Another Narrow Miss
Had a good lead on a 7 plex in St. Paul where the owner was selling, but had not managed the property as well as I believe we could. I formulated an offer, prayed about it, and was quite certain we were on a good plan on this one. The building had a 14% vacancy rate, so I worked out my offer based on the historical vacancy rate, and looked to accomplish a 10 cap. Offer in, and rejected outright. The owner believes it has value at the proforma, which in my opinion is pure nonsense. I have to plan for the same results they have, just in case. So, we are now heading into our yearly offseason. We will not discuss or pursue any RE deals for the next two months. It is a good marriage builder, and gives us a break.
Comments (2)
Thanks, Daniel. We actually upped our offer twice. We found further cost savings that made the cap rate baloon, so a higher valuation was justified. The seller kept holding at 325K. On our final offer, we offered $300K for the building, and they could sell us an option to buy the 2nd lot (vacant) for $25K within 5 years, giving them the sale price they wanted. We also asked for 15% second at 4%. It was too complicated for them was the reply. Too complicated?
I've learned that some sellers really aren't motivated to sell, even if their property has been on mls for 122 days. They were always slow to respond to every offer. This ownership was a three member LLC, and they apparently couldn't handle any concept other than cash offer $325K. I bet they won't get another offer until they cut the price $25K. But you cannot make a seller sell. My confidence in MLS listings is shaken.
I see in your profile you go for 9-12%. That is good.
David Moore, over 9 years ago
That's a bummer! Sorry it didn't work out. Hopefully the next one is a home ru!
Daniel
Daniel Okon, over 9 years ago