Value add baked into the price?

Question

This might be a silly question. I'm finding lots of parks with the value add already included in the price. For example - current value is at 500k, after value add (raising rent, decrease expenses), the value is projected to be

$1 million. Then they price it at $1.3 million while it's only worth 500k. My question is: if an unstabalized asset is going to sell for just as much as a stabalized asset, why would anyone even bother do an value-add?

Rachel H. · Answer

@Jingwen Dunford Very common among unmotivated sellers. Stay in touch and move on. If they become motivated in the future, then they'll change their tune. Hope that helps!

Jack Martin · Answer

@Jingwen Dunford in a strong market like we have today, this is quite common.  As mentioned above, this usually means they are not really motivated to sell, but if a buyer comes along that will pay them a ridiculous price, then why not?  But sometimes they DO want to sell, so make sure to uncover that with the seller's agent. If you get the sense the agent is agreement about the high price, let them know you are willing to assist them in "educating" the seller as well.  That way, if the seller eventually comes back to reality, you have made a friend of the agent. I have seen properties initially priced 2x more than they eventually traded for and the only one left at the table willing to make a lower offer eventually got the property.

Joshua Diaz · Answer

@Jingwen Dunford

They are hoping to snag an uneducated buyer, to put it nicely.

Paul Barbeau · Answer

Yes this is common but the value add is WORK. They shouldn't get paid for the work and risk.

Jon Dorsey · Answer

Exactly. Don’t fall for it and move on.

Charlotte Dunford · Answer

@Paul Barbeau I agree. I just see it so frequently and I'm assuming that they priced it like that for a reason right? Obviously they expected somebody to pay for that.. are they targeting a different buyer type? I seriously don't understand who they are targeting

Value add baked into the price?

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