Learn how to buy commercial property the right way. Matt Bingaman shares a proven step-by-step process for business owners and investors.
I’ve guided hundreds of business owners and investors through their first — and their fifth — commercial property purchase. And the one thing that separates the buyers who get great deals from those who overpay, overlook critical issues, or simply never get across the finish line is this: a disciplined, step-by-step process. Buying commercial property isn’t something you improvise. It’s something you execute — methodically, professionally, and with the right team around you.
Here’s the exact process I walk my clients through.
Step 1: Define Your Objectives Before You Look at a Single Property
The single biggest mistake I see new commercial property buyers make is jumping straight into property searches before they’ve clearly defined what they’re trying to achieve. Before you look at a single listing, answer these questions:
- Why are you buying? Owner-occupied space for your business? An investment property for income? A development opportunity?
- What asset class fits your goals? Office, retail, industrial, multifamily, or special purpose?
- What’s your target market? Which city, region, or submarket aligns with your knowledge and risk tolerance?
- What’s your investment horizon? Short-term value-add and flip, or long-term buy-and-hold income?
- What returns do you need? Cash-on-cash return, cap rate threshold, or total return requirements?
Clarity on these questions shapes every subsequent decision in the buying process.
Step 2: Assemble Your Advisory Team
Commercial property transactions are complex, multi-disciplinary endeavors. You need the right professionals in your corner from the outset:
- CRE Advisor/Broker: Market intelligence, property identification, negotiation, and transaction management
- Commercial Real Estate Attorney: Contract review, title issues, lease analysis, and closing
- CPA/Tax Advisor: Tax structuring, depreciation analysis, and 1031 exchange planning
- Commercial Lender or Mortgage Broker: Pre-qualification, loan structuring, and lender introductions
- Commercial Property Inspector: Building condition assessment and capital expenditure identification
- Environmental Consultant: Phase I (and if needed Phase II) environmental assessment
I always tell my clients: the cost of assembling a great advisory team is a rounding error compared to the cost of making a poorly informed decision on a multi-million dollar purchase.
Step 3: Get Your Financing in Order Before You Make an Offer
Nothing undermines a commercial property negotiation faster than being unable to demonstrate financing credibility. Before you make an offer:
- Understand your equity position: How much cash can you deploy as a down payment?
- Get pre-qualified with a commercial lender: Know your borrowing capacity and likely loan terms
- Understand the financing landscape: Conventional bank loans, SBA 504/7(a), CMBS, bridge financing — which is right for your deal?
- Prepare a borrower package: Personal financial statements, business financials, tax returns, and a clear investment thesis
Step 4: Build a Disciplined Property Search
With your objectives defined and financing in order, build a systematic property search:
On-Market Sources
- LoopNet, CoStar, CREXi, and local broker platforms
- Listings from active CRE brokers in your target market
- Auction platforms and distressed asset databases
Off-Market Sources
- Direct outreach to property owners in your target area
- Broker network relationships that surface pre-market opportunities
- County property records and ownership databases
- Relationships with developers, lenders, and property managers
In my experience, the best deals are often found off-market — before they’re broadly advertised and before competitive tension drives up the price.
Step 5: Evaluate Properties with Disciplined Underwriting
When you identify a potential acquisition, run a thorough financial analysis before getting emotionally committed to the deal:
The Core Financial Model
- Gross Potential Rent: Total income at 100% occupancy
- Less Vacancy and Credit Loss: Realistic estimate based on market conditions
- Plus Other Income: Parking, storage, signage
- Less Operating Expenses: Taxes, insurance, maintenance, management fees
- Equals Net Operating Income (NOI)
- NOI ÷ Purchase Price = Cap Rate
- Model cash-on-cash return, IRR, and equity multiple over your target hold period
Stress Testing
Always model multiple scenarios:
- Base case: Conservative rent growth and market occupancy
- Downside case: Higher vacancy, flat rents, rising expenses
- Upside case: Value-add execution and above-market rent growth
Step 6: Make a Strategic Offer
Once you’ve identified a property that meets your criteria and your underwriting supports the investment thesis, make a well-structured offer:
- Letter of Intent (LOI): A non-binding document outlining your proposed price, terms, due diligence period, and closing timeline
- Price your offer strategically: Support it with comparable sales data and cap rate analysis
- Include favorable contingencies: Due diligence period, financing contingency, and specific inspection rights
- Move with confidence: Well-prepared, professionally presented offers get taken seriously
Step 7: Conduct Thorough Due Diligence
Once your offer is accepted, the due diligence process begins. This is where you verify everything the seller has represented and uncover any issues before you’re legally committed:
Physical Due Diligence
- Building inspection and property condition assessment
- HVAC, electrical, plumbing, and roof evaluation
- ADA compliance and code compliance review
- Environmental assessment (Phase I, and Phase II if warranted)
Financial Due Diligence
- Verify rent roll against actual lease documents
- Review 3 years of operating statements and reconcile to actual expenses
- Analyze lease terms, escalations, options, and renewal risk
- Assess deferred maintenance and near-term capital expenditure requirements
Legal Due Diligence
- Title search and title insurance commitment
- Survey review for encroachments and boundary issues
- Zoning and permitted use confirmation
- Review of any easements, covenants, or deed restrictions
- CC&Rs and strata/HOA documents (if applicable)
Step 8: Finalize Financing and Close
With due diligence complete and any issues resolved or priced into the deal:
- Submit formal loan application with complete due diligence package
- Order appraisal and third-party lender reports
- Review and negotiate purchase agreement with your attorney
- Satisfy all closing conditions — title insurance, lender requirements, insurance binders
- Close the transaction — fund escrow, execute documents, and take ownership
Common Mistakes to Avoid
- Skipping due diligence to close faster: This is how costly surprises happen
- Underestimating capital expenditure requirements: Always budget conservatively
- Overpaying in competitive markets: Discipline beats emotion every time
- Ignoring lease expiration risk: Upcoming lease expiries are the most common source of post-acquisition pain
- Going it alone: The right advisory team pays for itself many times over
Conclusion
Buying commercial property is one of the most powerful wealth-building and business-enabling decisions you can make — but only when it’s executed with discipline, preparation, and the right professional support. The process I’ve outlined here is the same one I walk my clients through every day, and it consistently produces better outcomes than improvised approaches.
Ready to buy commercial property and want an experienced advisor in your corner from day one? Contact Matt Bingaman for a personalized consultation and a disciplined buying strategy tailored to your goals.