How to Choose a Sale Price
If you’re planning on selling healthcare properties in the seniors housing industry, deciding on a sales price for your investment is a crucial step. The sales price is important in determining whether or not the sale goes through and also determines whether the buyer or seller meet their numbers in the long term.
Apply these basic criteria when determining a sales price:
- Location
- Market demand
- Quality of the physical plant
- Profitability
Generally, sellers in the seniors housing industry desire high sales prices. However, buyers are drawn to lower prices.
With these two conflicting perspectives, how can one reach a fair sales price for a seniors housing investment?
Strategy #1: Go Above Market Valuations
The first strategy places a value on your seniors housing asset that is above market for the industry. For example, if your asset has a current market value of $15MM, you list it for $19MM.
With this strategy, you can aim for a higher price as well as attract only serious buyers who can see its potential value.
However, despite this strategy’s large price tag, it can cause negative effects down the road because buyers often can’t keep their promises.
In addition, buyers often try to restructure the deal, renegotiate terms and might lower the prices.
Strategy #2: Dip Below Market Valuations
The second strategy used in the seniors housing industry is to price below the market value. For example, if your asset has a value of $15MM, you list it for $14.5MM.
This strategy gathers more interest because it gives the appearance of a valuable deal. Sellers using this strategy often gain a larger amount of inquiries and offers, causing a bidding war. The price of the asset then rises when two to three bidders remain.
However, when underpricing your investment, bidders in the bidding war can drive the price way higher than the market value. This causes unmet expectations.
Strategy #3: Meet Market Valuations
The third and final strategy is to list the asset at the current market valuation. If your asset is worth $15MM, then list it at $15MM.
This strategy generally works best in the seniors housing industry. It makes it so the escrow period can be smooth and is the most fair method.
This strategy reduces trouble down the line even though it does not allow for the potential of overbidding like the previous strategies do. This strategy protects your seniors housing asset.
Make Your Sale with The Stahler Group Investment Specialists
This year, there is a record amount of new seniors housing assets opening. This industry offers remarkable investments. The average value of the industry is also rising, which is why your next seniors housing investment should be a well-researched choice.
The Stahler Group has over 60 years of combined experience, brokering deals for buyers and sellers. Our team offers free pricing strategies and business valuations. We can help you find out where you stand in the seniors housing industry. Make the most of your seniors healthcare investment and contact The Stahler Group today.