Do I need a RE Attorney or Buyer's Agent on Eight figure deal?
I've operated a successful corporate housing company for the past decade and have been wanting to get in to the multi family space. I have identified a property (just under 100 units) that is suited to our use and have thus far been speaking directly with the sellers and their agents. However, next week the sellers would like to see an LOI submitted.

My RE experience with multi-family so far has only been what I've read in books and in online forums. I'm fully capable of negotiating purchases of single family homes but I'm afraid I'm a little out of my depth here and would love to have someone advise me on this deal.

Do you recommend I obtain the services of a local real estate attorney or commercial buyers agent?
[{"id": "ey8npdf", "text": "Yes to both. You're in new territory. The cost of hiring an attorney is minuscule compared to the liability you're putting yourself at risk for.", "replies": [{"id": "ey8owk3", "text": "Why would he need a buyers broker at this point ?", "replies": [{"id": "ey8q0kn", "text": "My thinking was that the sellers agents only have a fiduciary responsibility to their clients and I don't have anyone who is advocating for my interests outside of myself. These are seasoned developers and they are used to negotiating deals of this size and property type whereas I am not.\n\nMy only reluctance to not bringing on a buyers agent is that the sellers agents and sellers have been very accommodating to being creative in how we go about funding the acquisition. I was assuming that had to do with me not have a buyers agent therefore no commission split?", "replies": [{"id": "ey8tlan", "text": "That may be the case, but they'll either get over it or you can pay the buy side broker. An attorney will help with paperwork but not the due diligence or negotiation or know anything about the market necessarily. With the information you've given, an option would be to find a buy side broker and explain the situation and offer 1% that you'd pay to represent you. They didn't find the property for you but that's a small piece of the puzzle.", "replies": [{"id": "ey931ac", "text": "\\^\\^this guys gets it, best advice so far. due diligence for something like this is a whole different animal than SFR. having appropriate exits or options for extension are super important. negotiating a good purchase contract with reasonable timelines and options will save a lot of headache later on. being able to do this requires an understanding of not just the law, but also standard DD, and if lender is involved, the financing process as well.", "replies": [], "depth": 5}, {"id": "ey9mrhc", "text": "Depends on the lawyer.  Seasoned lawyers in the multi-family space know how to navigate diligence and have a sense of what's market.  I'd still strongly recommend both a broker and an attorney.", "replies": [], "depth": 5}], "depth": 4}, {"id": "ey9mxnm", "text": "Multifamily is currently the most sought after real estate sector. If the seller has an agent listing the property, and their best buyer is a guy that has never done a multifamily deal, has no representation, and needs creative financing to get the deal done, this all raises a TON of red flags. Bring in someone that knows what they\u2019re doing. It\u2019s too cheap to do so, and the risks are too high to get screwed here.", "replies": [{"id": "ey9v0p9", "text": "Yeah came to post this. This SOOOOO much. Run like hell from this deal.", "replies": [{"id": "ey9vf58", "text": "Haha exactly. This deal size and type is my sweet spot and I\u2019m seeing this more and more. Guys wanting to go from single family to multifamily, and not knowing what to look for. I\u2019ve had deals I\u2019ve bid on sell for way over what they should and the only explanation is the buyer didn\u2019t understand the deal.", "replies": [{"id": "eycjolp", "text": "I've run the numbers on my own and have done my own analysis. However, I'd still like to get a second opinion or someone to look over my analysis to double check for any red flags or items that haven't occurred to me.\n\nIs that person a commercial real estate attorney or a buyers agent or someone else? That's my quesiton", "replies": [{"id": "eys0d55", "text": "Do you know what similar apt complexes are selling for per unit? Do you know what market rents, vacancy rates &amp; cap rates are for this type property (i.e. is it class A, B or C?).   Do you have a really good fix on what the expenses should be &amp; therefore the true net income?  You should not buy any apt complex unless you become an expert on these stats in that market.  \n\nWhy not start with a smaller building if you need owner financing to help acquire this one?  The diligence costs on a commercial property are pretty substantial - survey, environmental, digging thru all those leases, getting estoppel from the tenants, building inspections etc.  \n\nMF isn't my specialty but even if purchasing a property in my long time field, Id have the sharpest commercial RE atty specializing in that property type I could find.  You sound in love with this property, you need someone to poke holes in it.", "replies": [{"id": "eywn8pr", "text": "Yes I know all of these numbers. I do understand what you're saying about doing your due diligence. We have ID'd a few smaller properties but listings like this one don't come along very often and this is the last opportunity we have to acquire something in this location that would work so perfectly for us. Otherwise, we are completely priced out whereas this one could work for both the owners and us given the proper creative financing involved.", "replies": [{"id": "f1bb5q7", "text": "That all sounds great, please make a post to let us know how it's  working out", "replies": [], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}, {"id": "eycjcr7", "text": "The reason they approached me was because I was willing to pay more for it than anybody else. In exchange for getting more than market rate for the property they are offering to be flexible on the terms. They have had other offers but they are very focused on getting their price.\n\nThat being said, this is the purpose of the post. I'd love to find someone who \"knows what they're doing\" but is that a commercial real estate attorney or find a buyers agent? I've done my own analysis but I'd like to get a second opinion from someone with more experience in multi family.", "replies": [{"id": "eye7mm9", "text": "A real estate attorney should be all you need here. Make sure they have a lot of experience obviously.", "replies": [], "depth": 6}, {"id": "eyeos6m", "text": "You need to talk to another investor who buys apartments.\n\nI'm guessing you can pay more because you're running corporate housing numbers and not market rate numbers.   Does that sound right ?", "replies": [{"id": "eywnr9g", "text": "We are running our financing model based on current market rents but our ROI and returns are being calculated based on our model. We know that we will only get credit for and financed based on market rents and not our boosted cash flows.  We are hitting a DCR issue with current market rents due to the fact cap rates are insanely low in my market but are finding ways around that.", "replies": [{"id": "ezch1tm", "text": "&gt;We are hitting a DCR issue with current market rents\n\n...is there an occupancy issue? If you're at market rents and stabilized occupancy but can't clear a 1.3x or whatever DSCR then you're likely overvaluing the property (even if you think you can add value).", "replies": [{"id": "ezf3wtk", "text": "The biggest issue is that I'm located in one of the top 5 markets in the US where class A MF assets trade for sub 5 cap rates so the market price relative to the NOI is insanely high right now", "replies": [{"id": "ezf7mh1", "text": "If you have a property at a 4.5 cap and debt at 3.5% (Fannie Freddie full term IO right now) levered at 65%, you\u2019ve got a 2.0x DSCR. You could buy at a 3 cap and still clear a 1.3x. Is there something else going on then?", "replies": [], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "ey8qb55", "text": "If he is feeling a little out of his depth, the right buyer's agent will add value. He hasn't submitted an LOI yet, so there is much more to be done in order to see the transaction through. The buyer's broker's fee traditionally comes from the seller, so the buyer will not incur any additional cost for one's services.", "replies": [{"id": "ey8tasr", "text": "I like keeping as much money as possible in the hands of the listing broker ... so I don't lose deals do to them not wanting to share it (greed) with my broker.  But yes, it all depends how comfortable OP is in dong this deal.", "replies": [{"id": "eyck5pi", "text": "This was my rationale as well and why I was initially reluctant to bring in a buyers agent. However, at this point, I don't know what I don't know and would love to find someone to advise me on the deal.", "replies": [{"id": "eyds03k", "text": "At this point, after reading additional comments of yours, I tend to agree.  I initially felt like you had more experience than you actually do.  It's all good though ... it's why you came on here asking for advice in the first place.\n\nI sent you a PM asking for basics in the deal, to help guide you.  No problem if you aren't comfortable sharing.", "replies": [{"id": "eywnzl8", "text": "I appreciate your contributions to the discussion. I fully admit I have never done a deal of this size $ wise or number of units but my math seems accurate.  I'm a huge believer though in hiring experts who are much smarter than you when it comes to these things and am not naive enough to think I can pull it off on my own. Too much at stake for me to even try.  I think I've taken the negotiations as far as I'm comfortable taking them and know I need expert guidance. Whether that was a CRE attorney or buyers agent I wasn't certain. After reading through these comments though I think a RE attorney would be the best route.", "replies": [{"id": "eyxlm3m", "text": "Good.  Surround yourself with good people and you'll be fine.\nGood luck.", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "ey8psk1", "text": "Do commercial re attorney's do deal analysis or just help with contracts once the terms have been decided upon?", "replies": [{"id": "ey8tegn", "text": "Not really.  They can advise you if something looks woefully bad but ultimately you make your own decisions.", "replies": [], "depth": 3}, {"id": "eyd1q27", "text": "You need an attorney to help you negotiate the contract and your loan documents.  There's so much stuff in both of those that you probably would never even think about...", "replies": [], "depth": 3}], "depth": 2}, {"id": "ey9bp5v", "text": "Yer a fool if you don't hire a lawyer.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ey8on8c", "text": "Approach it the same way you would a single family ... except you're going to send over an LOI.\n\nMy LOI's are 1 page and they are painfully simple and include only the most important information:\n\nLetterhead\n\nDate\n\nTo Who\n\nFrom Who\n\nRe: (regarding)\n\nOne sentence explaining this an LOI and I want to buy X property\n\nPrice\n\nTerms (I always keep this to 2-5 bullet points)\n\nClosing terms\n\nSincerely\n\nKeep the attorney and buyers broker (if you need one) out of it for now.  An LOI is not binding.  Obviously if you come to terms and go into contract, you most certainly want an attorney representing you.", "replies": [{"id": "ey8q7l9", "text": "Theoretically it seems to be the same but I guess I'm being thrown off by the dollar amounts involved here. That's really what I'm finding to be intimidating.", "replies": [{"id": "ey8szfq", "text": "Take away the $ symbol and it's all just numbers.\n\nTrust your instincts and trust your math.", "replies": [{"id": "eyajp3j", "text": "Trust your instincts and (trust your math)", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ey8tzq2", "text": "Both", "replies": [], "depth": 1}, {"id": "ey8x4to", "text": "I would skip a buyer\u2019s broker and get an attorney and a property manager who handles inspections/who you want running the day to day. Any buyer\u2019s agent you bring on is going to get paid when the thing closes, so they\u2019re incentivized to close the deal. Sure good ones are gonna tell the complete truth, but I wouldn\u2019t be surprised if you don\u2019t always get the whole truth. Plus every agent is gonna wanna work a deal that you found that you have already started negotiating. Your a qualified buyer and your basically asking, \u201chey, do you want to make a quick $100k-$200k for very little effort\u201d", "replies": [], "depth": 1}, {"id": "ey92b2f", "text": "Absolutely, these deals aren't remotely close to SFR transactions in their size and complexity. You definitely want an experienced CRE attorney to assist with the drafting of the LOI and purchase agreement. Keep in mind however, attorney will likely not understand the extent of due diligence needed on something of this size. Buyers agent should be able to fill in the gaps here, but in all honesty, most of this will fall on your shoulders.", "replies": [{"id": "ey9cxd7", "text": "So an LOI is not really as simple as u/german_mafia is suggesting? Should I come up with only one LOI or several possible options? I don't want these guys to know that I'm a rube here", "replies": [{"id": "ey9e7fm", "text": "LOI's are not binding, they simply lay out the basics of what both sides want to accomplish.  The contract is where you want every I dotted and T crossed.  That's where the rubber hits the road.\n\nAll of my LOI's are 1 page with a few bullet points and that is true for every deal I have ever done up to $50m+.  Now these were for straight up warehouses and apartments.  If I were to put an offer in on a difficult deal with several retail tenants, apartments, a development aspect ... then yes my LOI would have to be a few pages long addressing all the different aspects of the deal.", "replies": [], "depth": 3}, {"id": "ey9glr1", "text": "yeah, not so much for an 8 figure deal.  LOI is going to set the terms and conditions for drafting the purchase agreement so I would have someone experienced help prepare it. You want to include the deal points that are non-negotiable upfront, outline basic dates and timelines and identify who prepares the purchase contract, etc. Its a lot more than just identifying a price and closing date. With little info, they'll draft the most advantageous purchase agreement for them and leave it to you to figure out the details and pitfalls. You're going to be dealing with sophisticated and experienced developers on a high dollar transaction, not the time or place for training wheels.\n\nEdit: to address your questions, you want one LOI to establish your non-negotiable deal points, and desired conditions, and go from there. one of the benefits of a buy-side broker here is having someone that can help separate the essentials from everything else. with an experienced buy-side broker, you could hold off on the attorney until after the LOI.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ey939ul", "text": "The seller's agent should be representing you as well. You should work with the seller's agent, especially if you want the property. The seller's agent then becomes your agent as well and has a fiduciary duty to both of you. You can continue your negotiation skills yourself, and you are much more likely to get your LOI accepted because the seller's agent is also your agent, and should be incentivized to help you write the best offer to beat any other offers since he or she will keep their commission and not have to split it with an outside broker.\nAlso, you could consider getting an attorney if you are new to this, but you should make sure they are reputable and experienced so they bring value to the table", "replies": [{"id": "ey9d1t5", "text": "I'm only concerned about a conflict of interest they might have and where they would come down on it. So far they seem to be acting fairly but 1) I have agreed to pay slightly more than market value for the property and 2) I don't have a buyers agent for any commission split. I'm not sure if that all would change if I had my own representation.", "replies": [{"id": "f39tf4m", "text": "How did it go?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ey9685e", "text": "Commercial re lawyer here so take this with whatever condiment you prefer but you'd be insane to buy without a lawyer. Call me with your state and I can probably make a referral.", "replies": [{"id": "ey9d5my", "text": "I would MOST CERTAINLY get a lawyer to hammer out the details of the final purchase contract but do you feel they would bring value at the LOI stage or should I wait until we start drafting the actual purchase agreement?", "replies": [{"id": "ey9lyyx", "text": "Am also a CRE attorney. You will need at least an attorney to close; you will need a broker too if the attorney does not practice in CRE. \n\nIf you are questioning whether or not you need to bring in an attorney, you need to bring in an attorney, even at the LOI stage.  The \"2-5 lines of terms\" mentioned above can mean a lot in an LOI if you don't know what you are doing - while non binding, the LoI sets and brings people to the table.   A misunderstanding at this point could have your seller walking away without a contract.\n\nIt is relatively cheap, an hour or two at most (if you are drafting), to get an attorney in at this stage.  Plus, makes it easier to get the LOI on paper when you are trying to go under contract because the attorney will already be up to speed.", "replies": [{"id": "ey9t8r7", "text": "All my LOIs say \"not legally binding, but intended to form the basis of a lawful purchase and sale agreement,\" etc.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ey9v28y", "text": "Broker here with experience in multifamily, industrial, retail, and restaurants. I now specialize in retail and restaurants. Early in my career I assisted a senior Broker with a multifamily deal and can tell you that I would have no reservations hiring a multifamily  broker if I was in your shoes. A recommendation I would suggest is to make a list of multifamily brokers in your area. Try to gauge their experience with that product, also if they have a CCIM, SIOR, CRE designation you are talking with seasoned brokers that can add value to your transaction and assist with many questions/resources you may have/need now and in the future. Most of the productive multifamily brokers across the country work in teams and will be able to help significantly with analysis, comps, finance, etc.", "replies": [], "depth": 1}, {"id": "eyafwzt", "text": "both...attorney is a must, and a broker is free and experienced, ideally has done several very similar transactions recently", "replies": [], "depth": 1}, {"id": "eyc56ee", "text": "You need both or you will likely get taken advantage of or lose the deal by trying to negotiate things that are pretty standard in your market in this product type.", "replies": [], "depth": 1}, {"id": "eyf7dte", "text": "Are you sure on your pricing? It seems like they want you to buy it because of your overpriced bid.\n\nWe just started going thru DD for a new property (retail). We submitted our first LOI at x because we knew it would likely fall around there. We were accepted to put up a 2nd LOI. With guidance from the broker, there was a 99.8% \u201cchance\u201d that we would be accepted to essentially buy and go through DD and all that good stuff.\n\nWe have a team of attorneys, an outside consulting firm doing lease audits and abstracts. We already put down a deposit of $250k. 2nd round offer was accepted a little over a week ago.\n\nNot sure how much the property is but the more you spend, the more you need to try cover all of your bases", "replies": [{"id": "eywnlq8", "text": "They absolutely want us to buy due to our overpriced bid. They know we're not a PE firm or some algorithm that spits out a value and the business use case of this property and our hold period actually justifies a slightly higher than market price. We are currently supply restricted in our business and this is our last chance at acquiring something in this location as we are completely priced out of everything else.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ezh4gvg", "text": "A must is hire an experienced real estate lawyer first asap. Then you can submit the requested LOI.  In the meantime try to find out from the Seller's agent what aditional details there are and what is the bottom min. price to make a deal.  Many times the Seller's agent is willing to disclose the min. offer the Seller would accept for a deal to be approved. That gives you an idea  what to expect. Good luck.", "replies": [], "depth": 1}]