Most pricing mistakes in commercial real estate happen before a property is ever listed. An owner hears a cap rate from a neighbor, applies it to last year's income, and anchors on a number no buyer will pay. Then the listing sits, the price gets cut, and the property picks up a reputation.

Underwriting is how we avoid that. It's the work of turning a rent roll and a stack of leases into a value a buyer's lender will actually support. Here is what that looks like on our side.

Start with the leases, not the rent roll

A rent roll is a summary someone typed. The leases are the contract. We read every lease and build an abstract for each tenant: term, options, escalations, expense recoveries, renewal rights, co-tenancy clauses, termination rights, and any rights of first refusal.

Those details decide what the income is really worth. Two tenants paying the same rent can carry very different value if one has five years left with bumps and the other can walk in nine months.

Rebuild net operating income from scratch

Net operating income (NOI) is the number everything else rests on. We rebuild it line by line:

• Base rent in place today, not asking rents on vacant space.
• Expense recoveries as the leases actually allow them. Caps, base years and exclusions change what the landlord can bill back.
• Operating expenses from actual bills: taxes, insurance, utilities, repairs, landscaping, snow removal, management.
• Reserves for roofs, parking lots and HVAC, because a buyer's lender will add them even if the seller doesn't.

When our number differs from the seller's, it's usually recoveries. Leases promise one thing and the reconciliation shows another.

Look at who is paying the rent

A cap rate is partly a bet on the tenant. We look at credit, time in business, how the location performs for them, and whether the space is easy to re-lease if they leave. A national tenant on a short remaining term can be riskier than a strong local operator on a long one.

Price it against real comps

Only then do we apply a cap rate, and we get it from recent comparable sales, not headlines. We adjust for lease term, tenant quality, building age and location. The result is a range, and we tell the owner where in that range we think the market will land and why.

Why owners should care before they sell

The same work pays off even if you're not selling this year. Underwriting shows where value is leaking: an unbilled recovery, a renewal priced below market, a vacancy that's sitting because the space is configured wrong. Fixing those before a sale moves the price more than any marketing will.

A cap rate is an opinion until someone verifies the rent roll. That verification is the first thing we do on every assignment.

Thinking about what your property is worth? Reach out and we'll walk through the leases with you.

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