Calculating the value of a duplex
I am considering purchasing a package of 3 duplexes located in what I would consider a transition point between high-end ($500K homes) and lower end (30K homes). There have been no recent sales in the very neighborhood these properties are located, and I'm a bit stuck on what value to place on the properties.
With an asking price of $200000, and monthly rents of ~$5200 the CAP rate comes to about 16% - Normally I'll take that any day, but the prices per square foot of the closest recent sales, a few blocks down, would bring the value of these properties to range between $120K-$150K. The owner argues that those recent sales are in a very different neighborhood, and so don't count.
While I should cash-flow easily at the current price, I'm concerned about what happens if I decide to refinance or sell these someday.
For small multifamilies, what strategies do you use when calculating the value?
This is Rochester, NY by the way.