1st Duplex: Pls. Help me analyze this deal

[Adam Frehm]

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Hi everyone. I'd greatly appreciate your advice and ideas. I'm wondering what a good purchase price would be on this duplex along w/feedback on my numbers/ideas/red flags/etc. The final numbers don't look great but I'm hoping there's a way to make this work for me and the seller. Some background info first: I live in an inflated market where demand is greater than supply and people purchase at and above asking price extremely quickly. This property is not yet listed on the MLS; the seller would like to avoid a realtor, and I'd like to avoid a bidding war. He wants to list on MLS this week if I don't make an offer so there's some pressure on me now. The idea is a joint investment with my girlfriend, for her to live in the top 1 BR unit for the next year or so, and we'd rent the bottom 2 bedroom unit to start, and eventually she'd move out and we'd rent both units. The property is an old farmhouse the seller has completely rehabbed it himself (gutted & added new spray insulation, new electric, all new plumbing, fresh sheet rock & paint, all new windows (cheaper Andersons double pane), brand new fiber-cement siding, 13 yr old shingles, appliances approx 5 yrs old (beautiful stainless in lower unit). His finish work is not pro-quality, but the work he did seems sound, solid, up to code, and the units are nice, bright and attractive. We've looked at many dumps in the area in a similar price range. *Seller has also done engineering on the parcel for a subdivision for a future duplex w/two 3 bedroom units. I don't think we can initially afford that too although we'd love to have the extra land and ability to develop that lot ourselves. He's asking 120k for this lot. Seller says a standard purchase and sale is not really applicable because the town won't let him finish creating the new lot until this duplex is sold first. He's paid lawyers to create a contract regarding the subdivision but he said the contract still needs more language around the subdivision (could this be a few thousand for more lawyer fees?) Seller's asking 340k. I ran my analysis at a 325k offer, assuming that's a stretch and the final analysis/numbers do not look so good. Besides attaching the report, I've listed more detailed info w/the numbers with my concerns/thoughts. Thank you all so very much for your ideas!

Total Square Footage: 1,800 sq/ft

Are there any other expenses I'm not seeing, i.e: inspection/appraisal (or does the seller pay those) etc?  The seller thinks the property will pull more income since he used this chart with his numbers here: https://www.mortgagecalculator.org/?q=KJQm-1KQ  But it looks like he didn't use any Variable Landlord-Paid Expenses.  I don't understand how he came up with '$903 monthly cost to live and build equity at this property if occupying upstairs' (see below)  Here's what he wrote to me:

Hi Adam,

Great talking with you tonight.

Total monthly utility expense: 352.85+65= 417.85

Current Rental income: 1345

Estimated conservative rental income from downstairs: 1600

Total: 2,945.00

Utility: 417.85

Net: 2,527.15

Mortgage payment with tax and insurance escrowed: 2,085.15*

Profit margin in first month: $442

Cost to occupy:

$1158 monthly cost to live and build equity at this property if occupying downstairs

$903 monthly cost to live and build equity at this property if occupying upstairs

I hope this is helpful, and I hope I didn't take all of the fun out of this process by doing these numbers. I just was wondering about it myself. Also, please check the math. I know I would.

Looking forward to hearing from you,

-Seller