Sourcing & Qualifying a CRE Deal

A financeable deal is one that a lender will actually fund. The three things lenders check are the property's income (does it make enough?), the property's condition (is it in good shape?), and the borrower (are they creditworthy and experienced?). If any one of these is weak, the deal gets harder or impossible to finance.

Your first skill as an originator is spotting these problems before you waste time chasing a deal that was never going to close.

Learn to recognize the warning signs early. High vacancy means empty space and no income. Leases expiring all at once create a 'rollover cliff' that puts future income at risk. Deferred maintenance means the building is falling apart and needs big repairs. Environmental problems, like contamination, can scare off lenders outright. A borrower with bad credit or no experience is a red flag on its own, and so is a property that is simply overpriced.

Any one of these can mean the deal will struggle to fund -- and it's common for more than one to show up together.

To qualify a deal you need the basics: the Rent Roll (who rents, how much, for how long), the T12 (the last 12 months of income and expenses), the property tax bill, and the borrower's financials.

If the owner will not give you these, the deal is usually not real or not ready. A real deal has real documents.

Before you invest time, ask: How much money does the borrower need? What is the property worth? What is the income? What is the property type and condition? Is the borrower ready to move?

If you cannot get clear answers to these questions, walk away. Time is your most valuable asset, and most of it should go toward deals that can actually close.