CRE Investment Criteria

1. Price range:  most investors seek properties between $700K and $15M.
2. Property types: most if not all investors want to invest in retail properties and office buildings where tenants have long term low-risk NNN leases, i.e. tenants pay for property taxes, insurance and maintenance expenses, in favor of landlords.  They prefer not to invest in apartments where leases are mostly riskier gross, i.e. landlords pay for taxes, insurance and unpredictable maintenance expenses.  Besides, apartment tenants normally don’t have much money which may affect their ability to pay the rents in a timely fashion.
3. Cap rate: the return of investment must be “reasonable”, i.e. generally higher than the interest rate.  The cap rate is typically lower in Western States like California and higher in other states.  However cap rate is not everything.
4. Property condition: investors prefer properties with little deferred maintenance.
5. Demographics: the selected properties tend to be in growing, high income and bigger cities/metros as they have better chance to appreciate and easier to find tenants.  Besides they are easier for disposition if required.  It is best to stay away from geographic areas where the economy has been struggling.  Properties in these locations are easy to purchase but much more difficult to sell.  In addition, it’s hard to get attractive financing, if at all, for these properties. Properties in remote areas are tougher to finance and sell.  These are also easy to buy but difficult to sell. Properties in cities where the average household income is way below the national average, e.g. $28,000/year, also will be screened out as these are most likely high-crime areas.  
6. Occupancy: close to 100%.
7. Good Visibility: properties tend to have most if not all units facing the road to show case the tenant businesses.  Tenants love visibility.  What’s good for tenants is also good for investors.
8. Great locations: properties on a major artery with heavy traffic, near the freeway exit, on corner lot, near a mall, on an outparcel to a shopping center.
9. Land: if land is not included then it does matter how beautiful the property is, it will not be selected. This is the type of property that is easy to buy but difficult to sell. 
10. Lease Type: most likely NNN leases.
11. Parking spaces: at least 4 spaces per 1000 SF of leasable space.  It’s difficult to lease a retail property unless it has sufficient parking spaces.
12. Age: not over 20 yrs old unless the property is well-maintained or recently renovated.
13. Price per square foot: sometimes a property is selected because the price per SF is low.  The main reason for the selection is appreciation potential.
14. Low rent: there is upside potential if the rent is below market.  When the leases expire, the rent is adjusted to market rent which increases the value of the property.  
15. Financing: sometimes a property may be selected because it offers attractive financing.  For example, the seller is willing to carry 80% LTV at low interest rate or buyer can assume a loan at 5.5% interest, fixed for 10 years.  This in turn may increase the overall return or cash on cash.  On the other hand, a property may be screened out because it is difficult to get reasonable financing.  For example, in this tight credit market it is extremely difficult to get financing for a single-tenant mom-and-pop restaurant.
16. Environmental: this is an obvious criteria, you want to purchase a property without environmental contamination or risks which could adversely affect the value of the property.