July 1, 2025 • General
When a promising commercial property hits your inbox, timing matters. Whether you’re reviewing a retail strip center, office building, or warehouse, being able to quickly determine if a deal is worth pursuing can save you hours—and help you move faster than the competition. Here’s a quick and effective way to analyze a commercial deal in under 10 minutes.
1. Start with the Asking Price and Net Operating Income (NOI)
Look at two numbers first: the asking price and the NOI (Net Operating Income).
- NOI = Gross Income – Operating Expenses (excluding debt service)
Once you have the NOI, divide it by the asking price to get the cap rate.
Cap Rate = NOI ÷ Purchase Price
This gives you a high-level read on return. Compare this to typical cap rates in your market (Amarillo, for example, often falls in the 6%–9% range).
2. Examine the Rent Roll
Skim the rent roll to answer these questions:
- Are the tenants paying market rent or is there room to increase?
- When do leases expire? Are there long-term tenants in place or a lot of near-term turnover?
- Any vacant units? That affects your immediate income and potential upside.
A solid rent roll with stable, long-term tenants makes the deal more attractive. Lots of vacancies or under-market rents? That could be a value-add opportunity—or a red flag.
3. Assess Physical Condition
You can’t inspect everything in 10 minutes, but you can ask:
- How old is the roof, HVAC, and major systems?
- Are there obvious signs of deferred maintenance?
- Has the building been updated recently?
If big-ticket repairs are needed soon, that needs to be factored into your offer.
4. Consider Location and Use
Pull up the property on Google Maps.
- What surrounds the property—residential neighborhoods, businesses, or nothing?
- Is it near major roads or traffic generators like hospitals, colleges, or industrial hubs?
- Does zoning align with your intended use?
If it’s in a high-traffic, business-friendly area, that’s a big plus.
5. Quick Debt Coverage Check (DSCR)
If you’re financing, calculate the Debt Service Coverage Ratio (DSCR):
- Estimate your loan payments
- Divide NOI by annual debt service
DSCR = NOI ÷ Debt Service
A DSCR above 1.25 is typically considered safe for lenders. If it’s lower, you may need more equity or better terms.
Final Thought
This isn’t the full underwriting process—but in 10 minutes, you can spot whether a deal deserves a deeper look or a quick pass. Over time, this quick-scan method helps you build speed and confidence in evaluating opportunities, while filtering out the noise.
If you need help analyzing commercial deals in Amarillo or want to discuss current opportunities, reach out to the team at Wellborn Real Estate—we’re here to help you invest with clarity.