How to Buy Commercial Real Estate (2023 Edition)

4 Commercial buildings with the Chicago city skyline in the background

Table of Contents

Apartment Buildings/Multifamily Properties Buyer Guide

People dream of buying an investment property.  It is easier to do than most people realize. However, many don’t execute this plan. In this post, I’ll give you some foundational knowledge on how to buy investment properties, specifically commercial properties that are apartment buildings, otherwise known as multifamily properties. Most of this information can be applied to any market, but some things are specific to Chicago.

Disclaimer *

Yes, this post is long; it is about a 13-minute read. However, for most people, this will be the largest transaction of their life. 13 minutes isn’t a bad trade-off for some excellent free information. Save the page and come back to it later if you are short on time, or click the section that interests you the most in the table of contents to skip ahead.

I’m a commercial real estate agent and the Sales Director at Root Realty.  In 2022 Root was added to Inc. Magazine’s 5000 list of the fastest-growing, privately-owned companies in America. Seventy per cent of my sales are from apartment buildings, with the rest being development sites or mixed-use buildings. I’ve brokered millions of dollars of commercial sales, and leased over 100 units. 

Educating investors is one of the most important aspects of my job, so let’s begin!

Table of Contents

Creating Your Buying Criteria 

Access to capital is not the reason why most don’t follow through on the goal of buying investment properties. It’s usually because there isn’t a clear goal combined with the will to move forward into a new venture. People just give up. It is not rocket science. We all have some experience with real estate because we’ve all either rented or bought a place before, use that experience to help you reach your goals.

What asset type are you looking for? 

Knowing if you own a commercial or residential property is extremely important.  

  • A five or more unit building is considered commercial property, even if all the units are residential. 
  •  A two to four unit building with at least one of the units being an office or retail space is commercial.
  • A two to four unit building without any office or retail spaces is considered residential.
5 unit frame building in Chicago's Logan Square.
Looks can be deceiving this building has 5 units, it is considered commercial.
Mixed-Use commercial building with small retail space on the ground floor
Mixed-Use commercial building with small retail space on the ground floor.
3 unit residential property, in Chicago's West Town
3 unit residential property

After you answer these questions, you need to search for property in areas with the highest likelihood of producing your desired results. 

For example, if I want a double-digit return on my $80,000 cash investment and I want a five unit building I also know that the most likely place to find that type of asset in Chicago is on the South or West side.

I can further refine that search by looking at available properties in that area and figuring out which neighborhoods have the highest concentration of what I want. Don’t spin your wheels looking at 20 different markets. That’s a great way to burn yourself out

Fundamentals for Analyzing Deals

The last thing I do is go to see the property. Figure out if the deal is worth your time before making a site visit.  
  • Does the cap rate match the area average and condition of the property? – this concept confuses a lot of people. Cap rate is the return a property produces if purchased without a loan. Like any other investment, a property with a low rate of return should be a safe investment, the higher the return, the riskier the investment. If your property has a low cap rate and there is no way to increase revenue but it is a risky investment, it may be overpriced.
  • Check current rents and pro-forma rents. Do pro forma rents match the realistic numbers for the neighborhood? I use this tool to check rents 
  • Are there any issues with the property, such as city violations? Did contractors pull proper permits for the rehab work? In Chicago, you can find that information on the city portal here  – Chicago Violation Website
  • If you have to renovate the property, do you have the right contractor partners and the skill set to manage those contractors? Do you have a realistic budget?  

Where can you buy apartment buildings? 

If you are using residential real estate platforms to find apartment buildings of five units or more, then stop. Zillow, Redfin, etc, do not have that type of inventory. Here are some better places to search: 
  • Local MLS – This platform can only be accessed by licensed real estate agents. If you aren’t an agent you can ask an agent to set up a search for you. Your market will dictate how many apartment buildings get to the MLS. Here in Chicago, many properties are on the MLS because we have a lot of inventory. However, there are just as many owners that don’t want their property on the MLS. Typically the bigger the property and the higher the price point, the less likely the chance it will be on the MLS. 
  • Loopnet – National platform with all kinds of commercial property. However, it is an expensive tool for agents. This means most brokers put properties on there that are worth the added expense. If you are looking for property north of 1 million, it’s great. Under that, it’s hit or miss. 
  • Crexi – Newer national sales platform, much cheaper for brokers, so you’ll find a lot more deals under a million dollars here. The platform still has a ways to go to match the reach of Loopnet.  
  • Commercial Brokerages Buyers List – Some of these properties never make it to an online platform. Being on the buyer’s list of commercial brokerages that sell the type of asset you are looking for in the area that you are looking in will increase your chances of getting the right deal. Each brokerage has their own criteria for getting on its buyer’s list. If you aren’t already familiar with the commercial brokerages in your are, google commercial brokerages in the area where you want to invest. To join our buyers list click this link –
Picture of search on Chicago multiple listing service website
MLS - Sample data for an apartment building search in Chicago
LoopNet - Sample data for an apartment building search in Chicago
Crexi - Sample data for an apartment building search in Chicago

How to buy apartment buildings with no money down?  

If you’re considering buying a 2-4 unit building with no money down. Some programs can make that possible such as However, there are strict income and area requirements. 

If you are considering buying a commercial building with no money down you could build a syndication and bring value outside of funds. Such as: 
  • Finding capital partners that are comfortable with that type of deal structure 
  • Finding a good deal 
  • Managing the property and or the deal itself
  • Bringing some specialized knowledge that will help the deal reach its goals 

Assemble the proper team based on your goals 

A good time to find the right people for your deals is before you go under contract. There are plenty of free real estate events happening throughout the year. Go out and meet people. If nothing else, google the people/companies who you need on your team and start a list.


There are a ton of lenders out there, with all kinds of different products. Big box banks are not the only option. In fact, they often aren’t the best option. I’m a fan of mortgage brokers who can shop the deal around to several lending institutions. If not, at the very least, google commercial lenders in your area and start reaching out. 

I think getting a commercial property loan is easier than a residential one. This is a business investment, and the lender is making sure the property can pay off the debt. Your financial stability also matters, but not as much as the building’s fundamentals will. Plan on at least 20% down for most commercial properties. Some lenders will include the money to buy and renovate the property in one loan.


In Chicago, real estate attorneys are essential. You don’t have to have one to complete a real estate transaction, but hiring a competent attorney is a good idea. It’s important to note real estate attorneys’ business model is usually volume based. I’ve seen attorney fees range from $500 to $5000 and they are usually paid at closing.  For complex deals that require zoning changes or other more involved work the attorney fees can be much more. Again find one that has experience in the needs you have. 

Property managers 

If you hire a property manager, make sure they have experience with the type of property you are buying and the type of area you are buying in. Just because they have a recognizable name does not mean they are a good fit for you or your property.


If you plan on doing rehab work on buildings you buy, it is good to start developing a network of contractors. Contractors will quote you different pricing based on availability, so will need a good list with plenty of options. 

Real Estate Agents 

It doesn’t matter how big or small your portfolio is. Develop relationships with agents with the inventory type you are trying to purchase. All agents do for a living is contact individuals who may want to sell their property. Even if you have a full-time acquisition staff, they can not cover every property in the city. Build and leverage relationships. Brokers frequently have an inside track on all kinds of listings. You have no idea where the next deal can come from.  

However, don’t expect a commercial agent to treat you like a residential agent would. A commercial agent isn’t going to sink all their time into trying to find something that may work for you, especially if you don’t have your criteria narrowed down. Remember, agents don’t get paid until a transaction closes. 


Really want to buy an apartment building or any other type of investment property? It is absolutely obtainable. It requires commitment, persistence, research and patience. Start by joining our buyers’ list, please use this link –

If you’d like to stay informed, subscribe to our newsletter by clicking this link – 

Bonus Section – Ten things to know before buying apartment buildings in Chicago

I’m not from Chicago, so I had to learn about the market nuances the hard way. Here are ten things every buyer should know: 

1. Chicago has a large inventory of really old buildings. I’m talking about buildings that were built in the late 1800s. Understanding when mechanical systems were last upgraded is essential when purchasing a building. If that’s not possible, at least make sure they are working properly before buying a property.

2. Who pays for heat? There are many buildings in Chicago where the owner pays for the heating cost. Boilers are probably the most common form of heat for these buildings. As an owner, you need to factor in the cost of gas and water expenses. Old boilers are inefficient and can create high gas and water bills. 

Old, poorly insulated windows will also help contribute to a high gas bill. If you buy a boiler building and have tenants pay for their own heat, you can drastically cut your expenses. This will help raise your ROI and possibly even the value of the asset even if you can’t raise rents.

3. Just because there’s a thermostat doesn’t mean there’s central air. AC window units are not uncommon in Chicago, even in affluent areas.

4. Owners pay for the water bill in apartment buildings.

5. The 70 – 60 rule of thumb: If the owner doesn’t pay for the heat, they can expect to net 70% of the gross income. If the owner pays for the heat, they can expect to net 60% of the gross. When seeing higher net income numbers, in either case, you really need to pay close attention

6. Each unit doesn’t always have its own gas and electric meter. Not the end of the world. Just make sure you know what the situation is before you purchase. No tenant wants to pay for someone else’s gas or electric consumption.

7. Are all the units legal? Meaning, has the city permitted the building for the unit count being presented? If there aren’t gas and electric meters for each unit, that is the first tip-off that all units aren’t legal. 

Oddly enough non-legal units aren’t the end of the world here in Chicago. There’s even a city program to get more units legal. – Additional Dwelling Ordinance (ADU). Two big things with non-legal units, though. 

Safety is of the utmost importance. There must be two proper exits Lending depends on legal units. If you are trying to buy a property with an illegal or non-conforming unit, the lender will not count the income from that unit into the valuation. This will impact how much money they are willing to lend. 

8. Laundry. Given the age of the buildings here many properties don’t have in-unit laundry. Basement coin laundry is common. The building owner pays the water bill, so choose wisely. 

You can now add digital systems to coin laundry machines so tenants don’t always have to get coins. This is an added bonus for properties with younger occupants. Nobody goes to the bank now to get coins. 

Laundry revenue may not be that much, but having laundry somewhere onsite can help command a higher rent and/or keep tenants in units longer. 

9. Neighborhood demographics. A neighborhood’s average age and income should give you an idea of what type of amenities will increase your return on investment. 

Such as: Parking, Dishwashers, Laundry in unit or in basement Cosmetic finishes,  Bedroom count/bedroom size, etc

10. Chicago has a surprising amount of public information online compared to other cities. Such as building permits/violations, zoning, etc. If you are looking for a more powerful tool, Cityscape is excellent, but there is a monthly fee. Worth it if you are analyzing a lot of properties.

Director of Sales at Root Realty | 773-904-1387 | [email protected] | Website | Additional Post

Hi! I'm Kevin, nice to meet you!

I'm a commercial real estate agent and the Sales Director at Root Realty in Chicago. 70% of my sales transactions are apartment buildings, the rest being development sites or mixed-use buildings. I've brokered millions of dollars of investment sales and leased over 100 units, but educating owners is one of the most important aspects of my job!

Picture of Kevin Itima - Commercial Real Estate broker in Chicgo who specializes in the sale of commercial apartment buildings, development sites, and mixed use buildings.
Hi! I'm Kevin
nice to meet you!

I'm a commercial real estate agent and the Sales Director at Root Realty in Chicago. 70% of my sales transactions are apartment buildings, the rest being development sites or mixed-use buildings. I've brokered millions of dollars of investment sales and leased over 100 units, but educating owners is one of the most important aspects of my job!

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