Figuring out max offer - Well here is my plan, advice welcome

[Rob Randle]

I put an offer in today on a duplex that I plan on living in with a FHA mortgage. It's my first offer on a multi family home. The property already had an offer on it so I submitted a "strong" offer. The list price for the home is $175k and I put an offer in for $170k with $5k in closing costs back.

Now I'm realizing that determining a fair market price for a multi family home is slightly more difficult because of the small sample size.  From comps etc. I see that similar multi family's similar are selling at $85 per square foot.  When I calculate that number the square footage of the property of 2100 square x $85 = $178,500.

I figure my max offer can be something to the tune of $182,000 with $6,000 back in closing (which is effectively $176k).

As far as numbers and factoring in absolute worse case scenario (worst rents possible, property management, and all other expenses) I'm looking at 16% cash on cash return with this purchase price.  Now I plan on managing myself and saving the PM cost puts me at around 40% cash on cash.  The reason these cash on cash numbers are drastically different are because of the low down-payment of 3.5%.

How do you like my plan?  Advice on it is more than welcome.  I like this property, however I want to take a smart approach.