Duplex in San Antonio

[Nathan Seltzer]

Greetings! My wife and I are about to purchase our first property and I wanted some advice from the internet.

Our plan is to purchase a duplex and live in one side while renting the other side, which will almost cover our mortgage.

It is currently a big time sellers market so our options are limited, as is our negotiating power. We currently have a property under option that has a few major concerns.

1. The price is rather steep for this property at $165,000. The units are a 2/2 ~900 sq.ft. and a 3/2 ~1200 sq.ft. Rent at the moment is 1625/month for both units combined. This is below market, and market rent is approximately $1850/month.
2. The property is very run down and the inspection showed it needs a lot of work. Mostly minor things, but a number of serious things, including significant wiring problems that could be safety problems, undulated siding all over, sediment in cold side water connector, HVAC not cooling sufficiently (return vs supply temp). The roof is being replaced by the owner's insurance company, due to storm damage.
3. There are tenants in leases in both sides. For us to get a 20% down conventional loan, our lender is requiring us to move in within 60 days, so we will have to buy out a tenant from his lease, or else put down 25% and increase our interest rate by 1%. No guarantees we can get a tenant to move.

After the inspection, we asked for $5000 towards closing in addition to the roof replacement. Does this seem like a good idea to you if they accept our amendment? We're out $650 in earnest money and the inspection if we pull out now, which isn't all that much, compared to getting a bad deal.