Analyzing commercial deals isn't nearly as hard as you think. It's harder than residential, sure. You can't just run the numbers in your head on the back of a napkin. But the thing that's actually been making it hard for most investors isn't the deal itself. It's the tools.
For years, the only way any of us analyzed commercial real estate was a giant Excel spreadsheet. And those spreadsheets get complicated fast. I've used them for years and they work fine, but it took me multiple full-day underwriting courses and a long time practicing with other people before I could run one properly.
So I built a better one. Today I'm going to show you how I underwrite a commercial deal in under 10 minutes using the commercial real estate underwriting software my team and I put together. You can use the free version yourself with the Deal Analyzer.
In This Article
Why Underwriting Feels So Hard
Underwriting a Deal in Under 10 Minutes
The Underwrite, By the Numbers
Under 10 Min
To fully underwrite a real deal, start to finish
$244K
Year-one depreciation the tool flagged on the example
18-22%
Annualized cash-on-cash I target as a pro
Why Commercial Underwriting Feels So Hard (It's the Spreadsheets)
Here's what I figured out when we started the CRE Accelerator mastermind and I had to teach people to underwrite. Anybody can open a spreadsheet and start plugging in numbers. But you can make a hundred tiny errors and never know it. You have to understand how every formula works and what each cell is referencing, and it gets overwhelming fast.
So a lot of investors, and maybe you're one of them, just don't bother. They either don't underwrite properly, or they don't underwrite at all. And that's how people end up buying bad deals.
That's the whole reason we spent the better part of a year building a piece of software that does the heavy lifting for you. Instead of chasing cell references, you click buttons. Let me show you what that looks like on a real deal.
Underwriting a Real Deal in Under 10 Minutes
I was in Tupelo, Mississippi yesterday with clients, so let's pull up Tupelo. I hop on LoopNet, and I find a $2.3 million industrial building. Premier Countertops is the tenant, it's an absolute net lease with eight and a half years left on the term and 2% annual rent bumps. I download the offering memorandum, and here's where it gets fun.
In full mode, I hit smart import and drop the offering memorandum right in. The software uses AI to scan the document and pull the numbers for me: $2.45 million price, 26,800 rentable square feet, built in 2006, a 6.86% cap rate, the NOI, the occupancy. All of it.
I always do a quick back-of-napkin check on the imported numbers, because you should never fully trust an auto-fill. $2,450,000 times 6.86% gives me about $168,000 of NOI, and the true number is $168,095. Close enough. It pulled it right.
Then I expand the inputs, and most of them are already filled in. Zero rehab, because there's eight and a half years left on an absolute net lease. 1% closing costs. 35% down, since maybe I'm in a 1031 exchange. Interest rate in the mid-sixes, 20-year amortization, five-year term, a 1.25x minimum debt service coverage ratio. One thing I always add: a 5% vacancy rate even on a 100%-occupied building, because your lender is going to underwrite it that way anyway.
The Tax Piece Most Spreadsheets Skip
Before I calculate anything, I toggle on a cost segregation study. Just by buying this building, the software estimates a $244,000 first-year depreciation deduction and about $90,000 in tax savings. That's the kind of number that never shows up cleanly in a basic spreadsheet, and it changes how you think about a deal.
Calculating Returns (And Watching It Fail)
For the exit, I'm buying at a 6.86% cap but I'll only have three years of term left when I sell, so I assume the next buyer pays a 7.5% cap. I click calculate returns, and it's a terrible deal.
Which is exactly what I expected. I'm buying a 6.86% cap with only 35% down while my debt costs 6.5%. It's not going to pencil. But here's what I love: the software tells me why. It flags a $136,000 interest carry reserve in red, and when I jump to the cash flow tab, I can see the deal loses money every year. A spreadsheet just spits out a bad number. This actually teaches you how to read the deal, and every figure is hoverable so you can see exactly where it came from.
From there I just iterate. What if I put 50% down? What if I negotiate $400,000 off the price? What if the rent were at market? A few clicks each, and I can see instantly whether any version of this deal works.
What I'm Actually Looking For
So what makes a deal good? Honestly, it depends on who you are.
If you've got a billion dollars to park and you want something safe, a 6.7% cash-on-cash return on an absolute net deal, where the tenant handles literally everything down to the roof, beats a Treasury bond. Add in $86,000 of first-year tax savings and it's hard to argue with.
But when I'm actively doing a deal as a real estate professional, I'm going for 18 to 22% annualized cash-on-cash and a two-times equity multiple, meaning I double my money in five years. In multifamily you might be happy with 12 to 15% today. On your first deal, 8 to 12% is a win. The point is to know your own target before you ever calculate the returns.
The Rest of the Toolkit
The Deal Analyzer is just one piece. There's also a cost estimator that's plugged into a national construction-cost database, so it adjusts by market. Nashville runs about 0.92 of the national average, while New York City is 1.55. You pick a renovation scope and it gives you a range, so you're not stuck waiting on a contractor's bid just to figure out if a deal works.
And there's a deal desk that replaced our whole pipeline: research, LOI, under contract, due diligence, closing, closed. Each deal carries its saved underwriting, its tasks, key dates, contacts, and documents, all in one place.
Since we rolled this out inside the accelerator mastermind about six months ago, we've seen our members submit at least double, sometimes triple, the number of deals. Not because they got smarter overnight, but because the friction is gone.
Key Takeaways
The deal was never the hard part. The tools were. Spreadsheets, not commercial real estate, are what stop most people from underwriting.
Smart-import, then sanity-check. Let AI pull the offering memorandum in, but always run a quick back-of-napkin check on the numbers.
A good tool tells you why. Interest carry, cash flow, and hoverable figures teach you how to read a deal instead of just spitting out a number.
Know your target first. 18 to 22% for a pro, 12 to 15% in multifamily, 8 to 12% on a first deal. The number changes everything.
Kill bad deals fast. A 10-minute underwrite frees you to spend your energy on the deals actually worth chasing.
This article is adapted from an Office Hours livestream on the Tyler Cauble YouTube channel. Try the tool for free at the Deal Analyzer.
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