Thinking about your first commercial real estate deal? Start with “boring” ones.
With interest rates beginning to come down, something interesting is happening across the country: commercial brokers are getting more calls from people asking how to get started in commercial real estate investing. If you’re one of those people, you’re not alone—and hopefully you’re asking the right questions.
Your first commercial real estate investment can feel intimidating. It’s new, the numbers are bigger, it requires a higher equity investment, and the stakes just feel higher. But it doesn’t have to be overwhelming. In fact, your first deal shouldn’t be about hitting a home run. It should be about building a strong foundation for long-term success.
Let’s walk through what you should be looking for as you prepare to make your first commercial real estate investment. I’ve also created a video for this if you prefer that format.
Start With the Right Mindset
When I made my first investment, I’ll be honest—it was scary. I wasn’t fully confident in what I was doing. But I talked to a lot of people, asked questions, and learned the process step by step.
The most important lesson I learned early on is this: don’t take the first deal—take the right deal for you and your long-term goals.
Your first property should be approached with a future-focused mindset. You’re not just buying a building; you’re laying the groundwork for everything that comes next. This deal should teach you: how to operate a property, how to get the most out of debt leveraging, how you will exit the property. It should also build your confidence, and position you for sustainable growth.
Stability Over Speculation
One of the biggest mistakes new investors make is chasing flashy, once-in-a-lifetime returns they saw on social media. That mindset can get you into trouble quickly.
Your first deal should prioritize stability over speculation. Look for a property that provides:
Consistent cash flow
A manageable learning curve
Credibility as an investor
Think of your first investment as your real estate training ground. You’re not trying to hit a grand slam—you’re trying to get on base and stay in the game.
Choose the Right Asset Type
For most first-time investors, the sweet spot is something straightforward and resilient—ideally in an asset class you’re already familiar with, or at least understand at a basic level.
-Multifamily
Smaller multifamily properties—such as a five- to ten-unit buildings—can be a good starting point, but they come with operational complexity. If you go this route, having a mentor or experienced advisor is critical.
-Neighborhood Retail Centers
Another strong option is a neighborhood retail center with local tenants. These properties are typically simpler to operate and spread risk across multiple tenants. If one tenant leaves, the entire investment doesn’t collapse. This is typically not a DIY type of property, It will require you to hire professionals such as attorneys to draft leases and brokers to identify tenants.
Compare that to a single-tenant property: if the tenant leaves, you could potentially be responsible for covering the entire mortgage yourself if there isn’t time left on the lease. That’s a risk many first-time investors underestimate.
Location Means More Than You Think
We’ve all heard the phrase “location, location, location,” but in commercial real estate, it goes much deeper than that.
You have to think like a tenant.
Retail tenants care about visibility, traffic counts, signage, tenant mix, and ease of access.
Multifamily tenants look for nearby jobs, access to transportation, proximity to shopping and services, and a sense of community.
Your first property should be in a market with strong fundamentals. A great location can often cover small mistakes, especially while you’re still learning.
Focus on the Numbers—But Don’t Overcomplicate Them
Many new investors either freeze when it comes to underwriting or rush in without fully understanding the numbers. You don’t need to know everything—just focus on these three key metrics.
1. Cap Rate
The Cap Rate helps answer one basic question: does the return make sense for the risk?
It’s calculated by dividing the property’s net operating income (NOI) by its current market value.
2. Cash-on-Cash Return
This metric shows your actual return on the cash you invest. The formula is:
Annual pre-tax cash flow ÷ Total cash invested
A higher cash-on-cash return generally signals a more profitable investment.
3. Debt Coverage Ratio (DCR)
DCR tells you whether the property can comfortably cover its loan payments. It’s calculated by dividing the NOI by total debt service.
A ratio above 1.0 means the property generates enough income to cover expenses and debt.
A ratio below 1.0 signals potential financial trouble. Most lenders and investors try to target properties with a 1.25 or higher DCR.
Numbers don’t lie. If you’re unsure, lean on an experienced broker or mentor. Don’t guess your way through the math.
Underwrite the Tenants, Not Just the Property
Here’s something many new investors overlook: buildings don’t pay rent—tenants do.
For retail properties, evaluate the quality and stability of the businesses and the length of their leases.
For multifamily, understand who your renters are—families, students, or young professionals—and how stable that tenant base is. If the unit mix is mainly studios, or there are a lot of younger tenants or students, understand that you may have more turnover and make-ready expenses.
Your cash flow depends on tenants showing up month after month. Underwrite them just as carefully as the property itself.
Management Can Make or Break the Deal
Even the best deal on paper can turn into a nightmare if it’s poorly managed.
Ask yourself:
Will you self-manage or hire a professional management company?
What are the costs associated with management?
Is this property something you can handle without it consuming your life?
Your first deal should have manageable complexity. You can always scale up later.
The Big Picture
Your first commercial real estate investment doesn’t need to be perfect—it just needs to be solid.
The goal is to find a property that provides stability, teaches you the fundamentals, and builds your confidence for bigger opportunities ahead. Every great investor started with their first deal. This is where you lay the foundation for your future.
Once you get that first win under your belt, doors start to open.
If you have questions or want to go deeper on any of these topics, feel free to leave a comment. Taking that first step can feel daunting—but it’s also where the journey begins.
If you found this helpful, subscribe to our weekly articles—we share practical insights on CRE investing and brokerage every week.
