What I’m thinking about: The bidding wars we surfaced on a deal we were trying to fire-sale our way out of, and what kept us countering anyway.
The punchline first: all three child parcels on our Louisiana subdivide are under contract, all set to close in the first half of June.
Quick recap for anyone new: ~32-acre minor subdivide in the nicest parish in Louisiana, split into three child parcels (~10-11 acres each) with driveways and home sites cleared, utilities at the street. All-in cost was roughly $475K (or ~$15K per acre, fully developed). Our base-case underwriting was a ~$29K per acre exit.
That was early 2025…before the local real estate market effectively collapsed for the second half of the year (strategies/tactics utilized covered here and here).
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Almost two months ago I wrote about begging buyers to lowball us (after 30+ site visits, multiple price cuts, and zero offers).
As noted at the end of that article, our most premium child parcel went under contract, with the buyer’s offer contingent on selling their existing house in a different part of Louisiana.
Since we were already in fire-sale mode, and the buyer’s offer gave us significant cushion on the required break-even exit numbers for the remaining two parcels, standard practice for us would have been to keep slashing price on the other two until we got them under contract ASAP, especially once the buyer’s house went under contract (which it did within a few weeks of listing).
But what followed once the buyer’s house got a signed offer was something I’d never seen before (and neither had our realtor). Their listing agent for the house pulled the listing OFF market entirely, even though it was supposedly under contract pending inspection and appraisal.
Per the buyer’s house listing agent, the messages we kept getting back were variations of, “Everything’s moving forward, just trust the strategy,” and “You’ll see the brilliance of our approach later.”
(We never did get an explanation btw. I’ve seen tactics of removing active listings to reset DOM, but still doesn’t make any sense to me on why to do that if listing is pending. If anyone can enlighten me, I’m all ears.)
So we were stuck in a game of uncertainty. We had already cut the remaining two child parcels by $25K each after the first parcel went contingent, but if we continued to cut and parcel 1’s contingent buyer eventually fell through (or worse, if something shady was going on in the background we couldn’t see, since we had zero proof they had a pending buyer for their house other than taking their listing agent’s word for it), we’d risk locking ourselves into pricing that wouldn’t break even on principal.
Worst-case math at the time: we needed a blended ~$17K per acre gross across all 3 parcels to fully recover capital. The first parcel was under contract at ~$23.5K PPA, so we needed about a $14.5K PPA blended gross across the remaining two. While we waited for the house contingency to clear, they were priced at ~$20K PPA.
More room to cut, but not much, especially with such a long listing history with multiple price cuts, and most buyers likely to come in below list (and much of this during the start of the Iran War, with maximum market volatility/uncertainty).
The call: hold prices, keep marketing, wait for parcel 1 to clear contingencies, and close shortly thereafter before making additional moves.
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About 2.5 weeks of quieter-than-we-wanted activity passed (genuinely sweating through that stretch). Then in the start of May, the buyer’s house finally pended for real (verifiable on the MLS this time, not just verbal, with inspection and appraisal cleared), closed about a week after, and we suddenly had a stack of new site visits walking the other two parcels.
Stunningly, both of the remaining parcels ended up in bidding-war territory within ~10 days of each other (after a year of grinding dispo, the velocity flip was just remarkable).
Parcel 2: the lowball that won the race
Two offers landed on parcel 2 (our least premium parcel) within roughly 24 hours of each other.
Offer A: $120K, well below our $200K list (and more importantly below our targeted $135K break-even price), but bundled with a 2.5% buyer-side commission concession.
Offer B: a verbal $170K all-cash indication from a father-son duo, with the written contract being drafted by our broker’s partner agent. (A single broker can only legally represent one buyer at a time, so the second offer had to be channeled through a different agent inside the same brokerage.)
Tactical wrinkle: we could only have ONE counter outstanding at any moment. Offer A had a built-in expiration window that would lapse shortly before Offer B’s paperwork landed. So we either engaged Offer A’s lowball, or sat tight and waited.
We countered Offer A at $170K, fully expecting them to walk, or counter lower. Father-son’s $170K written offer arrived an hour or two later, exactly as our broker had previewed.
The next morning, Offer A signed our $170K counter. Net of their commission kicker (saving us over $5K net), that was actually a better economic outcome than father-son’s all-cash $170K (…which we’d planned to counter back up into the $180-185K range).
I was almost kicking myself when the lowball came back signed, as the better move likely would have been to counter them at $180-185K, as we’d planned to counter the father-son duo at.
(At the same time, it could’ve backfired, with the lowball offer potentially walking at that threshold, and the father-son duo holding firm at $170K, which would have left us with a worse net outcome.)
Parcel 3: the bidding war that wasn’t
Father-son duo didn’t get parcel 2, but my suggestion to our realtor was to try to get them to submit an offer on the remaining parcel (still listed at $225K, scarcity kicking in with only one lot left).
They agreed to another site visit, which was back to back with another couple checking out the remaining parcel (a married couple telling our broker they’d call lenders and put an offer in shortly).
The father-son duo was aware of the additional buyer interest and they’d already lost out on one of the lots, so they came back at $180K, less than a day after their visit.
As we planned to counter, our realtor let us know the other couple dropped out (they decided they didn’t want to enter a bidding war), so our leverage decreased dramatically.
But, the father-son duo had no idea that lever had collapsed, and it was entirely plausible another offer would come along shortly given recent momentum.
Our broker was actually wary of any counter, as the father-son duo implied that $180K was their highest and best. (We were nearly out of the most difficult project to dispo in the history of our land business, and all we needed to do was exit the last parcel with at least a $115K purchase price to break even, so we were well above margin.)
Nevertheless, our rule is to always counter, even if we were ready to roll over at the slightest hint that a buyer would walk. We countered father-son at $209,750. Intentionally odd number, using game theory to imply another bid was already on the table.
Internally, I gave our chance of the counter succeeding at less than 20%.
The next day, they came back at…$200K, $20K above their initial offer. Our broker was genuinely surprised the counter worked. So was I.
As I’ve written about before, whoever’s most willing to walk away wins the negotiation. We were absolutely not willing to walk away from any of these (year-long hold, fire-sale mentality, break-even economics mapped out). All of that can be true…and you can still thoughtfully counter (which may lead to a substantially more profitable outcome, like ours).
The projected numbers: a 1.17x net Multiple on Invested Capital (MOIC)
Combined gross exit (under contract, all three parcels to close by mid-June): roughly $606K total vs. our base-case underwriting of ~$930K.
Every investor gets principal back, plus their full preferred return. Not what we underwrote, and not close to it (though our investor deck projected a ~$20K PPA worst-case outcome, which is right where we ended up at).
But we abided by the number one rule of investing: DON’T LOSE MONEY. In arguably the toughest national real estate market in the last century, we returned principal and preference on a deal where many operators would have eaten meaningful losses.
(Crystal clear example of why we preach downside protection above all else. We dramatically underperformed our base-case underwriting, and even with near 50% price cuts to move these parcels, we still exited profitably.)
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Nevertheless, not a situation we’re in any hurry to repeat, but this doesn’t sour us on minor subdivides as a strategy. The five-step subdivide system has been refined since we underwrote the Louisiana deal. Our threshold for pulling the purchase trigger is higher, and more deal-level data points are considered (e.g. tools like Reventure weren’t in our stack in early 2025).
Huge sigh of relief on the anticipated close (…but won’t be able to fully exhale until the cash is wired in).
As a reminder, business (and life) is all about skill acquisition and reps. Stay alive, keep improving, and take your victories when you can.
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If you’re an experienced land operator who wants to work with a capital partner who has the battle scars (and winning track record) that prove our mettle…we should be talking.
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