Small business owner potentially has the opportunity to purchase the multi-unit office building currently leased from. I'm completely over my head. Would you point me at resources?
So, as the title says, I (co-)own a small business. We currently lease one unit in a small multiple office building. Today, the owner of the building was talking to my partner and mentioned that he was thinking about selling the building "sometime in the next year or so.", and that he'd be happier to sell to us rather than some investment portfolio, and indeed, might be willing to cut us a sweetheart deal.

I've basically reached the point where I understand the business side of the business I'm in sufficiently to not feel like I'm constantly drowning from not knowing enough, but this is well and truly beyond my knowledge base.

I've done some googling, and based on that, the (non-sweetheart) asking price the owner mentioned, and some semi-informed guesstimates, it looks like the purchase would be at least a breakeven proposition (I'm a huge fan of pessimistic financial estimates.). Given that, I want to move forward with exploring this.

I'm obviously going to be looking for a local professional to talk to in order to gain a better appreciation of the questions I need to ask, and what the answers will mean. One of my big questions at this point is what type of professional should I be talking to, a commercial broker, a real estate lawyer, or someone else? 

One of my concerns is that frankly, I'll probably get the best deal on this property if it never comes to the open market, and I'm leery of talking to a broker in fear that doing so might jeopardize my ability to carry this out privately. Is this a realistic concern? If it is, could I try to find a broker who operates near, but not in, the market and just pay them for their time? (If so, what kind hourly fee should I expect?). The argument in favor of a real estate lawyer goes that although they probably have less relevant knowledge, they probably know enough to guide me through these basics, and being a lawyer, gives me an expectation of confidentiality and neutrality.

Next, in order to both better know what questions to ask whatever professional I settle on, and to better understand their answers, I'd really like to do more reading on this...and preferably from a more reliable source than "The first page of Google results". Would anyone be so kind as to point me at resources germane to this kind of real estate deal? I'm open to websites, books, MOOCs, mini-courses, or whatever.
[{"id": "ick4x87", "text": "Commercial real estate brokers are always a good source. They can give you insights of the local market. Make sure though that you\u2019re talking to a commercial real estate person and not a realtor dabbling into commercial real estate.\n\nIf you are going to finance this acquisition, then you should be talking to your commercial banker or a commercial loan broker. If you\u2019re buying in cash, maybe talk to a local appraiser.  They will know more about market data including market rents, price per square footage etc. \n\nLoopNet and Crexi are sources for any commercial estate listings nationwide.", "replies": [], "depth": 1}, {"id": "ick75oc", "text": "I take a half glass empty approach as well. \n\nAt the moment it just depends on you and your partners size and timeline. Personally if you have the capital and plan to stay there for 7+ years then I\u2019d lean to pursing the property.  \nI love capitalizing on hidden gems but with the current state of the market it\u2019s just simply not ideal and a bit more of a gamble if you will. \n\nAll in all there are dozens of other relevant factors that would decide a purchase here but if there\u2019s anything I can suggest, work with a broker\u2026", "replies": [], "depth": 1}, {"id": "ickq4z6", "text": "You need legal expertise to structure the purchase and ownership, a banker to finance it, market expertise from a commercial broker and an appraiser. The banker will want their own appraiser in the end. \n\nAt some point you'll need an attorney and CPA that understand real estate. This could be the same person.\n\nThe key thing to understand is that there is a lot of opportunity and risk in office real estate right now, and this has everything to do with location and COVID-accelerated change in the market. Change was coming and really accelerated because of COVID.\n\nMany people are not going back to the office, so demand is way down, so office space valuation is way down. You could test this with any office leasing people, simply by looking at vacancy rates and lease rates, comparing your current lease to something close.\n\nThe seller should know this and this be why they are getting out.\n\nUse those current lease rates to construct a cash flow model and proforma for purchasing the building. Any banker will need this. The appraiser will probably do something like this because they cannot do comparables only for commercial properties.\n\nThe banker will want to know if your company can pay the loan from your company income and if the building can have rental income as a stand alone operation given current lease rates. The banker wants to limit risk.\n\nI helped a small business owner reposition an old, small building. The renovation went well. He could pay the  loan from cash flow. The building has never been more than 75% occupied since. \n\nThere was never much demand for office at that location for the price he was asking. I would guess the market has dropped since then, but could possibly have gone up. It's possible that people are renting from him rather than going downtown.", "replies": [], "depth": 1}, {"id": "ickt8oc", "text": "Do you have a commercial banker? They can give you the documents they will need to underwrite the deal but first a foremost is how much of this building do you occupy (% by square ft &amp; % or gross rent)? You can get a much better deal if you can finangle a way to call it an owner occupied C&amp;I loan versus an investment real estate loan.", "replies": [], "depth": 1}, {"id": "ickvfnf", "text": "What method is the current owner using to value the property? Does the current owner have complete financial records to prove the valuation? If it looks like it really is an amazing deal just get it under contract with a long close, maybe 60 days DD to figure it out and wrap up any loose ends.", "replies": [], "depth": 1}, {"id": "icl57b1", "text": "We don't know where you are located or the specifics of the deal. However, office property is not a beginner investment. Outside of Class A office, that asset type has not been a popular choice the last few years. \n\nI've worked for two commercial banks over the last 4 years. One huge, one tiny. We are not touching office unless it's for big name guys with big name properties. \n\nIf your company takes up a good portion of the property, you might breakeven just because you are not paying rent to someone else. I can see it as a reasonable business decision for your company, but not an investment.", "replies": [], "depth": 1}, {"id": "icmcelc", "text": "A prudent real estate investor would look at the following :\n\n1) TENANTS\n\na) All Leases, Amendments\n\nb) Vacant Spaces\n\n3) Renewals and expirations within 6-12 months (probability of tenants to renew the spaces)\n\n4) Financial Information of the tenants\n\n5) Future obligations of the landlord as stipulated in the leases - such as commissions, TIs,  etc.\n\n&amp;#x200B;\n\n2) FINANCIALS\n\na) Rent rolls (to be reviewed in conjunctions with the leases)\n\nb) Income Statements for the past 2-3 years\n\nc) Balance Sheet\n\nd) Operating budgets for the current year + prior 2 years\n\ne) CAM recoveries - most recent calculations and invoices sent to the tenants\n\nf) Property tax bills, utility bills\n\ng) Capital Improvement schedules (with original cost, interest and amortization schedules)\n\nh) Security Deposits of the tenants (verify if what the LL has in its books matches with the leases)\n\ni) Copy of the current AR report\n\nj) Other outstanding obligations of the landlord\n\nk) Estoppel certificates from each tenant\n\nl) Tax assessments \n\nm) Review existing mortgage documents and other restrictive covenants\n\n&amp;#x200B;\n\n3) PROPERTY\n\na) title search and zoning review\n\nb) loan documents\n\nc) floor plans with BOMA surveys (review if the GLA of the units matches with the BOMA surveys)\n\nd) Appraisal report to see the appraised value of the property\n\ne) Property Condition report \n\nf) Environmental reports - min Phase 1 , if applicable go to Phase 2 report\n\ng) Engineering reports - structural and seismic\n\nh) Geotechnical reports\n\ni) Roof reports (maintenance reports, inspection reports)\n\nj) HVAC condition assessment (maintenance, service history, 3rd party assessment) \n\nk) Electrical Distribution (power availability, upgrades )\n\nl) Outstanding code deficiencies from the city to see if there are any outstanding orders, notices etc.\n\n&amp;#x200B;\n\nOTHERS\n\na) Copies of all service agreements (including fire alarm monitoring, fire and life safety ,mechanical, elevator, plumbing, electrical)\n\nb) Copies of all utilities bills and accounts for 6-12 months \n\nc) Building plans - base building, TIs (cad or pdf files)\n\nd) List of open permits \n\ne) Warranties\n\nf) Building chattels\n\ng) Discuss with the current tenants to see their opinion about the property \n\nh) Summary of open projects\n\ni) Copies of all COIs for the tenants\n\nj) Safety plan\n\nk) Complete Tenants' contact list\n\n&amp;#x200B;\n\nINVESTMENT ANALYSIS\n\na) Discounted Cash flow analysis\n\nb) Leasing assumptions for your market (market rents, rent abatement, expected vacancies) \n\nc) Cap rate analysis\n\nd) Financing analysis (if you plan to get a mortgage) \n\nLEASING\n\na) Analyze sales/ lease rates\n\nb) Review city's plans for future developments in the area\n\nc) Zoning review\n\nd) Restrictive Covenants\n\n&amp;#x200B;\n\nThis should be a good starting point. Feel free to DM if you need additional info/assistance.", "replies": [], "depth": 1}, {"id": "icnw6pb", "text": "If you\u2019re in Texas, shoot me a DM. I\u2019ll do my best to bring value (I\u2019m a commercial RE agent and owner)", "replies": [], "depth": 1}]