low-to-mid 90% range for a defined period, often 90 days.

This stage puts the scarcity thesis behind ground-up multifamily development to its real test. Houston’s multifamily construction pipeline has fallen to its lowest level in over a decade, with new starts down 64% in 2024 alone to just 6,300 units, the lowest total since 2011. A community delivering into that kind of undersupplied submarket leases against far less new competition than Houston has typically seen. That’s the entire point of building through a period when almost no one else will.

What This Means for the Capital Behind It

Ground-up multifamily development follows a longer J-curve than value-add investing. Capital typically funds pre-development and construction long before any unit generates rent. Distributions usually wait until the project stabilizes, rather than starting at closing the way they often do on an income-producing acquisition. In exchange for that longer runway, investors receive a brand-new asset with zero deferred maintenance at the exact moment the surrounding pipeline goes quiet.

Knowing which phase a ground-up investment occupies, and which risks are live at that moment, separates investors who anticipate a construction timeline from those who never see it coming.