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Updated 2 months ago, 10/08/2024
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Price Reduction From Vacant Lot Loss (Advice Please)
I'm in the process of acquiring a 100 space park, the park has 60% occupancy. Purely based on the park income, the NOI @7.5 cap show a valuation of $1.0M, because of the land, POH and pads for expansion I offered $1.2M for it. My plan is to fill the 40 vacant pads to get to 100% occupancy, at which point the park should worth $4M. So that comes out to be $40K per home in the end.
But during the DD, I've found instead of 40 vacant pads, only 35 vacant pads are usable, so there is a loss of 5 spaces for me.
What is a FAIR way (to both sides) of reducing the purchase price to account for the missing 5 vacant pads? Because of the missing pads, instead of getting to $4M, I could only get to $3.8M at the end of the project (loss of $200K). I don't want to ask for an unreasonable reduction because I might loose the deal, but I also don't want to be short changed.
Love to hear what y'all think.