By Andrew Hanson, Commercial Agent at Goldmark Commercial | Fargo, ND
Buying an investment property can be one of the most rewarding financial decisions you will ever make. It can also be one of the most complex. With more than 15 years of experience helping clients secure financing for commercial real estate projects, and now working directly with investors on acquisitions and sales, I have seen firsthand what separates a great investment from a risky one.
Whether you are considering an office building, retail center, industrial space, multi-family property, or agricultural land, here is how to evaluate a property like a professional. Below are the most important green lights (good signs) and red flags (warning signs) from both a financing and agent perspective.
- Location: The Foundation of Value
Green Lights:
- A strong local economy and steady job growth (the Fargo-Moorhead area is a great example)
- Easy access to major roads, amenities, and employment centers
- Signs of future development or infrastructure improvements
Red Flags:
- A declining neighborhood or shrinking population
- Poor access or visibility, especially for retail or office properties
- Dependence on one large employer or a single industry
Agent Insight: Location determines both current value and long-term potential. Ask about what is happening in the area. Are there new projects, zoning changes, planned improvements nearby, and have you found the city or county to be responsive and easy to work with?
- Property Condition and Functionality
Green Lights:
- A well-maintained building with little deferred maintenance
- A flexible layout that can adapt to different tenants
- Updates to the property, such as HVAC systems, electrical, plumbing, and the roof
Red Flags:
- Major repairs needed soon, such as a new roof, parking lot, or foundation issues
- A design that limits the type of tenant you can attract
- Issues uncovered in inspection reports
Agent Insight: A clean inspection report can save you a lot of money and stress later. Even small maintenance problems can affect financing, resale value, and tenant satisfaction.
- Tenant and Lease Quality
Green Lights:
- Reliable tenants with long-term leases and solid credit
- A diverse tenant mix in multi-tenant properties
- Clear lease terms with rent escalations and favorable renewal options
Red Flags:
- Short-term or month-to-month leases
- High vacancy rates or inconsistent rent payments
- Tenants with uncertain business performance or lackluster financials
Financing Lens: Lenders value predictability. Strong tenants and leases with stable income make financing easier and can often lead to better loan terms.
- Cash Flow and Financials
Green Lights:
- Positive cash flow after expenses and debt payments
- Market rents that are competitive and have room to grow
- Realistic expense estimates in financial projections
Red Flags:
- Overly optimistic rent assumptions or underestimated expenses
- Irregular income records or unclear financial history
- Relying only on appreciation instead of steady income
Financing Lens: Lenders review the actual financial performance of the property, not just projections. Make sure your numbers are based on facts, not assumptions.
- Financing Fit and Loan Structure
Green Lights:
- Manageable leverage with strong debt coverage ratios
- Fixed-rate terms that provide stability
- Flexible loan options, including SBA or local development program opportunities to strengthen the financing stack
Red Flags:
- Taking on too much debt or using a variable rate without a plan
- Not understanding loan terms such as balloon payments, debt service coverage ratio (DSCR), covenants, prepay penalties, resource vs non-recourse, etc…
- Financing a property type that your lender is unfamiliar with or the property is out of the banks market
Financing Tip: Talk with your lender early in the process. The financing structure can make or break an investment, especially in a changing rate environment.
- Market Demand and Exit Strategy
Green Lights:
- Consistent demand for the type of property you are buying
- Strong comparable sales and rental data
- Start with the end in mind and have a clear long-term plan, whether you plan to hold, redevelop, or sell
Red Flags:
- Buying based on emotion or speculation
- No defined exit strategy
- Paying too much in a competitive market without a backup plan
Agent Insight: Always think about your exit before you buy. Even the best property can become a challenge if the market changes or your goals shift.
Final Thoughts
A solid investment property is not just about finding a good deal. It is about aligning the right property, financing, and strategy with your goals. The best investors combine enthusiasm with due diligence and surround themselves with trusted partners who understand both the real estate and financing sides of a transaction.
With my background in both commercial lending and real estate investing, I help clients look at every deal from multiple angles. The goal is to make sure the investment supports your long-term financial success.
About the Author
Andrew Hanson is a commercial agent with Goldmark Commercial in Fargo, ND. He helps clients buy, sell, and lease office, retail, industrial, multi-family, and agricultural properties. Before joining Goldmark, Andrew spent 15 years in commercial lending, helping clients secure financing for real estate, business expansion, and investment projects. His combined experience in real estate, lending, and property development gives his clients a unique advantage in every transaction.