Commercial Real Estate Financing in Texas: The Complete Guide

Texas is the most active commercial real estate growth market in the United States. Population inflows, a business-friendly tax environment, and the largest concentration of private capital outside the coasts have made the state’s four major metros — Dallas-Fort Worth, Houston, Austin, San Antonio — consistent top-five CRE markets by transaction volume since 2019.

But Texas is not a single market. Financing a Class A multifamily development in Austin is fundamentally different from a value-add industrial deal in Houston’s East End or a bridge loan on a medical office in Frisco. The lender pool, pricing grid, and structural expectations vary by metro, asset class, and sponsor profile.

Why Texas Continues to Lead

The fundamentals driving Texas CRE are structural, not cyclical:

• Population growth. Texas added more residents than any other state every year since 2020. Net migration from California, New York, and Illinois continues at scale.
• No state income tax. This has driven corporate relocations (Tesla, Oracle, HPE, Charles Schwab, CBRE) and high-net-worth migration, which in turn drives demand across every CRE asset class.
• Diverse economic base. Energy remains significant but no longer dominates. Tech (Austin), healthcare (Dallas, Houston), finance and logistics (DFW), and biotech (Houston Medical Center) provide balance.
• Regulatory environment. Zoning friction is real but more surmountable than coastal markets. Entitlement timelines are shorter. Construction costs, while rising, remain below peer growth markets.
• Capital depth. Texas hosts more CRE debt funds, private lenders, and life company branches than any state outside New York. Competition on the right deal is consistent.

The Four Major Texas Markets

Dallas-Fort Worth

DFW is the second-largest CRE market in Texas by transaction volume and arguably the most diversified. Multifamily dominates institutional capital deployment; industrial around DFW airport and the north suburbs continues to trade actively; office is bifurcated like national markets but trophy Class A in Uptown and Plano still prices at a premium.

The DFW lender landscape is deep — every national debt fund has Texas coverage, regional banks like Texas Capital and Prosperity Bank are relationship-driven, and agency multifamily (Fannie/Freddie) is competitive. Value-add multifamily bridge is the most commoditized product segment.

Houston

Houston remains the largest metro in Texas and the most complex CRE market. Energy exposure has diversified but still influences capital flows — drawdowns correlate with WTI prices with a 6 to 9 month lag. The Medical Center is the largest healthcare complex in the world and drives specialized asset demand.

Industrial along the ship channel and the east submarkets remains one of the highest-conviction plays in the state. Class A office has struggled but specialty submarkets (Energy Corridor, Galleria) hold their own. Multifamily bridge and construction debt remains available but more discerning than in 2021.

Austin

Austin compressed to cap rates that made national headlines during the 2020-2022 migration surge and has since recalibrated meaningfully. The supply overhang in multifamily (roughly 30,000 units delivered in 2024-2025 across Central Texas) has pressured rent growth and lender sizing.

Ground-up construction financing in Austin is now underwritten with significantly more conservative pro formas than 18 months ago. Bridge lenders active in the market are pricing to the new rent reality. Sponsors who adjusted quickly are transacting; those still underwriting to 2022 assumptions are sitting on LOIs.

San Antonio

San Antonio is the smallest of the big four Texas metros but the most consistent. Population growth is steady rather than explosive, supply discipline has been better than Austin, and cap rates remain more accessible. Medical, military, and tourism drive economic base. Multifamily value-add and mixed-use near downtown are the most active segments.

Secondary Markets Worth Noting

El Paso, Corpus Christi, the Lower Rio Grande Valley, Waco, Lubbock, and Amarillo all have active CRE deal flow but with thinner lender pools and higher cap rate profiles. Relationship lending dominates. These are not markets to approach cold; local broker relationships and community bank networks matter disproportionately.

Non-Recourse vs Recourse in Texas

One of the most practically important features of Texas CRE lending is the prevalence of non-recourse with standard carve-outson permanent debt. Agency multifamily (Fannie/Freddie), life company debt, and CMBS are almost universally non-recourse. This matters because it protects the sponsor’s personal balance sheet from a non-fraud default event.

Where recourse typically shows up:

• Construction loans — completion guarantees and partial recourse are standard until the project reaches stabilization
• Bridge debt on transitional assets — many bridge lenders require sponsor guarantees, particularly on heavy value-add or deep renovations
• Community bank loans — often full recourse regardless of asset class

Experienced Texas sponsors structure their entity stack specifically to limit recourse exposure. SPEs, guarantor structures, and bad-boy carve-out negotiations are meaningfully different in Texas than in more restrictive states, and sponsors who take advantage of this protect substantial personal wealth across portfolio events.

The Homestead Exemption Nuance

Texas has one of the strongest homestead exemptions in the United States — the primary residence is protected from creditors in most scenarios. For CRE sponsors, this is a meaningful estate planning consideration, but it does not protect commercial real estate assets themselves.

The relevance: sponsors who have significant personal net worth tied up in Texas residential property have a stronger negotiating position with recourse lenders, since the lender’s potential recovery against personal assets is more limited than in most states. This can translate to tighter personal guarantee negotiations.

Property Tax Reality

Texas has no state income tax — but it has some of the highest property taxes in the country to compensate. Effective rates often run 2.0% to 2.8% of assessed value, with reassessments occurring annually. Senate Bill 2 (2023) compressed reassessment caps for residential; commercial property remains fully subject to market-based reassessment.

For underwriting, this means:

• Property tax line items should be modeled at 2.0% to 2.8% of likely post-acquisition assessed value, not seller’s historical tax bill
• Tax protest and consulting is standard practice in Texas and routinely saves 10% to 15% of the tax bill
• Net operating income figures from Texas deals should be cross-checked against the true post-sale tax reassessment, which can be materially higher than the trailing twelve months

Lenders sizing DSCR will underwrite to the higher, post-acquisition tax figure — not the current one. Sponsors who miss this lose debt capacity they assumed they had.

Typical Deal Structures in Texas

Three deal structures dominate current Texas CRE flow:

1. Ground-up multifamily construction. 70% to 75% LTC construction debt, three-year terms with extensions, non-recourse at stabilization. Agency or life company take-out.
2. Value-add multifamily bridge. 75% LTC acquisition plus CapEx, 18 to 30 month term, refinance into agency at stabilization. The highest-volume Texas debt product.
3. Industrial acquisitions. Permanent debt from the outset (life companies, CMBS, or banks on smaller deals), 55% to 65% LTV, 10-year terms at competitive rates.

How Passy Capital Places Texas Deals

We have active lender relationships across every major Texas metro and across the full debt stack — agency, life company, debt fund, regional bank, and private credit. The Texas market rewards breadth: what gets a deal done in Austin in 2026 is not the same product or same lender as 2022, and a broker with deep single-lender relationships instead of deep market coverage gets you worse terms.

We structure for Texas-specific realities — post-acquisition property tax, non-recourse positioning, regional bank vs debt fund routing by asset size and sponsor profile — and we shop deals efficiently because the lender pool is deep enough that competition actually improves outcomes.

Have a Texas CRE deal? Submit it here and we come back within 24 hours with the lender pool that fits. Or model the numbers first with our CRE loan calculator.