You receive a listing for a 6,930 SF office building in downtown Center, Texas. The asking price is $1.1 million, and the advertised cap rate is 8.18%. At first glance, the numbers are interesting. But office buildings introduce a different set of questions than self-storage, industrial, or single-tenant retail. A tenant leaving can mean months of downtime, leasing commissions, tenant improvements, and capital expenditures before the space produces income again. Before opening the spreadsheet, what are the first three questions you would ask to determine whether the reported income is sustainable? Share yours in the comments. Then we’ll work through the opportunity together from The Questions → The Underwriting → The Offer → The Decision. If these are the kinds of acquisition conversations that interest you, we'd love to have you join us.

This one has an interesting wrinkle. The listing advertises a 10.67% cap rate, but the same property also appears to be marketed as available for lease. Before doing any serious underwriting, what are the first three questions you would ask the broker? Drop yours in the comments. Then we'll work through the deal together: The Questions → The Underwriting → The Offer → The Decision

You receive this listing from a broker. The headline says 6.00% cap. Before doing any serious underwriting, what are the first three questions you would ask about the tenant and the lease? Drop them in the comments. Then we’ll work through the deal together: The Questions → The Underwriting → The Offer → The Decision

For nearly two months, the buyer and seller kept returning to the same disagreement. The buyer believed the asking price was simply too high. The seller believed the company's performance justified every dollar of it. Each conversation ended in roughly the same place, with neither side willing to move enough to close the gap. Eventually, the buyer stepped away from the negotiation and rebuilt the transaction from the ground up. Instead of asking what price he was willing to pay, he modeled exactly what would happen at closing and during the first several years of ownership. That's when he discovered something unexpected. The purchase price wasn't actually the problem. The business could support the valuation, debt service remained reasonable, and the projected returns still worked. What made the transaction uncomfortable was the amount of equity required on day one. Between the down payment, transaction costs, working capital, and reserves, too much cash was leaving the buyer before he had operated the business for a single day. For weeks, he had been negotiating the wrong number. When he returned to the seller, he didn't ask for another price reduction. Instead, he explained the constraint and proposed changing the capital structure. They discussed a larger seller note, a smaller amount of senior debt, and enough working capital remaining in the business to give the new owner room to operate after closing. The seller was receptive because the conversation no longer required him to defend the value of the company. He could still receive the price he believed the business deserved, while the buyer could reduce the amount of equity exposed at closing. The economics finally worked, not because either side surrendered on valuation, but because they stopped treating price as the only variable available to negotiate. That experience changed how the buyer approached future acquisitions. A deal can be fairly priced and still be poorly structured. Purchase price tells you what you're paying for the business, but capital structure determines how much risk you're assuming to own it.

The buyer and seller had spent weeks trying to close a valuation gap. The seller believed the company's recent growth justified a higher price, while the buyer wasn't comfortable paying today for earnings that had yet to materialize. Neither wanted to lose the transaction over a disagreement about the future, so their advisors proposed what seemed like an elegant solution. They would use an earnout. The seller would receive additional consideration if the business reached certain performance targets after closing. The buyer would pay the higher valuation only if the results actually appeared. On paper, it seemed to give both sides exactly what they wanted. The problem was that everyone focused on the amount of the earnout and not enough on how it would be measured. The agreement referenced revenue and profitability targets, but left important questions unresolved. How would unusual expenses be treated? Could the buyer increase staffing or marketing after closing? What happened if an investment reduced short-term profit but strengthened the company long term? Who controlled pricing, and how would revenue from new products be allocated? Those questions seemed manageable while everyone was trying to close. A year later, they weren't. The business had grown, but the buyer had also invested heavily in people, systems, and equipment. The seller believed the earnout had been achieved based on the company's underlying performance. The buyer's calculations showed otherwise. Neither side believed they were being unreasonable. They were simply interpreting an ambiguous agreement in the way that supported their own position. The earnout hadn't resolved their valuation disagreement. It had postponed it. Eventually, attorneys became involved, and a provision designed to save the transaction became one of its most expensive sources of friction. Looking back, both sides realized they had spent more time negotiating the potential payout than defining the rules that would determine whether it was earned.