How would you justify a $1M duplex that is 100+ years old

[Michael Kundrat]

My landlord knows that I am interested in his property and he is trying to 1031 his duplex into more houses closer to an area to where he has other properties close by. I have no rental property experience but want to get in the game. I have the income and money to support a down payment and mortgage - could do FHA or 10-20% down.

111 year old duplex I live in - 2/1 layout, upstairs downstairs. Although the second 'bedroom' on the first floor is an awkward layout because its an add-on feature. Good location, house has many issues (not cared for great, asbestos in basement with HVAC, lead pipes most likely, poor electrical system, among many other things) but also has HVAC for AC/heating.

Right now I pay $1,900 downstairs for the larger unit with backyard/hot tub/garden/parking space, and my upstairs neighbor pays $1,250. Internet/cable/water is included in rent. My lease goes into early 2023.

Details are sketchy but he offered it to me this week a $949,000 saying he expects it to go a bit higher if he goes to market. With me there would be no cost of sale on his end with RE commission cost. There is no cash flow with this deal anywhere near this price. Also these multifamily properties have been sitting on the market locally for a long time now with these high prices - the buyers are so siloed since these houses arent really move-in ready and most home buyers want single family. But he told me he wants to get top dollar.

How would you professionals in your wisdom and lessons learned over the years approach due diligence here to build a case for a counter-offer to stick with? I am wondering if its worth getting an inspection of the outside and my unit to get a professionals idea of what's going on with the property. Comparables data isnt too easy for me to get and they dont transact too much from what I have seen. I imagine that this is not an attractive property to too many investors and would need work done on a $1M property - I believe an inspection would uncover a lot of risk, especially on foundation issues being on a fault line too (cracks in walls and all over).

The easy approach I am thinking would be to just share with him that I think we are too far apart in pricing and see if he opens up the door to negotiations.

There are some value add opportunities to improve the property if it was to be sold in the future, and to increase rent upstairs the bathroom could be redone, dishwasher put upstairs, and perhaps a washer-dryer stand up unit (instead of sharing our machines).

Let me know what other questions I can answer - trying to think through this methodically because I like the deal but the price is ridiculous - this would sell well between $700-800 I believe. Maybe below 700 depending on what is going on with the house.