#089: Why You Want A Real Estate Attorney On Your Team

Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and your investing with The Accelerated Investor Podcast.   

Josh: Hey, welcome back to Accelerated Investor. Thank you again for joining me, having a great time putting this podcast together for you and just getting tons of amazing feedback on social media and wherever your podcast you’re consuming, it’s just been great. We’ve been getting people asking questions and leaving us ratings and reviews. We’ve had some amazing, amazing guests. And today I’ve got a good friend of mine who’s been with me along this amazing journey of real estate for a long, long time. His name is David Streeter. He’s one of my attorneys and David and I grew up in this business together. David’s been my attorney for going on now 10 years. Worked on everything from contractor agreements to joint venture agreements, wholesale deals, rehabs and rentals.   

Josh: And David and I have both over this last year or two, have made the pivot from working a lot in residential, residential, private lending, residential investing, residential attorney work into multi-family. So we’re going to talk today with David about his journey as well as some do’s and don’ts, some best practices and worst practices for multi-family investing. David, what is going on, friend? How are you and good to reconnect with the man.   

David: Josh, how are you? Good to see you buddy. 

Josh: You too. What is new in your world? What’s a, you’re working a lot on multi-family deals, a lot of rental properties, small balance commercial. What’s the latest in your world?   

David: Yeah, absolutely. It’s been crazy. Usually the fourth quarter slows down for me a little bit, but it has just continued to grow. You know, for the last two years, each quarter has gotten progressively a little bit better. I’m spending most of my time, you know, doing entity structuring for real estate investors to make sure they have the proper LLCs at Joint Ventures those type of a entity structures. And over the last year is, you know, there’s been a big boom in interest in the multi-family space. So I’ve been fortunate enough to have several clients kind of jump into that space and I’ve gotten dragged into it and we’ve had, you know, quite a lot of, activity this year and been very busy. So, have a lot of good stories related to those transactions, a lot of dos, a lot of downs and you know what to avoid and how to plan your plan, your deals.   

Josh: Awesome. Let’s jump into it. I don’t know, do you, do you want to talk about the good or the bad first? Sometimes the bad is more fun. Sometimes the good is better news to start with. And I know you’ve worked with a lot of, so we won’t name any names because some of them are friends of yours, they’re clients of yours, but they’re also friends of mine, guys that I know and guys we’ve lent money to. But let’s start with the good. So if somebody is getting going with, let’s call it a small balance or a middle market, multi-family practice, maybe pivoting from residential into multi-family, what are three or four things that they should do. What are some best practices to get their business set up? And then on a daily operational level, what are some things that you see them, encourage them, kind of coach them on to have a good clean practice?  

David: Sure. So I guess there’s a process. A lot of people that I’ve been working with are newer to this space where maybe they, prior to investing in the multi-family, you know, arena, you know, they were either doing, buy and holds, you know, having, you know, a rental portfolio of anywhere from 10 to a hundred units. Maybe they were just doing fix and flips and they took that contracting experience they got from their to buy these distress department buildings and employing it there. So one of the things that I see is that there’s just the from a transactional standpoint and the big picture, doesn’t matter if you’re doing, you know, single family flip or, you know, a renovation of a 50 unit building. The concept is the thing I always tell them, a lot of times the biggest difference is the purchase price. There’s usually another comma in there.   

David: You know, in all of your agreements and the people that you’re working with, that’s usually multiplied. So it’s just my clients that have done really well transitioning into this space, they’ve taken a lot of time to prepare, to scale their business to handle that additional volume. So I think one of the, you know, the biggest things a good do is, you know, upfront before they start, you know, making offers is to do their due diligence. You know, beef up their team, make sure they know that they have an attorney, that they’re working with commercial real estate brokers with experience and more importantly, establishing lending relationships, and also relationships to be able to raise the capital that is needed for these deals. So the guys that actually go out and network and build these teams first are able to, I find able to hit the ground running when, when they do find a good deal because it’s pretty competitive out there. As you know, you have to make a lot of offers you to get one deal accepted, right. In this space, there’s just not as many apartment buildings as single family houses. So you know, you have less of a pool to draw from.   

Josh: Yeah. I love the fact that you started with building a team because really in commercial, because the deals are so much bigger, you know, you’ve got to kind of posture up and you’ve got to show a seller or a commercial broker that you can close, that you know what you’re doing. And a lot of times these deals are off market where they’re double ending them. They’re getting both sides of the commission. And so you’ve got to kind of show them and posture up to them that you have a team that you can handle these deals because they don’t want to risk their commission with somebody who can’t close. So it makes a lot of sense, right?   

Josh: Line yourself with a great commercial attorney, commercial brokers, lending team and you know, and capital private money that you can use for down payments because these big deals sometimes are so big. You know, you don’t have an extra half, a million, $1 million, $2 million, $3 million, $5 million laying around of your own money. These deals are done with joint venture partners and capital investors, equity investors. So great way to get started building a team for sure. What else did you see like once the team is built, then what are some common do’s best practices for making offers and then running the buildings?   

David: Right. So I think you’re going to find is you can look back on this, you know, recording in that a do has a converse don’t in a lot of times they go hand in hand. So I think that the step one is, is once you know, have your acquisition team in place and you’re making offers and you get to the point where you know, you may have a letter of intent accepted. At this point, I think the, the best thing to do is to make sure that you have a very strong purchase agreement. You know a good purchase agreement is going to identify the purchase price, the earnest money, you know all the things that you’re used to. It’s going to identify a title company, have an accurate description of the property. A lot of times it’s more than just one address or it might be one address attached to, you know, six or seven parcel numbers.   

David: So you want to be able to do some due diligence on that, make sure your purchase agreement accurately identifies it. And you also in that initial purchase agreement, you want to have some language in there that gives you some flexibility. You know that the final identification of the property is going to be subject to verification by the title company when they run the exam. Maybe they find an old parcel out there that wasn’t, you know, merged in but should be part of this. So you want that and then that flows right into your due diligence or your, what you would see as an inspection clause. And you know your regular purchase agreement. And the commercial space, it’s going to be a due diligence section because it’s more than just the physical inspection of the property and it’s also the inspection of the books and records related to the asset itself.  

David: Also any contracts that are related, you want to be able to make sure that the seller is going to make a fair and accurate disclosure of all the contracts out there, whether it’s laundry room leases, maybe a rooftop leases for a cell phone company. All these things encumber the and can affect the value and more importantly the cashflow of the asset itself. So another key component that I find sometimes is a deal breaker. Your purchase agreement should have a strong seller’s representations in the warranty section. And I assume a lot of people listening to this may have been in the residential space before, that’s going to be similar to like a residential property to disclosure form where the seller discloses anything wrong with the property that he or she knows about.  

David: Well, the reps and warranties are very similar, but it’s going to have a wider or broader scope because it goes beyond the condition. It might also go to, are there any pending lawsuits or liabilities that are out there? Are there any building violations or city violations with regard to the asset? Are there any lead based paint issues, environmental issues, things like that. So you want to make sure that, you know, your purchase agreement has strong seller representations and warranties when you’re buying an asset because this is going to be your get out of jail free card if down the road. You know, you run into a problem.   

Josh: Nice. Yeah, great description there. Love it. I mean just the purchase price, obviously that earnest money, that’s the easy stuff, right? But the language flexibility, the parcels, the due diligence reps and warranties are really, really, really important. Commercial deals are often, like there was a property that we closed on last year and we all thought it was a 735 units and it actually turned out it was 730 because a building burnt down like 30 years ago. And so that kind of stuff happens with commercial, right? You’re talking about multiple buildings, multiple properties, potential multiple complexes, multiple addresses, purchase agreements, really, really important. So obviously the don’t on this side, right, is using some sort of in commercial is very important to have a custom, essentially a custom purchase and sales agreement. So a don’t here is what using a template agreement that’s kind of just off the shelf?   

David: Absolutely. I mean, and I have a little story here of something that I just experienced the past week. You know, I had someone get me into the game late. Literally they were four days away from closing and this buyer’s lender had said, hey, you need an attorney opinion letter on this. And he goes, well, what’s that? He goes, well, who’s your attorney? He says, well, I guess Streeter. And so he called me up and I started digging this deal. First thing I always look for, I said, give me the purchase agreement. Keep in mind this is a 68 unit, $1.8 5 million acquisition, okay. Let’s just sum it up that way. I get the purchase agreement, it’s a two and a half page fill in the blank residential purchase agreement.  

Josh: Holy smokes.  

David: Mostly put together by a commercial real estate broker. So this broker, obviously must’ve been his first deal and then you know, so there’s the contract talks about nothing. It doesn’t even have a default provision, doesn’t have timelines in it. It just has a closing date, which we’re well past already, the amendments that went to this. Whereas equally garbage like that is the original agreement and we’re, you know, guys in a little bit of a pickle now because the thing was supposed to close this week and it’s not going to. Well we don’t have any fallback language to go onto, into the agreement and both sides are at fault here. And I just told them, hey, if you bow out of this, if this ends up in court, it’s going to be a mess for everyone involved.

Josh: Wow. Wow. Yeah. So don’t use the two page boiler plate purchase agreement, right. Find a guy like David that can craft a, you know, a well-written, fully encompassing, you know, custom purchase and sales agreement after, you know, LOI that can be easy. You know, generally, you know, because it kind of States the general terms purchase agreement, earnest money, general closing date and some basic stuff like that. But then you’ve got to go custom from there. So, you, you know, you’ve worked with a lot of guys that have borrowed money from us, you’ve worked with a lot of people that we know in this space. So what are some other do’s that you’ve seen guys that are successfully, they’re pivoting out of residential or the successfully working in the multi-family space?  

Josh: So you really have to understand the timelines in your contract because the earnest money, you know, it’s usually refundable for a period of time. But at some point in the process it’s going to go hard or become nonrefundable. That means no matter what happens, you’re losing this money. And time is of the essence. You know, one day can make a difference. So and a lot of times the contracts are written where the dates are floating and you have extensions and additional earnest money might need to be the positive.   

Josh: But one of the things that once you have an executed purchase agreement, you need to sit down and kind of draft out a schedule or a timeline of when these drop dead dates are. Because if you miss it, even by a couple of hours, now you might have a seller that says, tough luck, your $25,000, $50,000 earnest money is gone. So if you don’t perform, you lose that regardless. I’ve seen that become a big issue, people not understanding the timelines. So you want to make sure that you sketch that out, you put it into your calendar, you put it in your bathroom mirror whenever you have a deadline, because those are important dates to remember.   

Josh: Yeah. I had a friend of mine a couple of years ago, it’s going back at least 10 years ago, that was in resi, was doing short sales wholesaling, made an offer on his first commercial building, put $200,000 down of his own money and missed several deadlines. Was granted, several extensions ultimately missed his final extension. The money went hard. He couldn’t close and lost $200,000 of real cash of his own. And it happens more often than I care to, you know, care to talk about. So he lost his marriage over it and you know, it was really tough situation. He was trying to do good by his family and trying to do the right thing. Didn’t really know what he was doing, missed his timelines, missed deadlines, couldn’t come up with the rest of the money. The equity to put down ended up losing the property, losing $200,000 and losing his wife.  

Josh: So that’s, you know, worst case scenario probably for most people. So scheduling the timeline is very, very important and getting ahead of that, right? Because commercial appraisals can take three weeks. Commercial inspections can take two or three weeks. These things are not easy when you’re walking, you know, 20,000 square feet or 30,000 square feet of a building. It’s not easy for an inspector to just whip this thing up in five or six days. We’ve got to walk the building, going to be there for hours and hours, could have to go back several times, have to get an individual units, every single unit.  

Josh: It’s just not something that you can get done when you’re up against a timeline. And just be like, Hey, can you get this done in 24 to 48 hours? It just doesn’t work that way. So yeah, great advice there and making sure we have the timeline. So from an operational perspective, you know, you’ve been able to see David several guys, again pivot into multi-family from residential and have success out of the gate, even though they maybe didn’t have a lot of previous experience in multi-family. So the guys that you’re working with, that you’re an attorney for your, you’re giving them some advice where they successfully made the pivot and maybe I bought a six unit or an eight unit or a 22 unit or a 25 unit or bigger, what are they doing right? What do you see them doing when they actually own the building? And now working with tenants like real landlord, tenant law, managing that building, managing the asset, making sure the tenants are comfortable and successfully repositioning the building to create equity.   

David: I mean I see that as soon as they get into the asset, you know, they’re starting to establish a relationship with the people on the ground there, whether it’s an existing property management company, maybe it’s just you know, someone who lives, you know on site. That is, you know, a maintenance person. And then also the tenants themselves. I think that you need to set the tone as the new owner by sending out a pretty thorough and strong welcome package that identify, not only identifies you as the new owner, you don’t want to come across like, Hey, there’s a new sheriff in town and things are going to change. You want to come across saying, Hey, we’re a new owner. Usually these are distressed assets. So have an acknowledgement that Hey, we understand that work needs to be done here we intend to do this.   

David: We have the capital and the funding in place to do it. But in order for this to go well for everyone, we’re going to need some cooperation here and kind of set the tone that hey, you’re here to do the right thing. We’re going to improve the place in which they live. You need them to help you. And through this process you’re going to identify the tenants that you know you may want to keep and also identify the tenants that need to go because that’s going to be part of, you know, your process there because you want to get rid of ’em, you know, bad tenants. You’re going to need vacancies if you’re going to be doing complete unit turn and renovations anyhow.   

David: But it’ll allow you to transition that so you don’t get, you know, killed with, you know, a vacancy. You might have a few people there that are really good tenants that want to stay and they can afford to stay. So maybe that you let them stay in during renovation as you renovate some of the other vacant properties. When those are completed, then those good tenants, maybe you transition them into the renovated space, which then opens up. So then you can structure your renovation so you don’t kill your cashflow from day one.   

Josh: Right. Right. So yeah, I’d like to do, which is send, you know, a thorough welcome package that’s like a welcoming, Hey, I’m the new owner? But not the don’t, which is don’t take the posture of, Hey, this is my building everyone’s going to comply with whatever I want. You have to remember many of these people have been there sometimes months, but sometimes years. Many people, when they have an apartment, they’re permanent apartment tenants, they’re permanent multi-family tenants. They never move, right? I’ve looked at buildings, made offers on buildings. People literally have tenants there that have been there 15 years, 25 years, and their rents haven’t been bumped up. And from a financial perspective, you’re thinking, Hey, I’m the new owner. Your rent is $300 $400 under market you’ve got to move out. I’ve got to renovate your unit and bump it up. And you’re thinking all about your cashflow, all about your deal, all about your cap rate, all about your equity.   

Josh: But that one person that’s been there for 10 years is everybody in the building knows them, right? And everybody in the building cares for them. And if you muck up the relationship with that person, you could really have a lot of problems with everyone else, right? So those relationships are real. You have to be very, very, you know, kind of tap dance a little easy in the beginning and kind of figure out because we’re all humans, right? We’re all have relationships and there’s going to be some people in that building that might have a little bit louder voice, a little bit more prickly than others, right. You have to definitely manage that. And so sending out a nice welcome packet that’s more cooperation as opposed to the demanding, hey I’m the new sheriff in town is a big, big deal, right.   

David: And one more thing, one more layer extension of that is not only establishing relationships with the people in the building, but then also maybe going to the local municipalities building department. Because if you’re going to be doing, you know, renovations and you don’t want the building department to be surprised by all of a sudden all this renovation’s going because then those inspectors are just going to be showing up on announced. It’s always a good idea to go introduce yourself as the new owner. Tell them what your plans are and you’re going to find that they’re going to then become your ally as you need certain permits pulled in that. Because if they understand that you really are serious about improving this property, investing the capital into it and actually appreciating its value, um, you’re going to find that they, believe it or not, a building department can become an ally if you set it up the right way.   

Josh: That’s fantastic. David so as we can around third and head for home here, um, are there any final kind of words of advice from, you know, either wearing your attorney hat or just because you’ve seen it before, you’ve seen other people do it before, either good or bad as people build their portfolio. Any other significant do’s or don’ts that we haven’t covered already?   

David: Well, I think one of the thing is that I see time and time again is that people who are coming into this space, they’re not used to maybe the dollars involved. You’re going to be spending much more on inspections, on due diligence on environmental reports on, you know, lenders, financing fees. And also returns the biggest mistake that I see, people get me involved right away. They do a good job of having me draft a purchase agreement. Then they get it executed and they don’t want to pay me anything more. And they, and it’s not that they need to, but they feel like every time they call me, you know, it’s going to ding this meter. And some attorneys are like that. But I’m not and you know that. But the idea is, is that it just goes crickets. And then they’ll go through their due diligence and it’ll be two, three months down the road.   

David: And then I get that call a week before closing and I have no idea what’s transpired. So I think it’s really important to at least keep your attorney and your lender and all the members of your team just kind of updated as to the progress because a lot of times once that purchase agreements, you know, completed, I don’t need to do anything during due diligence. They’re going to have their team set up to handle that. I’m not a due diligence expert, but I do want to know the progress of that. You know, if they’re running into problems with due diligence and need to force an extension, I need to be ahead of that with the other side’s attorney in order to lay the groundwork or like we talked about earlier, that earnest money could be gone, you know, thin air. You just need to keep everyone informed and really work together as a team, as an operator. This deal is that you know, the investor putting it together as the operator. Your number one job is to quarterback everything between the members of your team and to communicate that well. If you don’t, you’re going to find that there’s going to be a lot of chaos, confusion, you know, at the end when decisions need to be made clear.  

Josh: Yeah, I think it goes right back to point number one that you made, which is now your team, right? You talked about building a team and it’s, it’s interesting that your last point here is basically communication with that team, right? Because you have, you know, could be contractors and subcontractors that are turning over units or making improvements to the interiors and the exteriors, the common spaces, landscaping, sidewalks, driveways. You’ve got, you know, maybe an asset manager that’s helping you evaluate the books you might have if you have a large enough building, like some of the ones that we’ve closed on and own with our joint venture partners.   

Josh: You have a leasing office in the building, so you’ve got that person that’s on site that’s probably hearing from the tenants more often about what they need, what they want, what they’re happy with, what they’re not. You’ve got your lender, you’ve got your realtor, your commercial agent, you’ve got your attorney. You’ve got potentially leasing agents, property managers. There’s just, there’s a lot of people involved. That’s why these bigger deals are more fun, right? There’s more money in them for everyone. Everyone can make money.   

David: And don’t forget you have your capital investors, your partners in these deals. They want to be informed too. They want to know what you’re doing with their money. They want to hear, you know, the success stories. And by sharing those with your investors, that’s building confidence. It’s going to have them be partners in future deals too. So don’t forget those.   

Josh: No doubt. Yeah, we have a very specific process we do for that, which is, it’s the third week of every month following the close of a quarter. So we close a quarter, let’s say it’s October, November, December. By the third week of the following month, not only are the checks out to our capital investors for their return, their preferred return, their cashflow, whatever they’re getting, but we also have some sort of live video or on demand video of me and my partners and the operators who are just, you know, giving some commentary about the building. What have we done? How many units have we turned? What’s this, you know, is it stabilized or refinancing? Is there cashflow? Just what’s going on. And again, good, bad or ugly, like these investors know that not every business deal is perfect. So if they get in, they made an investment, but you had some overruns in one area, they want to hear about it, right?   

Josh: They realize that not everybody bats a thousand. They want to hear about what, what’s the true story of what’s going on? And remember, if you’re not telling them the truth, then you could cross over that very fine line of fraud, right? So if you know something and you’re not disclosing it and people are investing or continue to invest because they think things are going well and you’re not telling them the whole truth and you know, information that you’re withholding, that’s definition of fraud. So just be honest people know that good, you know, there’s good deals, there’s bad deals. Hopefully you have a reputation of doing a lot of amazing, great deals and you’ll do more and more and more. But people don’t realize not everybody bats a thousand, things are going to go wrong. Just be honest up front, do the best job that you can.   

Josh: David, I think the other thing too, like that you had mentioned, which is interesting is the fact that you want to stay involved, right? Because there’s going to be things that close along the way. And especially if you’re buying properties where they’re off market, the commercial realtor is a lot of times double ending the deal, meaning they’re getting both the listing commission and the buying commission. So your main advocate, if you’re the buyer, the main advocate in this deal is your real estate attorney, right? They’re the ones that are working through the purchase agreement with you, the law with you. So that relationship is hugely important because the listing agent may not be able to really just have your back because they’re representing both sides or they’re really representing the seller. And then also just getting that buyer agent commission and really don’t have your best interest in mind, right.   

Josh: So you’re really stepping in as the main advocate and giving advice to your client. Big, big, big deal. So David, listen, you’ve had a huge impact on my life over the last 10 years. I just want to again tell you in front of our entire audience how much I appreciate you and how much I’ve really enjoyed our relationship. And to see you pivot into this space as we’ve gotten deeper and deeper and deeper into this multifamily space has been interesting to see both of us. I’m excited to go to your holiday party coming up. I’m sure we’ll have a good time at that.   

David: Yeah it will be fun.  

Josh: You bet. And David, so a lot of our listeners probably want to reach out to you, especially if they have a deal in Ohio. David practices law, real estate law in Ohio. So if you’ve got a deal where you’re buying a property in Ohio or you are an investor in Ohio, you should definitely connect with David. Use him for legal services and advice for your deals, crafting agreements and purchase agreements. And he’s been a tremendous help for me. So David, if somebody wanted to reach out to you and connect with you to get some help and advice and some legal counsel, where can they reach out?   

David: Yeah, they can always reach me on my direct line, which is (216) 407-6644 or shoot me an email it DS Streeter. So that’s my first initial last name Streeter with an ER at Demer Law and that’s D E M E R L A W.com.   

Josh: Fantastic guys. There you have it. If you’ve got a deal in Ohio, multi-family or residential single-family and you need a good attorney, use my attorney David Streeter, reach out to him. David, thank you so much for jumping on, making some time for us today. Thanks for sharing your advice on best practices and do’s and don’ts.   

David: All right, this was fantastic. Thank you. I’ll see you later.

You’ve been listening to Josh Cantwell and the Accelerated Investor Podcast. Leave a comment on our iTunes channel and let us know what you want to learn next, or who you’d like Josh to interview. While you’re there, give us some five star rating and make sure to subscribe so you can be the first to hear new episodes. Follow Josh Cantwell and his companies, the Strategic Real Estate Coach and Freeland Ventures on all social media platforms now and stay up to date on new training and investment opportunities to start your journey toward the lifestyle you’ve always dreamed of. Apply for coaching at JoshCantwellCoaching.com. 

If you’re making the pivot from residential real estate into multi-family real estate, like I have, then you’re going to need to beef up your team. I talked with my personal real estate attorney David Streeter about some of the best practices and worst practices we’ve seen in real estate over the ten years we’ve worked together.

When you make that move into multi-family real estate, it requires a little different mindset. Everything you do has an extra zero on it. You’ve still got to do your due diligence, establish good lending relationships, and find investors to raise your capital. But a multi-family deal or a commercial property can be a lot more competitive to get into. There just aren’t as many for sale, so you really need to have a solid team in place that can handle the deal.

A strong purchase agreement is vital to protect you, shares David. You want some language in that purchase agreement that gives you a little flexibility, and you definitely want an inspection clause. A strong seller’s representation in the warranty’s section is similar to a residential topic of disclosure form, but it has a broader scope, like whether there are any pending lawsuits, lead based paint issues, or city ordinance violations attached to the property.

The biggest mistake that an investor makes, says David, is when they stop communicating with their real estate attorney. A two or three months radio silence means that when you run into a problem the attorney can’t jump on top of a problem and get it taken care of for you. Communicating regularly with your whole team will prevent some of the devastating consequences I’ve personally seen friends have.

If you’ve got a deal in Ohio, or you live in Ohio, you should definitely connect with David Streeter. We’ve worked together for a decade, and he is a great addition to any team.

What’s Inside:

  • How a strong seller’s representation in the warranty can protect you.
  • How to build rapport with your city’s municipality department.
  • How I communicate with investors to build trust with them.
  • David shares some worst practices that have cost investors a lot of money.

Mentioned in this episode​

You can contact David at:
Or (216) 407-6644
Strategic Real Estate Coach
Josh Cantwell Coaching
Freeland Lending

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