Duplex with Multiple Offers

[Nick E.]

Trying to pick up my first Duplex.  Put an offer in on a duplex on the first day of the listing, and the seller waited until there were multiple listings.  Now they are calling for best offer.  Here are the details. 

Several recent upgrades: brand new driveway, couple year old roof (architectural shingles), New gutters, gutter filters, downspouts, drain tile for downspouts.  All windows are newer vinyl.  New furnace and washer/dryer in both units.  One new water heater and one 6 year warranty water heater that is 10 years in service.  Essentially, most high cost items have been replaced very recently.  

One unit is newly rented with a 3 year lease (longer than I would do).  It is at market value.  The other is Section 8 and is below market value.  The Section 8 side has been in the unit for 6 years.  It was in pretty good shape, but not as updated as the newly rented one.  The current owner lowered the rent for that tenant this year on the renewal because of her budget constraints.    I don't know the exact rent they are receiving on that one yet.  

Asking Price: 209,900

Down Payment: 15%

PMI: ~$80/month = $960 / year

1st Year Rental Transfer (City Fee): $500

Insurance: $2,000 / year

Rental License: $138 / year

Trash: $900 / year

General Maintenance / CAPEX: $2400 / year

Water/Sewer: $2400 / year

Real Estate Taxes: $3,500 / year

Unit 1 rent: $1200 / month

Unit 2 rent: (estimate) $1000 / month

First offer: Full price, with 3% back for closing cost 

I plan to increase the rent for unit 2 at renewal in July. Even if I can't, I am still showing a cash flow of $216.43 with 0% vacancy. This equates to 16.5% ROI (cash flow, principle reduction, tax savings) on my estimated $38,900 cash invested ($5k of that is misc. repairs and closing costs). If I increase vacancy to 8%, I still cash flow positive. All of this excludes appreciation.

I believe the house is worth more than asking price.  My thought was to go to $226k with 3% back for closing, and that is about $10k over asking.  I still think it is worth more than that.  The cash flow and return numbers above are at that purchase price.  

Thoughts?