LandInvestors.com Forums $10K a Month for Life; Cash Flow From Land Chapter 6 – Cash Flow From Land Do We Change Pricing per Acre for Larger Purchase?

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    Aroldo Villarreal
    Participant
    Post count: 38

    Made an offer to a seller for 7.3 acres at $3,575.00 per acre ($26,101.11) . Turns out she wants to sell ALL the acres, which are 23 acres, including the 7.3.

    If I run the numbers at 35% of what properties of 20-25 acres are selling for, I get about $1,028.06 per acre, which equates to $22,617.21 offer, $4k lower than my initial offer for almost triple the land…I’m sure that wouldn’t sit well with the seller.

    I ran numbers for other offers I sent, this mailer I sent offers to 5 acres and 10 acres and the 10 acres were priced at $2,030 per acre. If I use THIS pricing, I’d be at an offer of ~$46k, but I’m not sure that would be a smart move.

    What would you do in this case?

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  • Kevin Farrell
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    Post count: 1772
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    Aroldo – Yes we definitely price smaller parcels more $/acre and the comps support this as you can see. The seller may expect the same $/acre for the larger parcel but you need to explain the difference in value when buying larger parcels in that county. Your initial price for the 7.3 may be a little high but you are in a dilemma. Are you telling me that your offer was 35% and it was $26,101. That would put land value at $74,574 per acre.(Correction $74,574/7.3 = $10,215 per acre Comp) I am a bit concerned about these numbers. How can a property be that expensive in a 7 acre parcel and then only worth $1,000 per acre for 23 acres.

    Please take a look at your pricing and see if there was a mistake on your offer.

    Kevin Farrell - Moderator
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    Schedule a 30 minute call - https://calendly.com/kevin-629

    Aroldo Villarreal
    Participant
    Post count: 38
    Pro

    Hi Kevin, thanks for the reply & sorry for the confusion. To clarify, the $26,101 price was for total of the 7.3 acres. So, my pricing per acre was $3,575.48.

    Kevin Farrell
    Moderator
    Post count: 1772
    ProAdvanced

    Aroldo – Sorry, I miscalculated – the comp price for this would have been $10,215 per acre calculated from your offer at 35%. The bottom line is that your 35% offers for 7.3 acres would be about 3 times the price per acre for 23 acres. I still suspect that there are incorrect comps for either the smaller acreage or the larger ones. Something doesn’t make sense.

    Kevin Farrell - Moderator
    Need more help?
    Schedule a 30 minute call - https://calendly.com/kevin-629

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