For a buyer, preparation should start before making an offer, especially with an income-producing commercial or multifamily property.

Preparing to Buy a Commercial or Multifamily Property

1. ESTABLISH YOUR INVESTMENT GOALS

• Income/cash flow or long-term appreciation?
• Commercial, multifamily or mixed-use?
• Stabilized property or value-add opportunity?
• Desired location and property size?
• Expected holding period?

2.KNOW YOUR POSITION
Determine how much equity you can invest and speak with a commercial lender or mortgage broker early. Understand your potential down payment, financing terms, interest costs and closing costs.

3. ANALYZE THE INCOME
Review the rent roll, leases, vacancies, operating expenses and Net Operating Income (NOI). Don't focus only on the purchase price—understand what the property actually earns.

4. REVIEW THE LEASES
For commercial properties, examine:

• Lease expiry dates and renewal options
• Base and additional rent
• Rent increases
• Tenant responsibilities
• Deposits and guarantees
• Any outstanding tenant issues

For multifamily, review the tenancy information, current rents, deposits, vacancies and applicable tenancy requirements.

5. INVESTIGAGTE THE PHYSICAL PROPERTY
Your due diligence may include building inspection, roof, HVAC, electrical, plumbing, elevators, parking, environmental matters and anticipated capital expenditures.

6. INVESTIGAGE THE PROPERTY ITSELF
Review zoning, permitted uses, title, easements, development potential, environmental information, property taxes and available municipal records.

7. BUILD YOUR PROFESSIONAL TEAM
A commercial Realtor, lawyer, accountant, lender/mortgage broker and appropriate building/environmental professionals can each identify different risks before conditions are removed.

8. PLAN BEYOND THE PURCHASE
Before buying, understand how the property will be managed, leased and maintained after closing. Prepare an operating budget and consider upcoming lease expiries, vacancies, repairs and capital improvements.