Running numbers on commercial properties

[Krisleigh Hoermann]

Hi everyone!

I am just getting started in real estate. I found some great forum posts on running numbers for residential and have had trouble finding anything for commercial properties. Do you have recommendations or tips on how to best run the numbers to quickly rule out bad deals and/or see which ones I should get more information on? What's on your checklist? I know proformas aren't entirely accurate and am trying to do some due diligence before reaching out to the broker.

Thanks in advance for your thoughts!

[Jaysen Medhurst]

@Krisleigh Hoermann, when you write "commercial" are you referring to large multi-family or retail/office/industrial space?

1. Most of the underwriting is the same, where it gets more difficult is determining market rents for the latter. Apartment rents are pretty easy to determine through Craigslist, Apartments.com, etc. You'll really need to consult a good commercial broker in the area to make those same estimates for commercial space.
2. Also, leases tend to be longer. Sometimes as long as 20 years, with regular increases negotiated at the outset.
3. The other twist is that many of those properties are Triple Net (NNN), meaning the tenant pays the insurance, taxes, and upkeep.

What's drawing you to commercial? Most newbies don't start there.