A commercial purchase is a sequence of short windows: the letter of intent, the due diligence period, the financing contingency, the title objection date, the closing. Each one is a chance to learn something and act on it, and each one closes on a date. Most expensive mistakes are a step done late, or not at all. Here is the whole sequence, with what goes wrong at each step.
Property type, size, location, how long you'll hold it, and what return you need. Then talk to lenders before you look: how much they'll lend, on what terms, and what minimum debt-service coverage they require. Banks set that minimum for each type of loan, and it caps what you can borrow.
Net operating income (NOI) is the rent and other income less operating expenses, before loan payments. The cap rate is NOI divided by the price. Debt-service coverage is NOI divided by a year of loan payments. Recompute all three from the seller's rent roll and operating statement; don't take the broker's package's figures on trust.
| Price | $2,400,000 |
|---|---|
| Net operating income | $180,000 |
| Cap rate (NOI ÷ price) | 7.5% |
| Loan (70% of price), 6.75%, 25 years | $1,680,000 |
| A year of loan payments | $139,288 |
| Debt-service coverage (NOI ÷ payments) | 1.29 |
The deal's outline: price, deposit, the length of the due diligence period, the financing contingency, the closing date, and the list of documents the seller will deliver and when. It is usually non-binding except for confidentiality and any exclusivity period, so say so in it.
Have a real estate attorney draft or review it. It sets the deposit and when it goes into escrow, the due diligence period, the seller's deliveries, the seller's representations, how title and survey objections work, tenant estoppels and lender agreements as closing conditions, and what happens after a fire or a condemnation.
Order every report the day the contract is signed: title, survey, Phase I environmental site assessment, property condition assessment, zoning. Read every lease against the rent roll. The whole checklist, with the red flags, is in the commercial due diligence guide.
Application, the lender's appraisal and reports, the loan commitment, the rate lock. Read the commitment's conditions the day it arrives: estoppels, lender agreements with tenants, insurance, reserves.
Compare the title commitment's exceptions with the survey. Object in writing to anything you won't accept, before the contract's date, and give the seller its cure period.
Read the settlement statement line by line against the contract. Before any money moves, confirm the wiring instructions by phone, on a number from a source you already trust, never from the email that sent them.
Tell every tenant in writing who the new owner is and where to pay rent. Collect tenants' insurance certificates, abstract every lease (dates, options, rent steps), and set the first year's expense budget and reconciliation dates.
PlainSight's real estate brokerage example reads fourteen agents' deals and a commercial desk the way a broker would, including what skipped steps cost the office. Everything runs in your browser.
Take the brokerage tour →This guide is general information for buyers, agents and brokers, not legal, tax or financial advice. The worked example is arithmetic, not a forecast or a market rate.