My out-of-town neighbor for the past 5 years (which the city deemed as the "worst land owner in OTR") decided to put all his properties on the market for sale. (Hallelujah!) After years of cutting their grass and picking up litter, as well as annually spraying for the cockroaches that came out of their basement, I was just happy at the prospect of a different owner than these bad guys. 2 years earlier I had actually already tried to get them thinking about a sale by mailing a $5,000 all cash offer (no response), so it was good to finally see any movement here.
A new neighbor alerted me to the opportunity this time around, but they seemed more serious about selling than when I had tried last time. Curiously they listed their portfolio of 11 OTR properties with a commercial broker instead of a residential realtor. So no sign in the window For Sale and really no real marketing to the market as a whole for the most likely residential buyers of OTR. This meant little competition for me and I was the most likely buyer being next door since I also own the rest of the land in the back.
Only problem is that I didn't have any money to buy another building while undertaking my renovation project. My family also couldn't help because they were already helping with the other project too. So I tapped my partner from Chicago & the Renner building for a similar deal on the side and we took a quick low ball shot at purchasing it in late August of 2017.
I started with collecting comps from the entire area. It was looking like shell buildings had sold for $10-12/SF in the area most recently; however friends in the area suggested it would more likely sell in the $40-60k range despite these immediate comps. I still used these low comps in selling my story to their broker to convince his client to sell low however. Next I measured the outside of the building as ~2,000 SF (despite it being marketed as over 2,500 SF....) and made a low ball offer of $10k site (inside) unseen with a comment that I might pay more if I got a full tour. It worked in getting a response and a tour and then we negotiated up slowly until their broker said that their seller would sell for $40k. Having slowly worked my way up I figured that there was still a little room to save some cash, so I countered at $35k.
Then things got more complicated. The seller decided to focus on the sale of 5 other buildings in their portfolio first before dealing with this building and "took it off the market" until the others closed. I learned that these were selling in the $30/SF range and was coordinating with their buyer so that we could get as many of these buildings out of these bad hands as possible. I kept working their broker to make sure that I would get the first shot at this building when they took it back out to market, but really I was kicking myself that I had lost it over being $5,000 cheap and not going up to $40k, which was exactly at the high end of our intended range at the time. So we couldn't do much other than wait it out and focus elsewhere on my other project.
By February when they had closed on the other properties and put this building back on the market, much of my cash was spent on my renovation project and it was even harder to find the money that they wanted if I kept up with my renovation project next door. It was during this time that I freaked out and decided to put my other project on hold, which meant that I now had resources from my family that enabled the cleanest/simplest purchase of this property. I planned to bring my Chicago partner back into the deal once we got to the construction financing and other details of the project.
So I scrapped together the $40k and made them the offer for the price that they had wanted previously. I was dismayed to learn that their broker who I had build up goodwill with previously had left the company (so I had to re-rationalize my lowball offer when they now had a $30/SF comp...) and even worse, now they wanted ~$75k for the building! My first reaction was to tell them that's crazy and we're out (with the intention of letting them sweat and realize there's no other buyer out there in that range before going back to them with a slightly higher number). [Note in hindsight, I guess at some point here it was somehow communicated to the guys that bought the other 5 properties that I was really out on this deal.]
After giving it some time, I came back to the table and was told by their broker that the seller said they would sell to me at $50k, but that there was now a 3rd party interested. I said that I would agree to $50k now only if the deal was mine (no bidding war with the 3rd party) and was informed that the seller was good with our LOI at that price and that I should put together the purchase contract for him to sign when he got back from vacation. So I did and started making arrangements with their broker to get into the property for inspections quickly so that we could expedite closing.
I was convinced that they used this time to shop my LOI while he was "on vacation" to the 3rd party before signing the contract, which is completely bad faith. Unsurprisingly the seller "returned from vacation" with an offer for $55k.... He asked me to go to $55k with his clear intention of starting a bidding war, so I stipulated that I would only go to $55k if he sent me a signed contract at that price from the seller (so I could sign and be done negotiating in bad faith further).
I was so pissed that they were reneging on our original verbal deal, but I now had a contract in hand. It just kept racing through my mind "who could this 3rd party be?", so I contacted my friend that purchased their other 5 buildings and was coordinating with me to get these properties out of this bad owner's hands. As you can guess, they had thought that I had actually stopped trying to buy it and had thrown in an offer of $5,000 more than whatever offer was out there to scoop it up. (They have need for more parking eventually in their future plans [due to parking minimums only] and the back lot could add a few). After I talked to them, they formally backed down and took back their offer with the idea that we'd try to find a solution to their parking issue using my entire back lot later.
I was advised by friends that I should just try to retrade the contract down $5,000 during my inspection period to get them back, however given the history with losing the deal over $5,000 once, I didn't want to risk it and looked at it as money to just pay this bad owner to just go away for good. So that's what I did. They didn't even come to Cincinnati to close the deal and I hope I never meet them. Thankfully they only still own one other property on this half of OTR and are intent on fully selling out.
So as of last week, I've fully closed on the purchase of this little corner building in OTR and fully own the lot behind it. Here's the money "before" shot that hopefully becomes a whole lot different down the road.
#thisisotr
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