Selling commercial real estate: what to know first
Selling commercial real estate means selling to investors and businesses who judge the property by its income, its leases and its condition, not by how it looks on a weekend showing. If you want to sell commercial property well, the work is mostly in the numbers you can prove and in choosing a buyer who can close.
Commercial property covers a wide range: office buildings, retail strips, industrial and warehouse space, hotels, self-storage, land held for development and apartment buildings with five or more units. Each type has its own buyer pool, its own lenders and its own deal points. The selling steps are broadly the same, and that is what most of this page covers.
We are a buyer for only one of those types. Skyline Capital Investments buys apartment buildings with five or more units in 47 states. We do not buy office, retail, industrial, hotel or land deals. If you own one of those, the guide below still applies, and the buyer list will point you to who usually buys them.
Commercial property types and who buys each
The right buyer depends on the property type, because each type is financed and run differently. The table is a general map of the market, not a ranking.
| Property type | Usual buyers | What drives the price |
|---|---|---|
| Apartment buildings (5+ units) | Private investors, syndicators, family offices, funds, REITs on larger assets | Rent roll, occupancy, rent versus market, expenses, condition |
| Office | Owner-users, private investors, institutional funds | Tenant credit, lease length, vacancy, cost to re-lease space |
| Retail | Net-lease investors, 1031 buyers, local investors | Anchor tenants, lease terms, traffic, co-tenancy clauses |
| Industrial and warehouse | Owner-users, logistics investors, funds | Clear height, loading, location, lease term |
| Hotel | Hotel operators and specialist investors | Revenue per room, brand agreement, capital needs |
| Self-storage | Storage operators and investors | Occupancy, rates, expansion room |
| Land | Developers, builders, neighbors, investors | Zoning, entitlements, utilities, access |
Where apartment buildings fit in commercial real estate
An apartment building with five or more units is commercial real estate in the eyes of lenders and most buyers. Fannie Mae’s multifamily business defines multifamily housing as rental housing with five or more dwelling units, and those loans are underwritten on the property’s income. A duplex, triplex or fourplex can still get a residential mortgage, so it often sells more like a house.
That line matters when you sell. A 12-unit building is priced on net operating income and a cap rate, inspected unit by unit, and bought by investors who will ask for leases, a rent roll and a trailing 12-month operating statement. Apartment buildings also have more tenants per dollar of value than most other commercial types, which means more leases to review and more security deposits to transfer at closing.
How to sell commercial real estate, step by step
How to sell commercial real estate comes down to six steps, and the first two decide most of the result. Skipping the preparation is the most common reason deals get renegotiated late.
- Pull your numbers together: the rent roll or tenant list, leases and amendments, two to three years of income and expense statements, the trailing 12 months, tax bills, insurance and service contracts.
- Set a price range from income: work out net operating income, then test it against cap rates on recent sales of similar property in your market.
- Choose a route: a broker listing, selling by owner, or selling directly to a buyer who owns the same type of property.
- Negotiate a letter of intent: price, deposit, due diligence period, closing date, financing contingency and who pays which costs.
- Sign the purchase and sale agreement and get through due diligence: inspections, title, survey, environmental review, lease audit and tenant estoppels.
- Close: the title or escrow company pays off your loan, prorates rent and taxes, transfers deposits and records the deed.
How commercial property is valued
Commercial property is valued mainly on its net operating income, which is rent and other income minus vacancy and operating expenses, before debt payments. Buyers divide NOI by a cap rate to get a value. A building with $180,000 of NOI priced at a 6% cap rate is worth about $3,000,000, and the same income at a 7% cap rate is worth about $2,570,000.
Appraisers also use sales comparisons and replacement cost, and those carry more weight for land, owner-occupied buildings and special-purpose property. For income property, small changes add up. Every $10,000 of NOI you can document is worth roughly $167,000 at a 6% cap rate, which is why clean books and a current rent roll pay off.
Our apartment building value calculator runs this math for multifamily. For other types, ask a broker who sells that type in your market for recent cap rates.
Documents buyers ask for
Buyers of commercial property ask for the same core records whatever the type, and having them ready shortens due diligence. Expect these requests:
- Rent roll with each tenant, rent, lease start and end dates, deposits and any concessions
- Copies of every lease, amendment and side letter
- Trailing 12-month operating statement and the prior two years of income and expenses
- Property tax bills, insurance policies and loss history
- Utility bills, service contracts and any management agreement
- Capital improvement history with dates and costs
- Existing survey, title policy, environmental reports and building permits
- Loan documents, including prepayment penalty or defeasance terms
Due diligence: what the buyer will check
During due diligence, the buyer confirms the income, the title and the physical condition before the deposit goes hard. Most of the late surprises in a commercial sale come from this stage.
Lenders and buyers usually order a Phase I environmental site assessment. The EPA’s All Appropriate Inquiries rule ties a buyer’s protection from cleanup liability under federal Superfund law to doing that inquiry before purchase, and the EPA recognizes ASTM standard E1527-21 as meeting it. If your property was ever a gas station, dry cleaner or factory, expect a closer look.
Buyers also send estoppel certificates to tenants, which confirm the rent, the deposit and that the landlord is not in default. A tenant who disputes a term in the estoppel can stall a closing, so read your own leases first and fix any errors before you go to market.
Selling commercial property by owner
Selling commercial property by owner is legal in every state, and it can save a commission if you already know who will buy. It works best when the buyer is a tenant, a neighbor, a partner or an investor who has asked about the property before.
Selling commercial real estate by owner means you do the broker’s work yourself. You price the property, prepare the package, screen buyers for proof of funds, negotiate the letter of intent and manage due diligence. You will still need a real estate attorney to draft or review the purchase agreement, and a title or escrow company to close.
- Get an opinion of value from at least one broker or appraiser before you name a price.
- Ask every buyer for proof of funds or a lender letter before you share leases or financials.
- Use a confidentiality agreement before releasing tenant information.
- Let your attorney draft the contract. Commercial forms are less standard than residential ones.
- Keep the due diligence period and deposit terms tight, so a buyer cannot tie up the property for months.
Broker, by owner or direct buyer: which route fits
The best route depends on what you value most: price competition, speed, privacy or the fewest steps. This comparison holds for most commercial property types.
| Route | Best for | Trade-offs |
|---|---|---|
| Broker listing | Stabilized property in an active market where competition can raise the price | Commission, marketing time, more people know about the sale, buyers may retrade after inspections |
| Sell by owner | Owners who already have a likely buyer and time to manage the deal | You carry the pricing, screening and negotiating work; smaller buyer pool |
| Direct sale to an operator | Property with vacancy, deferred repairs, messy books or a fixed deadline | No auction, so you compare one offer against your own price research |
How to sell commercial property fast
To sell commercial property fast, you need a buyer who does not depend on a slow loan approval and a package that answers due diligence questions before they are asked. Speed comes from removing the steps that usually stall.
- Price from documented income, not from the number you hope for. Overpriced listings sit, then sell after a cut.
- Have the rent roll, leases and trailing 12 months ready on day one.
- Favor buyers who pay cash or have closed on the same property type recently.
- Agree on a short due diligence period and a firm closing date in the letter of intent.
- Order a title report early so liens, old easements or a missing release can be cleared in parallel.
- Disclose known problems up front. A defect found late gives the buyer a reason to reprice.
Taxes when you sell commercial property
When you sell commercial property held longer than one year, the profit is generally a long-term capital gain, and the depreciation you took is taxed separately at up to 25% as unrecaptured Section 1250 gain (IRS Topic 409). For 2026, the 20% federal capital gains rate starts above $545,500 of taxable income for single filers and $613,700 for joint filers (Rev. Proc. 2025-32). The 3.8% net investment income tax can apply above $200,000 of income for single filers and $250,000 for joint filers.
Depreciation schedules differ by type. Under Internal Revenue Code Section 168, residential rental property, which includes apartment buildings, is depreciated over 27.5 years, and nonresidential real property such as office, retail and industrial buildings over 39 years. Parts of a building split out in a cost segregation study, such as appliances or parking lots, are recaptured as ordinary income when you sell. Business property sales are reported on IRS Form 4797.
A 1031 exchange can defer the tax if you reinvest in other U.S. real property held for business or investment. Since 2018, only real property qualifies, and you must identify the replacement within 45 days and close within 180 days of your sale (Treas. Reg. 1.1031(k)-1). An apartment building can be exchanged for a warehouse, and land for an apartment building, because all U.S. investment real estate is like-kind.
If the seller is a foreign person, the buyer generally must withhold 15% of the amount realized under FIRPTA, so plan for that at closing.
Worked example: net proceeds on a $3 million, 24-unit building
This example shows how a sale price turns into cash in your account. The selling cost rate is an assumption you should replace with your own quotes.
You own a 24-unit apartment building and accept $3,000,000. You bought it for $1,800,000 and have taken $600,000 of depreciation, so your adjusted basis is $1,200,000. Your loan balance is $1,400,000. We assume selling costs of 4% for commission, title, transfer tax and legal fees, and that your other income puts you in the top federal brackets.
Before tax, you walk away with $1,480,000. After federal tax at the maximum rates, you keep about $1,050,160, before any state income tax. In a 1031 exchange that reinvests the full $1,480,000 of equity into property costing at least $2,880,000, the $429,840 is deferred instead of paid.
| Line item | Amount | How it is figured |
|---|---|---|
| Sale price | $3,000,000 | Accepted offer |
| Selling costs | -$120,000 | 4% assumption |
| Amount realized | $2,880,000 | Price minus costs |
| Adjusted basis | $1,200,000 | $1,800,000 cost minus $600,000 depreciation |
| Total gain | $1,680,000 | Amount realized minus basis |
| Depreciation recapture tax | $150,000 | $600,000 at 25% |
| Capital gains tax | $216,000 | $1,080,000 at 20% |
| Net investment income tax | $63,840 | $1,680,000 at 3.8% |
| Federal tax total | $429,840 | Before state income tax |
| Loan payoff | -$1,400,000 | Paid at closing |
| Cash after loan, before tax | $1,480,000 | Amount realized minus loan |
| Cash after federal tax | $1,050,160 | Without a 1031 exchange |
Can a residential realtor sell commercial property?
In most states, yes, legally: a real estate license is not split into residential and commercial versions. California, for example, issues one salesperson license and one broker license, with no separate commercial license.
Experience is the real question. A good commercial broker knows the local cap rates, the lenders, the active buyers and how to handle leases and estoppels. Ask any agent how many sales of your property type they closed in the past two years, and ask for references from those sellers.
We buy commercial property: what Skyline buys
Skyline Capital Investments buys apartment buildings with five or more units in 47 states, from small 5 to 10 unit buildings up to larger properties done with capital partners. That is the only commercial property we buy. We do not buy office, retail, industrial, hotel, self-storage or land, and we will say so plainly if your property falls outside what we buy.
Within apartments, we look at stabilized buildings and ones that need work: vacancy, deferred maintenance, below-market rents, difficult tenants and incomplete books. We buy as-is. We buy directly, close on your timeline, and can work inside 1031 deadlines. Send the address, unit count, rent roll and whatever financials you have, and we will tell you whether the building fits and how we see its value.
