Free Tool · From the Podcast

The Commercial Buyer's Cheat Sheet

From comps to cap rates. Everything you need in front of you the first time a broker sends you a deal.

From the episode “From Single Family to Starbucks, Comps to Cap Rates”

Prefer paper? Get the printable cheat sheet and keep it next to the deal.

What is this building worth

Commercial value runs on income, not on what the house down the street sold for. Two numbers get you there.

NOI (net operating income, $/yr)

The money the property makes in a year after paying its own bills. Your loan payment doesn't count here, and neither do your income taxes or depreciation.

Cap rate (%)

The market's yield on that income. A broker will tell you the going cap rate for the type of building and the area.

What this building is worth

Value = NOI ÷ Cap Rate

Value is just the income divided by the cap rate. Push the income up and the value goes up with it.

The multiplier: why operators win

Every $1 of NOI you add (income raised OR expense cut) creates value equal to that dollar divided by the cap rate. Put in what you think you could add and watch what it does.

NOI you could add ($/yr, income raised or expenses cut)

Market cap rate (%)

Prefilled from section 1 if you set it there. Edit it if this deal trades at a different cap rate.

Value you just created

Added NOI ÷ Cap Rate

Market cap rate	$1 of NOI =	$10,000 of NOI =	$50,000 of NOI =
5%	$20.00	$200,000	$1,000,000
6%	$16.67	$166,700	$833,000
7%	$14.29	$142,900	$714,000

Your rental house gets none of this. Houses are priced on comps, not income. This table is the reason to switch games.

Your gap: do this math first

This is the number that gets people to move. It's the yearly difference between what your equity earns stuck in the house and what it would earn in a passive commercial deal.

A · Equity stuck in your rentals

What they'd sell for minus what you owe (line D of the SFR Reality Check if you have it).

B · What it earned you last year in the house

Real cashflow. What actually landed in your pocket, not the gross rent.

C · What commercial would pay you on that money

A × 0.065 (a typical passive deal pays about 6.5%)

What staying put costs you every year

C − B

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The 1031 bridge: move it without paying tax

The five deadline rules, the pro moves, and the bonus depreciation kicker.

"Like-kind" just means any U.S. investment property for any other. A rental house can turn into apartments, retail, a net-lease building (one long-term tenant), or a resort. All of it qualifies.

Before your sale closes

Hire a Qualified Intermediary (QI): a neutral company that holds your sale money during the swap. If the money touches your account, even $1, the tax break is dead and you owe it all.

Day 45

Tell your QI IN WRITING which buildings you might buy. You get up to 3 picks at any price. Want more picks? Then all of them together can't cost more than 2× what you sold.

Day 180

Close. Calendar days. No extensions.

At purchase

Buy something worth as much or more, put all your equity back in, and take on at least as much loan as before. Any cash you keep (called "boot") gets taxed.

Always

The same person (or LLC) that sold has to be the one that buys.

Pro moves: Find the replacement deal BEFORE you list. Roll several house sales into one bigger property. Selling multiple houses with leftover equity? DSTs also count (you buy a slice of a big building someone else runs). They're for higher-net-worth investors, you can't cash out quickly, and the fees add up, so read the fine print.

The kicker: 100% bonus depreciation is back, permanently, for property bought after 1/19/2025. That's a tax break that lets you deduct a big chunk of the building in year one instead of over decades. Have your CPA order a cost segregation study (an engineer splits the building into parts you can write off faster). It can turn 30–50% of the purchase into a year-one write-off. Order it before you close.

The 8-step underwrite

0 of 8

Check every box before you make an offer. Your progress saves on this device.

1 · Identify the investment

What business am I buying inside this real estate?

Can't explain how it makes money in one sentence? Don't buy it.

2 · Passive or active

Is income delivered (contract) or created (operations)?

Passive (rent checks arrive) ≈ 3–9%. Active (you run a business) ≈ 15–25%+. More work should mean more return.

3 · Underwrite the market

Would I want to own HERE if this deal didn't exist?

A great operator cannot fix a bad market.

4 · Break down the income

Which streams are stable, recurring, growable?

Steadier income is worth more than shaky income.

5 · Verify the income

Who PAYS, and what agreement guarantees it?

You're buying the agreements behind the income. Are they solid, or just hoped for?

6 · Rebuild the expenses

What do these lines cost under MY ownership?

Your numbers are not their numbers. Most deals are mispriced because expenses are wrong.

7 · Identify the value-add

What specifically changes when I own it?

5 ways to add value: raise income, cut expenses, fix it up, change what it's used for, refinance. A plan you won't execute is worth nothing.

8 · Back into price

What price makes this a GOOD deal for my required return?

There is no such thing as a good deal at the wrong price.

The mindset shift

Single family thinking vs commercial thinking, side by side. Tape it to your monitor.

Single family (comps)	Commercial (cap rates)
Market controls value	Operator controls value
Rent increases barely move price	Income increases ARE price increases
You cannot force appreciation	You can force appreciation
Effort doesn't guarantee results	Effort creates value
"What's the price?"	"What price makes this a good deal?"

Your equity doesn't know it lives in a house. Move it where effort counts.

Brett Tanner | The Be Wealthy Podcast