How do I comp a duplex

Question

How do I comp a duplex in an area that has had no duplex sales in the last year?  Also, is there anything I can do if it has a reverse mortgage that would seem to be similar to the actual value of the duplex.

Account Closed · Answer

A duplex is a business like owning a gas station or liquor store. You don't price the duplex based on what other people paid or are willing to pay. You look at the price and calculate your profits just like owning a gas station.

Suppose there were comps and other investors paid $250k per unit and your current seller wants $300k per unit. It the duplex gives you a great return at $300k, then you can walk away because it doesn't comp, or buy it because it gives you a good return on your money.

I put all my effort into finding properties that give me the best return on my money and while nobody wants to pay more than they have to for any property, your need to worry more about getting the best return dollar-for-dollar.

Wayne Brooks · Answer

@Shona Macmillan Buying a property with a RM is just like buying any other property with a mtg....the mtg has to be paid off at closing, or do short sale.  A RM short sale requires the property sell for 95% of a current fha appraisal.  The balance on a RM grows every month due to no payments being made.

Shona Macmillan · Answer

Thank you guys.  Yes it makes sense to rather base the value on rentals.  When I do that the value of the house is $225k and the reverse mortgage principal owed by the family is $250K.  I really don't understand reverse mortgages.  How on earth did the bank value the property at that price 14 years ago?  In the deed records the original loan was $255k!!  I mean I know 2007 had all the lenders playing silly games but wow.  And isn't there a rule that the house cannot be worth less than the outstanding principal at time of death?  Max rental for each 2/2/1 side is $1250 in that area.  So it's a no go because there have been no repairs or upgrades done in almost a decade so repairs alone are probably a minimum of $40k

Marc Freislinger · Answer

If there are no similar properties to compare to, I would estimate the value using the income approach. If it's for sale, you can ask the listing agent for the actual rents, otherwise you could look for similar sized units (same beds/baths) in the area in duplexes, triplexes or fourplexes. Or call a PM company and ask them to estimate the rents for you.