Offer and counter offer far apart in price

[Ian Whiteman]

Im looking for a little guidance here. Currently, I am in negotiation on a duplex. The property is very large and unique and fits our niche perfectly. We do a lot of rentals that are similar to a room share, Airbnb, hostel. or dorm type rental. For our model, the more bedrooms the better. 

Pertinent info as follows:

1. Seller is out of state and the property belonged to his grandmother. I believe it is paid off. It has been in the family for 70 years. He is not in a rush but wants to get rid of it.

2. In 2010 he listed it for 310k, no buyers. A year ago my agent thought it was on the market as FSBO for $410 but we cannot confirm.

3. Both units will need some light code work and some rehab. Id expect rehab costs around 20k but no clue on the code work until an inspection is done. The roof on one side probably will need replacing in 1-2 years, to the tune of about $12,500. Other costs are completely unknown.

4. It has been on the market for about 2 months for $515k and is being sold as-is, we have the right to inspect in the offer. 

 Currently, the seller is using half the house for AirBnB and he states it nets 46k annually. I think it is closer to 35k when you factor in operating expenses. Our rental business works a lot like Airbnb and consequently cap rate really means nothing, since we run it more as a business. Comps are also very tough because it has over twice the bedrooms a normal duplex in the area has. It usually takes a 6 plex to get to the same bed/bath count and most comps on those are 600-900k. 

We offered 405k against the asking price of 515k. We were countered at 495k. Here we sit 90k apart. I don't feel this property will fit many people as a primary residence. I do not want to overpay. That being said, it would still be worth it to me at well over 500k. I would be shocked if someone else made an offer in the 500k range. At the same time, if we lost it, I could almost guarantee we won't find another property like this. I think the seller has put an extra 100k in the asking price due to the Airbnb revenue. Any thoughts or suggestions on counter offer and negotiation would be great. Id love to speak to the seller but everything is agent to agent.