If you don't plan to ever househack this duplex, I would let NOI, cap rate, expected appreciation, and projected IRR drive the valuation.

How is your occupancy rate?

Hey there, I run a Real Estate Call Center I think I see some things that can help:-First off, 9% contact rate is not bad at all.

To get elevated rates on this one, we felt the interior needed a cosmetic face lift.

Expect a higher rate and/or fees with these types of programs.

Mortgage rates just dropped a little bit in the last two weeks also. 

I’d love to hear who you’ve used in similar situations, or what sort of rates and terms could be expected.

(I'm worried that my sisters lower credit score will negatively impact interest rates)Purchase the house outright for $160K , pay off the note, wait 6 months seasoning period and take a HELOC out for AUD.

Many properties are unrented, even at heavily discounted rates.  

Although I am not a multi family pro, if you have any questions about owner financing, drop me a line!