COMMERCIAL REAL ESTATE / PERSPECTIVE
Commercial real estate due diligence: test the assumptions before you commit
By Mina Tawadros ·
A commercial property can look attractive on a rent roll and still leave important questions unanswered. The useful work begins when you connect the income, the building, the financing, and the timing.
In the manuscript for my book, The Engineered CRE Investment Method, I describe the difference this way:
A checklist tells you whether something is present. A diagnostic process tells you whether it matters.
Source: Mina Tawadros, The Engineered CRE Investment Method, Chapter 10, “Due Diligence That Sees Around Corners.” Excerpt verified against the author's manuscript.
A completed checklist shows that documents have been collected. A stronger review also explains what those documents mean for the assumptions behind the purchase.
Here are five questions to make that review more useful.
1. What does the investment plan depend on?
Write down the conditions that support your view of the property. They might include existing tenants remaining in place, a particular leasing timetable, manageable maintenance needs, or financing on the terms being considered.
Separate current facts from future expectations. An executed lease, a seller's estimate, and an assumption in a projection are different kinds of information. Treating them as interchangeable makes it harder to see what still needs verification.
The aim is a short, specific list of dependencies that you can test.
2. Which evidence supports each assumption?
Match each important assumption to its supporting information and note the gaps.
For income, that might mean comparing the rent roll with leases, amendments, and collection records. For expenses, it might mean reviewing operating statements alongside invoices and the services that will be required under new ownership. For the building, it might mean connecting condition findings to maintenance records and specialist assessments.
A useful question is whether the information agrees across sources. If it does not, record the difference and identify who can explain it. An unresolved discrepancy should remain visible rather than disappear inside a spreadsheet.
3. What happens at the same time?
Today's occupancy and condition are only part of the picture. Put key dates on a single timeline: lease expirations, expected leasing work, planned capital projects, and financing milestones.
Consider a simple planning question: if a major repair is needed during a period of tenant turnover, what information would you need to understand the combined cash requirement?
That is a hypothetical question, not a forecast. It illustrates why reviewing each item separately may miss an important connection. The timing of several demands can matter as much as the size of any one of them.
4. What does each professional's review cover?
Different specialists answer different questions. Make sure their assignments relate to the assumptions that matter for this property.
Ask what was reviewed, what was outside the scope, what remains uncertain, and whether another specialist's input is needed. A condition report, legal review, and financing discussion should inform one another without being treated as substitutes.
A report can be useful and still leave an investment question unanswered. Bring the findings together so the limits of each review are clear.
5. Which finding would change the decision?
Before the process becomes dominated by momentum, define the findings that would require a new assessment.
Perhaps the expected work is more extensive than the plan allows. Perhaps a key income assumption cannot be supported. Perhaps the timeline depends on conditions that have not been verified.
Record what would need to change and what further evidence is required. Whether revised terms, additional investigation, or no transaction is appropriate depends on the specific facts and professional advice. This framework does not create a right to renegotiate or withdraw from a contract.
Turn the answers into a working record
For each important assumption, write down:
- The assumption: What does the plan depend on?
- The evidence: Which document, observation, or professional finding supports it?
- The open question: What is missing, inconsistent, or outside the review's scope?
- The timing: When could this affect the property or the decision?
- The next step: Who should resolve it, and what would change your assessment?
Mark the item as supported, unresolved, or contradicted, and date the record. This is a way to organize questions, not a substitute for property-specific diligence.
The result should be a clearer explanation of the opportunity, including what you still do not know. That is the structured perspective behind my approach to commercial investment decisions.
Explore the method
The Engineered CRE Investment Method develops the broader thinking behind these questions.
If you are considering a commercial property in Florida, start a conversation with the property type, location, and questions you want to explore. Please do not include sensitive financial information in the website inquiry form.
About the author: Mina Tawadros is a real estate consultant with eXp Commercial working across commercial and residential real estate in Florida, and the author of The Engineered CRE Investment Method.
Educational information only, not individualized financial, investment, legal, tax, engineering, or other professional advice. Commercial real estate involves risk, including potential loss of capital. Consult qualified professionals about the specific property and transaction.