Opportunity or not?

18 Replies

So, an opportunity came my way and I have been wrestling with the numbers to confirm that the deal makes sense.  The situation is this:

A Piece of land zoned as a multi-family property but undersized is up for sale due to the owner not able keep the property (house is rundown and needs to be demolished).  The Public Trustee for the Province is now acting on behalf of the owner and is tabling offers (to be closed mid January 2015).

So that's the background, now for the situation... I am convinced that there are not many if any, who can put a multi-family unit on this piece of land which will meet all the City guidelines successfully; I managed to achieve this on a very similar site, which was completed in July 2014, only because of my training and coming from Europe where we have a lot of instances like this there. 

Right now the numbers do not stack up, because the trustee's are asking a lot for the land, due to appraisers valuation.  Should I just make an offer which will be way under the asking price, or do I just let it go? I have not worked with a government body who is acting on behalf of the owner, would they be interested to negotiate, the realtor feels they won't; I don not trust realtors?

As mentioned, I can put four townhouse on the land, I developed the first of it's kind in Calgary on a previous and similar undersized site,  Multi-family plus meeting all the guidelines.

Anyone, out there able to give me any advice on how to deal with the trustees?

I know, its a hard one to respond to.

@Kelvin Hamilton  

Make an offer which is supported by your business case.   If you feel it necessary, include your analysis - or a summary thereof - with the offer.

If someone else comes overtop of your and overpays for the property ... smile and wish them well  {but keep tabs on it in the event they blow-up}.

Medium greenapartmenthires 1024x1024Roy N., Louer Louer Ltd. | 1.506.471.4126

Thanks Roy,

But in doing that, will I not be giving the secret away to show that the site could be developed into 4 units?

How can I do it without shedding too much of my plan?  Be easy with me... I am a "Newbie" so forgive me if I am being dim.

You can give them a summary of "budgetary estimates": just the high level phases (demo & site prep, foundation, etc).   Let them know if they require or would like more detail, you are willing to execute an NDA with them.

Medium greenapartmenthires 1024x1024Roy N., Louer Louer Ltd. | 1.506.471.4126

BRILLIANT!

Thanks very much for that Roy... I'm going to try that and see how it goes.  You are right, I should not change from my price that works, and if someone wants to pay more... good luck to them.

Cheers

Well Kelvin you have run YOUR numbers and they indicate a lower price. Ignore your Realtor advice and offer what the property is worth to you. If you feel the need to justify your price to the seller then find a scenario and do a little leg work on a report that shows why the property value is where you are at with your offer. Comps/condition reports/estimated demo and clearing costs from the most expensive companies you can find, you get the picture. There is no way that I would present my secret plan and give away my advantage. The worst deals I have ever done are the ones where the numbers were stretched to make the deal happen because I felt that I had already invested myself into it and HAD to make it happen. Step back a few steps and evaluate from a different angle.     

@Kelvin Hamilton   What do you have to lose by making an offer? If the choice is walk away or make an offer that makes sense to you why wouldn't you always choose to make an offer?

One of my rules of thumb is "Never make an offer based on what the seller wants or what you think the seller will accept - Always base it on what makes sense for you."

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

          I would present them not with your plan, but with the difficulties with the plans most other people would come up with, and why they would not work.  It is the likely failure of most people's plans, not the likely success of yours, that should dictate a low purchase price.

John D., Palm Vacation Rentals | [email protected] | 4155195039

Originally posted by @Darryl S. :

Well Kelvin you have run YOUR numbers and they indicate a lower price. Ignore your Realtor advice and offer what the property is worth to you. If you feel the need to justify your price to the seller then find a scenario and do a little leg work on a report that shows why the property value is where you are at with your offer. Comps/condition reports/estimated demo and clearing costs from the most expensive companies you can find, you get the picture. There is no way that I would present my secret plan and give away my advantage. The worst deals I have ever done are the ones where the numbers were stretched to make the deal happen because I felt that I had already invested myself into it and HAD to make it happen. Step back a few steps and evaluate from a different angle.     

 Great advice, it makes me feel better.  From what Roy suggested, I have informed the realtor already that the numbers do not stack up to offer anything near what was mentioned to already be on the table.

It's funny, she has already come back and suggested that I should still make the offer... Hmmmm.

Originally posted by @Ned Carey :

@Kelvin Hamilton  What do you have to lose by making an offer? If the choice is walk away or make an offer that makes sense to you why wouldn't you always choose to make an offer?

One of my rules of thumb is "Never make an offer based on what the seller wants or what you think the seller will accept - Always base it on what makes sense for you."

 Ned,

Thanks, a rule of thumb that I will keep close to my chest from now on.

Appreciated advice.

Originally posted by @John D. :

          I would present them not with your plan, but with the difficulties with the plans most other people would come up with, and why they would not work.  It is the likely failure of most people's plans, not the likely success of yours, that should dictate a low purchase price.

 Definitely John,

For one, the existing house is in bad condition, I cannot even rent it while I get permits in place.  Secondly, to start fixing up to make it rentable will inevitably lead to asbestos issues (1940s built house).

I will arm myself with the ammunition.

Thanks

Your original post asks how to deal w trustees.

Allow them to feel in control in the process.

Act as if you are doing them a favor.  "What are your biggest issues..."  and address with your solutions.  Be a part of their team.

Express there are some major concerns on your end but you believe they may resolved if they can allow you some flexibility.

Think win win.

Originally posted by @Ruben Prieto :

Your original post asks how to deal w trustees.

Allow them to feel in control in the process.

Act as if you are doing them a favor.  "What are your biggest issues..."  and address with your solutions.  Be a part of their team.

Express there are some major concerns on your end but you believe they may resolved if they can allow you some flexibility.

Think win win.

 I was just reponding to your strategy Ruben and for some reason the text box went blank. So if you receive two reponses from me then you know why.

So I was thinking that this is an interesting strategy, however at what stage can I play this, from the time I make my offer?

I am meeting with the realtor tomorrow morning to make my offer, which will be forwarded to the Trustees; do I give them a full explanation at this point as to what the difficulties are in offering more than the price I propose to offer?  Previous advise suggested that I should keep my advantage card close to my chest (i.e. my solution that will make the land profitable). Do I wait incase they counter offer before expressing my concerns to raise the price?

I am all ears ready to listen.

Thanks

LOL, 'all ears'.

My point of view is mainly in respect to managing the relationship.

Build trust.  You're not looking to completely exploit.

I cant speak to how much info to offer at first.  More of a gut call.  Depends on how necessary it is for them deal w you.

Ok,

Thanks for your thoughts Ruben. Let's see how it pans out and whether the opportunity arises.

@Ruben Prieto  

The Public Trustee involved here is not quite the same as trustees of a private trust, but an agency of the state.   That said, making the functionaries fell important and in control is not necessarily a bad strategy.

Medium greenapartmenthires 1024x1024Roy N., Louer Louer Ltd. | 1.506.471.4126

I get that Roy... I think that was the missing link from Ruben's advice, I do not have direct access to the Trustees as it is a Public entity.

All the same, the strategy is good to try and adopt if I get through to the next stage.

@Kelvin Hamilton  

I don't have any experience with Trustee's but it sounds like from what you're saying you won't have contact with them at all for the first "round"; especially since you said they are tabling offers until mid January. That being said IMHO I would include as much info in your offer as you can. You want them to feel like you have a very solid plan and that you've thought about everything and can show details. Do you know if the bids will be made public? If not I wouldn't be worried about "tipping your hand" to them for what your plan is. I don't think they care. I think they just want a solid bid from someone who they know will be successful with the project so I say lay it all out there. The more detailed and exact your plan is with all your supporting information the more they may feel comfortable going with you. That may go along the lines with what others have been saying about building trust and repore with the Trustee.

Think of it this way, if you don't even get through the the next "round" will you be kicking yourself for not providing enough info?

Good point Alexander.

I'll provide a rational with my bid for sure.

Thanks for your clear points on the matter.

Regards