Your First Commercial Property Investment
Feeling overwhelmed by spreadsheets and financial jargon? This practical guide breaks down what actually matters—no hype, just clear steps to help you make your first commercial real estate decision with confidence.
Building Your Investment Foundation
Your Learning Journey
Who This Kit Is For
This kit is for people taking their first step into commercial property — from duplexes and small retail plazas to mixed-use buildings.
It distills what actually matters before you buy: how to read the numbers, what lenders expect, and what questions to ask early.
Core Concepts
Three numbers that unlock commercial real estate analysis
Net Operating Income (NOI)
NOI is the property's annual income minus operating expenses (excluding debt payments). It's the number that drives property value—stronger NOI means higher value. Think of it as the property's "profit" before financing.
Cap Rate
Cap rate is NOI divided by purchase price, expressed as a percentage. It shows the yield on your money if you paid cash. Higher cap rates typically mean more risk or lower growth potential. It's a quick way to compare properties.
DSCR (Debt Service Coverage Ratio)
Lenders use DSCR to test if property income covers loan payments. Typically, they want DSCR of 1.25x or higher—meaning income is 25% more than the loan payment. Lower DSCR means tighter cash flow and higher risk.
Ready to practice?
Try these concepts using our calculators to see how small changes in rent or price affect returns.
Explore CalculatorsFinancing Basics
What you need to know before talking to lenders
Equity & Down Payment
Commercial deals usually require 25–35% down, unlike residential mortgages. Lenders want more equity because commercial property income drives repayment—not personal income. Plan for larger upfront capital than a home purchase.
Amortization & Term
Amortization is the total loan length (often 20–25 years). The term is the fixed-rate period (typically 5 years). After the term, you renew at current rates. Longer amortization = lower payments but more interest over time.
Rate, Risk & Covenants
Rates vary by property type, location, and borrower strength. Lenders may add covenants—conditions like maintaining DSCR above a threshold or limits on other debt. Understand these before committing.
Understanding these basics helps you talk to lenders with confidence and realistic expectations.
First-Time Deal Checklist
Use this checklist as you evaluate properties
Property & Income
Location & Tenants
Financing & Risk
Before You Submit an Offer
The goal isn't to eliminate risk—it's to understand it.
Ask yourself:
- • Why is the seller selling now?
- • What's my worst-case scenario?
- • Am I comfortable holding through a slow period?
Ready to Take the Next Step?
Bring this kit to a conversation with us
We'll walk through your notes, test your numbers live in the calculators, and help you decide whether now is the right time—or what to do next.
Request a First-Time Investor Call
Get personalized guidance for your first commercial property investment.
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