Assisted Living Facility - Posted by Delmar


#1

Posted by Gary-Ore on December 26, 2006 at 20:43:19:

If you offer the seller’s asking price (you probably won’t), but I will give the numbers based on this. The seller will carry 15% or $140,700 in the form of a 2nd secured by the property. If the seller;s numbers turn out to be inaccurate, your reliance on his numbers has caused you damages. Had you been given the correct numbers, what price would you have paid? Perhaps 20K less for the property (I don’t know how you are calculating the value so you will need to determine what the loss is based on -a formula that you and the seller can agree to).

If your valuation formula determines that the property was actually worth 20K less than you purchased it for, but because you relied on the sellers inaccurate numbers you paid too much, this is where you will have the right to set-off this 20K from the $140,700. note due the seller reducing this note to $120,700. (and your payments would be adjusted accordingly).

Now, the seller will ofcourse not be inclined to go along w/ this. So, you will need to convince him that you are only willing to pay his price (whatever you agree to), based on his numbers. If he provides you with accurate numbers he will have nothing to worry about.

You can anticipate that he will argue that your numbers will be different than his numbers based on your own unique ability to manage the property. This is an accurate argument, but assuming you have the ability to manage the property and control your expenses you should get at least the same result as he did. Try to put this burden on him to provide you with accurate numbers. If he is not inclined to go along with this, suggest that it is perhaps that he is not providing you with true numbers and that the value should actually be less.

I would suggest that the sellers numbers are almost never accurate. Count on less income, more expenses, greater vacancy factor, and do not “buy into” his rosy optimistic scenarios.

LOL and God Bless!


#2

Assisted Living Facility - Posted by Delmar

Posted by Delmar on December 25, 2006 at 15:39:55:

I have an interest in going into this type of business I like the idea of owning the building and the business. I am presently looking at a 10 unit facility that has a private owner/manager suite. 4,700 square feet living area. The asking price is $938,000. The seller will only provided audited financials with an accepted offer. My research indicates that these facilities can take up to 50% of gross in operational expenses. Rent in the area is $2,500 to $3,000 per resident. Using $2,500 as rent this thing would give $25,000 per month when full. That means an NOI of $12,500. I would put 15% down and negotiate that the owner gives me a 15% 2nd mortgage. Any advise or experience on the forum? What questions should I be asking? Things to watch out for?


#3

Make sure your offer is contingent upon… - Posted by Gary-ORE

Posted by Gary-ORE on December 26, 2006 at 24:08:01:

your review and approval of the audited financials. You may also want to consider a right to set-off against the owner carry 2nd if the actual numbers you experience to not resemble those that they have provided. (ie- the 2nd will be reduced-or set off- by an amount equal to the amount their numbers were inaccurate. LOL


#4

Re: Make sure your offer is contingent upon… - Posted by Delmar

Posted by Delmar on December 26, 2006 at 14:13:24:

Thank you Gary for your input. I got lost where you are suggesting that - "the 2nd mortgage will be reduced or offset by an amount equal to the amount their numbers were inaccurate."
Could you please give an example using dollar figures.