How to analyze a commercial real-estate deal like a pro: the 6 checks before you wire a dollar

The listing always looks great. Professional photos, a confident pro-forma, a cap rate that seems to beat the market. The question is never whether the deal looksgood — it's whether it survives ten minutes of real analysis. Most don't.

Professional underwriters don't start with gut feel. They run the same checks, in the same order, on every deal — because the checks are designed to catch the specific ways a listing flatters itself. Here are the six that matter most, what each one actually measures, and the trap hiding inside each number.

The debt service coverage ratio is the first number a lender looks at, which makes it the first number you should look at. A DSCR of 1.0 means the property's net operating income exactly covers the mortgage — zero margin for a vacancy, a rate reset, or a surprise repair. Most lenders want at least ~1.25×; below that, there is no cushion, and a single bad quarter puts you in the position of feeding the property out of your own pocket.

The trap is that DSCR is only as honest as the NOI you feed it. Compute it from the in-placeincome — what the property earns today — not the pro-forma income the brochure projects after a hypothetical renovation and rent bump. A deal that shows 1.45× on pro-forma numbers and 1.10× on actuals is a 1.10× deal. PropHunt computes DSCR from the deal's actual NOI and loan terms and flags it when the coverage is too thin to be safe.

The cap rate is the deal's unlevered yield — what the property returns before any financing. It's the cleanest way to compare two buildings of different sizes and prices, and it's also the number listings manipulate most. The classic move: quote the pro-formacap rate (based on projected future income) where you'd expect the in-placecap rate (based on current actual income). A "6.1% cap" built on rents nobody is paying yet is not a 6.1% cap.

The second trap is quoting a cap rate with no reference point. A 5.8% cap is cheap in one submarket and wildly expensive in another. The number only means something next to what comparable assets in the same submarket actually trade at. PropHunt recomputes the in-place cap from the deal's real income and benchmarks it against the submarket, so the comparison is in-place vs. in-place — not brochure vs. reality.

A price means nothing without comps. $129K per unit sounds like a number; it only becomes information when you know the submarket median for similar vintage and unit mix is $141K — now it's 9% under the pack, and the next question is why. Sometimes the answer is a motivated seller. Sometimes it's deferred maintenance the photos were framed to avoid.

The two comp metrics that matter for most CRE assets are price per unit (for multifamily) and price per square foot (for office, retail, and industrial). Both need to come from recent sales of genuinely similarassets — a 2019-vintage Class A comp tells you nothing about a 1978 Class C deal. PropHunt benchmarks the deal's $/unit and $/SF against recent submarket sales and shows you where it lands in the distribution, so "priced to sell" becomes a measurable claim instead of a broker adjective.

This is where the most expensive fictions live. The rent roll says what each unit is supposed to rent for; the trailing-12 (T-12) statement says what the property actually collectedover the last year. When a unit shows $1,850 in-place against a $1,510 trailing average and a $1,540 market rate, that $1,850 is not income — it's a wish with a lease attached, often a short-term concession deal or a related-party tenant dressed up for the sale.

The check is mechanical: cross-reference every line of the in-place rent roll against the T-12 actuals and the market rate for that unit type. Real income shows all three numbers in agreement, within noise. Inflated income shows in-place rents floating well above both. PropHunt runs this cross-check across the full rent roll and flags every unit priced above what the trailing actuals and the market support — because a valuation built on three inflated units compounds into six figures of overpayment at a 5–6% cap.

A great spreadsheet on a bad block is still a bad deal. Underwriting captures the asset; it doesn't capture the block — and the offering memorandum will describe every neighborhood as "thriving" and "rapidly developing." The signals that actually predict performance are measurable: the direction of the crime trend (a flat medium-crime area and a deteriorating low-crime area are different bets), the demand drivers within commuting distance, population and income trajectory, and physical-hazard exposure — flood zones, wildfire risk, seismic codes — that flows straight into your insurance premium.

Insurance is the quiet killer here: in exposed markets, premiums have repriced hard in recent years, and a property that penciled at the seller's legacy policy can fail at the quote you'll actually get. PropHunt scores crime trend, demand drivers, demographics, and flood/hazard exposure for the specific location — the risk layer the OM never mentions — and folds it into the deal score, so the block is underwritten with the same rigor as the building.

The last check is the one that catches what the first five can't: problems that live in public records instead of financial statements. Open building permits that were never closed out. A roof and HVAC plant at end of life that the capex budget pretends not to see. A tax lien recorded on title. None of these appear in a pro-forma, and every one of them transfers to you at closing.

These are findable beforeyou're in contract, because cities publish them: permit histories, code-violation records, and recorded liens are public data in most major markets. PropHunt scans city open-data records and the deal's documents for deferred maintenance signals, open permits, and liens — surfacing, for example, an unresolved building permit, a deferred roof, and a recorded tax lien as three explicit red flags on the deal rather than three surprises in month two of ownership.

• Physical:deferred maintenance, end-of-life major systems, capex the budget doesn't cover.
• Legal: open permits, code violations, liens, anything clouding title.
• The rule: every red flag is either priced into your offer or a reason to walk. There is no third option.

DSCR, in-place cap rate, comps, rent roll vs. T-12, location risk, and physical & legal flags — those six checks catch the most common ways a listing flatters itself. They are also a subset of what a full underwrite looks like: environmental exposure, regulatory and zoning posture, construction-quality signals, market news and sentiment, and the interaction effects between all of them.

That's the part PropHunt automates. Ten specialist AI agents run these checks — and the dozens behind them — on any commercial deal in about 30 seconds, pulling from 20+ data sources including city open data, and each read comes with a confidence level, so you know which findings are solid and which deserve a second look.