how do I price a duplex with no comps

[Jerry Puckett]

Hi everyone,
I have a motivated seller looking to sell his duplex, but I can find no comps for the area. There are maybe 3 other duplexes within a mile, but no one has sold in years. Could someone please share with me the basics of determining fair market value based on the financial model?

Side A has 2 bedrooms and rents for $695. Side B has 3 bedrooms and rents for $850. Both are occupied by long term tennants, and lease comps support a $25 increase on both sides. The tax bill was $3,061 last year.

The property had been listed at 133k with one offer at 128k. The offer maker got tangled up with his bank and had to withdraw, but their was an inspection showing about 13k in repairs needed. I've worked with this seller before, and he was so happy with the last deal, he brought me 3 more properties. I want my offer to be right and maintain the relationship.

Any advise? Pointers? Can I hear 2 cents from the likes of Jon Holdman ??

[J Scott]

If you want to know what the property is worth to an investor from an income perspective, read this:

http://www.biggerpockets.com/renewsblog/2010/06/30/introduction-to-real-estate-analysis-investing/

Then use the formula:

Value = NOI / Cap Rate

If you don't know what the cap rate is in your area, I would use 10% to get a reasonable estimate. If the property is in a very desirable area or is in great shape, perhaps drop the cap rate to 7-8%. And if the property is in a more rural area or is in rough shape, perhaps raise the cap rate to 12-13%.

But, that should give you a rough idea of the value from an income perspective...