Advice on Deal

[Mav Larson]

Hey guys, I’d like to ask your opinion on a potential deal. I’m going back and forth on this one and would like some opinions from people who have some more experience than I do.

Some background: 

I am a small business owner that needed an office, so in 2012 I started searching for properties that would be less expensive now but more desirable at a future date. In 2012, I found and purchased a one acre property with a 2 unit, 3,500 square foot building on it, between a major university and the city’s downtown. I knew that the university was pouring money into the area around their end, and the city was pouring money into the downtown area on the other end. I had a good idea that eventually they would meet in the middle which is where my 1 acre property is located.

There is a dilapidated 1 acre, 5 unit, 6,000 square foot building next door. In 2014 I asked the owner if he’d sell it to me and he did. I now own 2 acres, 7 units, and a vacant lot between the university and downtown. In 2012 I had a good idea that redevelopment would eventually reach my properties. Now I know it will.

I’ve already started rehabbing the strip malls, I reached out and got a couple awesome tenants to take a chance and move in, but I still have a ways to go to get these properties the way I’d like them.

Several weeks ago, a developer asked me if I'd be interested in selling the properties. He asked for my rents and NOI. My current NOI is $60,636/year. I know that within three years, with the renovations and reaching out that I'm doing, I know that I could get NOI up to $79,200.

Property Fact: Zoning on the 2 acres allows for about 100 residential and 50,000 of commercial space.

So if I were to set a price and sell this, does anyone have any insight into pricing this based upon them approaching me, current NOI, NOI in three years, and knowing it's highest and best use?

FYI: my original exit plan for the property was to sell it to a developer, but not now, in about 10+ years. I'm not in a hurry to sell. If I did sell the property, I would eventually reinvest in real estate.

Any comments would be greatly appreciated. Thanks!