How much can the neighbors hurt your value?

[Ian Broadie]

Hey guys! If anyone saw my post about the tiny waterfront home... I ended up pulling out of that one to pursue this opportunity. It's a duplex in town with views of the water, what more could you want? Well I'm having trouble determining the ARV. A duplex that is not in town (though not far and close to the freeway), without a view, fixed up in good condition (looks great but no high end features like granite or anything), getting $1550 / month per side sold for $460k cash with two offers in the first week on the market. There aren't many duplex's in town and they never come available, but I think this is a good comp for the duplex I'm under contract for because it's the same size on each side, mine has a better floorplan, but only one car garage (the other has two) and mine is in town and one side has a view. They are both on the same amount of land. My problem is, I'm trying to figure out how much money I want to put into it.

Based off this comp I had made the assumption that it would be worth at least $460k once it's all done up, and only higher if I fixed it up further (I would like to make it really nice even though I won't get as good of an ROI, just so I can get better tenants). However, I've now had a few people point out to me that the duplex directly across from it (they share a driveway) is in horrible condition and it will lose value as a result. This other duplex (which is the mirror image of mine) has trash all over their yard, the roof needs to be replaced and just generally looks very dumpy. This is the million dollar question..... but what do you think guys? How much could you imagine this other duplex dropping my value? I realize this is impossible to answer without knowing all the details, but I bought the house with FHA and at a price where I should be able to refinance into a 20% conventional once it's completed... but not if it isn't worth as much as I had originally thought. Thank you in advance for any insight you can help me with!