This blog is an update regarding our efforts to purchase another mobile home park is 2013. Please see the previous blog for details about our first offer of the year including a description of the property, pros and cons and initial due diligence steps.
Offer Not Accepted (MHP #1 2013)….
We received a call from the broker 3 days after the seller received our offer asking for a 3 day extension so he could discuss with his partners (which we agreed to, no problem.) A couple of days later the broker called and said the seller had rejected our offer and would not counter. He said they didn’t like the length of the contract, which had an expected close date 110 days from execution. The broker also said our offer might have created some strains between the partners and that one didn’t know what the other was doing buying park owned homes, etc…
We wanted the longer escrow to get our partners on-board and committed to the deal. This is our first partnership and we know it’s going to take a while for everyone to learn the process and evaluate the merits of the opportunity. I asked the broker what the seller planned to do with the proceeds and he said he didn’t know. Not a good answer because it’s a fundamental question and it reminded me the broker didn’t have the deal under contract.
Getting back to the offer, the broker knows how to address length of the contract concern. Set an earlier close date with “gates” and agree on a list of conditions, which would allow us to extend the agreement. We could also make the deposit “hard” or non refundable, if we fail to close by a specific date (something we’d prefer not to do…) Since he didn’t offer, I was thinking the partnership strains were the real issue and the best course of action to “sit tight” and see what happens next…
Listed with Another Broker
I stated calling around and sure enough, within a couple of days, I talked with another broker who said he had the listing under contract. The price – 30% more than we offered! The basis for the difference is the current rents are below market, $100-$200 per space. Apparently, a family has owned the property since 1968 and they’ve not kept a close eye rents at other MHPs in the area. I contacted the original broker to let him know another broker was in the loop. He said he had a new property for me to consider and sent materials. I thanked him for the docs and explained we were still very interested in the first property. The reason for “circling back” was to let him know if we pursue the property we will do so with the listing broker.
The new pricing puts the park into the “interesting” vs. “killer deal” category. I talked with the broker this morning and he’s expecting the first offer sometime today. There’s an old saying about offers, “it’s better to be first or last!” Since we’ve already sorta been first perhaps our best strategy is to wait this one out. There are some significant hurdles to clear on the deal including financing and potential remediation and reserves around the utilities. Many of these deals get signed quickly and 30 to 60 days later, they “fall out” and are back on the market. I’ll look take closer look a the new underwriting (from the new broker) and see at what price the deal would fit our purchase criteria.
If you’d like to receive all the details about the properties we are considering, please reply and I’ll add you to the “friends, family and investors” list. Folks on this list will receive a copy of the broker’s underwriting, our financial analysis of the deal and due diligence results as they become available. If you have a question or comment, please reply below. If this post could be of value to someone you know, please LIKE and email or repost to Facebook, LinkedIn or your favorite network.