Just finished running the numbers on a 42 pad park and have tried everything to make “The Numbers” work as to what the seller has in mind.
The seller told me that just a couple of days ago a guy offered him $2.5 M for his park. And a few days after that another local park owner offered him $2.2 M to both he received nothing in writing.
Now, back to my numbers which came in at the highest price of $1.3 M. So the question is how would you break the number to the seller. Now, he is 84 years old and I will have to do this over the phone as we are several states away from each other.
Hard to say…guy may think you are clueless with money and can pump the price. All you can do is offer what is right and leave a bit of room for him to negotiate up. I wouldn’t burn the bridge if it doesn’t work out. He may come back later if he doesn’t do better.
The only way he is coming up with that price is that they are all POH’s and he is capping the rent from the homes. Even at a high rent on $450 to $500/month for lot rent which is on the very high side your coming up with a value of ± $1.5M to $1.8M and that pretty high lot rent is most places.
@WhiteTrashGator Thanks for the input. I think also the other (“buyers”) maybe throwing out numbers just to block other people from actually showing/proving what the value of the property is through common scene. I have see this tactic used in all other types of RD investing, usually by “want to be investors”.
It’s possible that the guys who are making the high offers will go away once they dive into the numbers. I would stay in contact with the owner. This will show him that you’re committed. Let him vet out the guys who likely won’t commit. Continue to educate him on how parks are evaluated and sold. Perhaps send him a LOI to show you are serious and willing to go through the long purchase process. I would also send him a Purchase Agreement for him to review at his leisure… he’s 84 so he’ll likely push back because it will be too long. Be flexible and willing to remove a lot of the language in it. Have someone drive the park and provide you with a video - tell him you are having one of your ‘local contacts’ do this on your behalf… this will also show you are committed.
When I find I’m playing a different ball game than a seller I typically respond, via phone, with something along the lines of:
“Hey there Mr. Seller, so I’ve taken a look at numbers and I’m cautious how I run things. [I might add in some “You’ve done a great job doing x, y, and z getting things looking good and taking care of it” even if they haven’t just to keep the rapport]. Unfortunately, with the price you’re asking I’m just way too low. I don’t even want to share my offer with you as I’m sure you’ll find it offensive and I certainly don’t want you to take it that way.”
At this point, you’ve put them in a position where the only way they can get a number from you is to ask for a low ball offer basically so they usually do. And then you share your number and they are much more open than a standard “Here’s what I’m at, take it or leave it.”
Sometimes all you can do is wait for the seller to come back to earth… Make your best offer, say you have no more room, and then go silent. After a few months/years they may call you back.
Thank You for the response, I agree with that. I am going to wait and see and either let somebody else overpay or the seller will come down from the clouds.
I know that is what is going to happen with the other guy and I was planing on sending the seller a LOI and make it good for X days so he can go and talk to the other guy and TRY to get it sold to them. I agree that will show that I am a “Real Buyer” not somebody just throwing numbers around to sound big!
Thanks and happy holidays