How to screen commercial real estate deals: checklist and example

Check asset type, geography, size, vintage, strategy, deal structure, check size, and other hard limits. Make the rules explicit enough that two analysts reach the same result from the same evidence.

Do not confuse missing information with a violation. A deal that lacks a price may need a request or range analysis; it has not automatically passed the basis threshold.

Confirm which documents exist, their dates, and whether key facts reconcile. An OM-only opportunity can still receive a preliminary screen, but the result should carry lower confidence than a package with a current rent roll, T12, and supporting detail.

• Property and transaction facts
• Current occupancy and lease schedule
• Historical revenue and expenses
• Seller’s business plan and projections
• Material missing files and contradictions

Estimate the deal only to the precision supported by the package. Look at price per unit or square foot, going-in yield, rough debt constraints, major capital needs, and the gap between current operations and the seller’s pro forma.

The screen should identify what must be true for the opportunity to work. It should not bury a weak historical base under a complete-looking long-term model built from unsupported assumptions.

Consider this invented 100-unit example. The asking price is $12 million, reported annual NOI is $600,000, and initial renovation spending is $1 million. Price per unit is $120,000. The going-in cap rate is $600,000 divided by $12 million, or 5.0%. Initial cost is at least $13 million before closing costs, financing fees, and reserves. That last figure is a cost-basis check, not a stabilized yield.

Assume proposed annual debt service is $480,000. Reported NOI divided by annual debt service gives 1.25x DSCR. If supported tax and insurance recasts reduce annual NOI by $60,000, the adjusted $540,000 supports only 1.125x coverage. At a hypothetical firm minimum of 1.25x, maximum annual debt service would be $432,000. The debt proposal and operating case now require review before the deal advances.

These figures are arithmetic examples, not market assumptions or lending terms. The screen has not proved rents, renovation premiums, financing availability, environmental condition, or investment returns. Its useful output is a specific dependency: the proposed debt service does not meet the stated threshold on adjusted operations.

Record whether the deal advances, stops, or waits for information—and why. If it advances, name the questions the full underwrite must answer. If it stops, preserve the rule and evidence so the team can learn from the decision later.

A consistent record improves future screening because the firm can compare written pass and pursuit reasons against later outcomes rather than relying on institutional memory alone.

• Identity: property, source email or listing, received date, analyst, and buy-box version.
• Evidence: OM version, rent-roll as-of date, T12 period, price source, and conflicting figures.
• Fit: each hard rule, its observed input, source, and pass, fail, or unknown result.
• Economics: price per unit, historical and adjusted NOI, debt service, DSCR, and required capex.
• Decision: pursue, pass, or request; one factual reason; named owner and next action.

For the worked example, a useful record reads: Request. Recast NOI of $540,000 produces 1.125x DSCR on proposed $480,000 annual debt service, below our assumed 1.25x threshold. Analyst to obtain current insurance support, tax treatment, and a revised debt quote before moving to a full underwrite. A polished score without that explanation leaves the next person doing the screen again.

If a field is unknown, name the document or person that can resolve it. If a deal fails a non-negotiable rule, preserve the evidence and stop spending underwriting time unless an authorized person explicitly changes the mandate. Revisit the screen when facts change, with the earlier decision retained for comparison.