So You Want to Buy Commercial Property.

1. Pick the product type — light-industrial / warehouse vs multifamily. They run on different metrics (per-SF vs per-door), different debt markets, and different operating models. Don't be "both" early on.
2. Pick the submarket, not just the city — employment base, in-migration, logistics corridors, rent-growth history, and upcoming supply that could flood rents.
3. Set the return target — target cash-on-cash, IRR, and how much of the return is income vs appreciation vs tax benefit. Know which you're actually buying.
4. Define the exit before the entry — hold-and-stabilize, value-add-and-refinance, or buy-to-sell in 3–7 years. The funding and improvement plan follow from the exit.
5. Set the budget including capex — acquisition price, acquisition costs, and a real initial-capex reserve. Under-pricing first-year capex is how good-looking deals go negative.
6. Write down what you will NOT buy — dying submarkets, single-tenant concentration, unknown environmental history, entitlement-limited sites. The filter is what saves you, not the shopping list.

Trap: chasing a "cheap cap rate" in a weak submarket. The asset is bought at the intersection of product, submarket and mandate — a great building in the wrong place, or for the wrong strategy, is still a bad deal.

1. Build the pipeline — brokers, owners, attorneys, lenders, CPAs, off-market networks. In this range the best deals often never hit the market.
2. Answer the #1 question early: why is it selling? A tired owner exiting, a lender-forced sale, a distress event, or a well-positioned owner just monetizing? Motivation drives price, terms and process.
3. Screen against the mandate — walk away fast from anything that violates submarket or size discipline, no matter how attractive.
4. Do the 15-minute pass — rent roll, asking price, rough cap, obvious red flags like a broken tenant mix or a too-good cap rate.
5. Price the "seller's story" — the OM is a sales document. Read it for what it doesn't show you (delinquency, expirations, deferred maintenance) more than what it boasts.
6. Prioritize by probability × spread — the best deal is one you can actually buy with a real margin of safety, not the shiniest brochure.

Trap: a data room that looks thick but is thin on the important documents — current estoppels, a rent roll that ties to the T-12, full leases (not summaries). Dense-but-thin is a classic sign someone is hiding something.

1. Load the T-12 — trailing twelve months of rent, expense and recovery detail, and ask for it in raw form, not the seller's summary.
2. Build the rent roll yourself — don't trust the one you're given. List every unit/suite, size, base rent, term, escalations, guarantees, deposit, and expiration.
3. Separate face rent from effective rent — free rent and concessions make the "average rent" look high. Underwrite the effective rent actually collected after concessions spread over the lease term.
4. Separate in-place rent from market rent — below-market leases mean captured upside if you can re-roll them; they also mean today's NOI understates value. Know the difference or you'll misprice both legs.
5. Trust collections, not paper rent — compare billed to collected over the trailing twelve. Delinquency and bad debt quietly shrink the "great" cap rate.
6. Normalize NOI — strip one-offs, non-recurring income, and check whether expenses are honest (or conveniently low this year).
7. Set a walk-away price — the number below which the spread to the potential leg disappears. Negotiate everything before that line, nothing after.

Trap: underwriting the rent roll as a spreadsheet and the T-12 as gospel. The gap between what the seller presents and what actually collects is where underwriting mistakes are born. Your model is only as real as the rent you can actually verify.

1. Submit the LOI — indicative price, structure, deposit, due-diligence and closing timeline.
2. Define the basis — asset purchase vs equity/entity purchase. An entity purchase can carry hidden liabilities; an asset purchase resets the basis for tax (good) but may trigger owner unwillingness (real-world friction).
3. Clarify deposit refundability — earnest money, and what's refundable before vs after you waive diligence conditions. Non-refundable early money should be rare.
4. Lock exclusivity and the diligence window — you want the property off the market long enough to actually do diligence, with a clean extension path.
5. List the confirmations you need — estoppels, SNDAs, survey, inspection access, and access to the actual leases and expense history.
6. Negotiate the "reps that are worth money" — not cosmetic language, but the reps whose breach actually compensates you later: condition of systems, absence of violations, accuracy of rent roll, no undisclosed environmental issues.

Trap: obsessing over price while giving away everything that protects you — a too-short diligence window, a hard non-refundable deposit, or reps that survive only for a few months. Price is the headline; sale basis, diligence window and tenant-confirmation rights decide how much risk you retire before close.

1. Legal — lease file & estoppels — confirm every lease, renewal, option and that the rent roll ties to signed documents, not a spreadsheet.
2. Tenant credit check — the financial strength and industry of your largest tenants. A national credit tenant beats a local one at the same rent.
3. Physical condition — engineer's review of roof, structure, HVAC, parking, façade, envelope. For industrial: dock doors, clear height, truck court, floor slab, fire/life-safety. For multifamily: unit interiors, plumbing, electrical, elevators if mid-rise.
4. Environmental — Phase I ESA; go to Phase II if anything flags. Industrial sites hide soil/groundwater problems; pre-1980 buildings hide asbestos.
5. Title, survey & entitlements — liens, easements, encroachments, zoning, and what the site is permitted to do. The ceiling on your potential leg lives here.
6. Insurance reality check — get a real quote, don't assume coverage is cheap or available. Fire/wildfire/flood/hail exposure can crush returns in a hard insurance market.
7. Code & life-safety — for multifamily, check for grandfathered non-conforming uses and any pending municipal violations that transfer with you.
8. Property-tax & reassessment — pull the current assessment and understand how a transfer reassesses your bill, plus whether an appeal is worth it.
9. Operations & management file — utility metering (who pays), outstanding work orders, service contracts, employee/turnover file, and the quality of the manager you're inheriting.

Trap: treating due diligence as a to-do list you "pass" rather than as the thing that re-prices the deal. Every finding is either a line item in your model, a negotiation lever (credit, price, rep), or a reason to walk. A well-run DD surfaces problems while you can still act on them.

1. Choose the funding model — conventional bank, agency (multifamily), bridge, or JV/equity syndication. Don't pick the loan until you know the exit.
2. Get an independent appraisal on a stabilized basis — and read the adjustments, not just the conclusion.
3. Size the debt — typically 60–70% LTV with a DSCR the lender accepts on real cash flow. Leverage amplifies both return and loss.
4. Know the prepayment terms cold — bridge and fixed-rate loans carry prepayment penalties or defeasance. A "cheap" rate can be an expensive trap if you plan to refinance or sell early.
5. Structure the stack — senior debt plus mezzanine or equity if a value-add needs re-tenanting or capex capital beyond the first mortgage.
6. Negotiate reserves & covenants — interest reserves, capex reserves, rollover covenants, reporting. And know whether you're signing a personal guarantee — that converts a corporate risk into a personal one.

Trap: assuming the term sheet equals the funded loan. Term sheets aren't commitments; appraisals come in short; markets move between LOI and close. Underwrite the debt the way the lender will, carry a funding plan B (and C), and keep enough liquidity to close even if financing tightens.

1. Finalize the PSA — reps, warranties, prorations, escrow, a clean closing statement you've actually read.
2. Clear conditions precedent — financing, title, estoppels, survey, clean closing statement.
3. Reconcile the money — security deposits, delinquent rent, prepaid rent, prorations. Get the seller's full deposit list and reconcile it to leases, or you inherit the shortfall.
4. Plan the property-tax appeal window — transfers often trigger reassessment; know the local appeal deadline before close so you don't miss it.
5. Close title & transfer the leasebook — deed, assignments of leases, notices to tenants, deposits, keys.
6. Transition operations — management, maintenance, accounting, insurance continuity. Day-one continuity matters more than it looks.
7. Fund reserves & launch the asset plan — the improvement and lease-up plan starts now, not "later." The first 90 days set the hold's trajectory.

Trap: letting the deposit reconciliation and property-tax appeal window slip through the close. The deposit list is real money that either transfers or doesn't — and a missed reassessment appeal is a permanent annual cost, not a one-time one.