Complex Dual Agent run deal in California

[Kevin D.]

We recently engaged in a deal on a duplex in the Bay Area and would love some feedback.  Here are some of the particulars.  

Duplex with 2 units, each 2/1.  Total SF is 1641.  Owner occupied unit is upgraded with new kitchen, appliances, and flooring in living room and kitchen.  Rental unit is tenant occupied at below rate rent with no apparent upgrades.  Inspections revealed mostly minor issues, the largest being water damage in bathrooms in each unit.  Damage was focused at the shower with expected repair costs ranging from $5k to $7k for each unit depending on the extent of interior damage.  

Seller was motivated due to three way transaction.  Duplex owner was under contract on a condo. That condo's owner was under contract on out of area new home.  Duplex and Condo sales were handled by same broker with two agents splitting as dual agents on each.  Duplex was not listed...we were the first offer and were accepted immediately as we were willing to go in without our own agent, accepting the dual agent set up and also due to the fact that we offered asking price of $910k.   Agent provided two comps, one at $1.03M and one at $1.07M.  Both roughly 6% to 10% larger in terms of SF.  Our expanded comps place duplexes in this area (all top rated schools, low crime, etc.) at $915k to $1,070,000.  This is the smallest duplex of all the comps in the area over the past year.  Cost/SF was $543 and was among the highest of all the comps we pulled which ranged from $470/sf to $588/sf.  The ranking of this duplex to the others led us to feel this price was too high and since the sellers were unwilling to negotiate on the repair costs as credits, we ultimately backed out of the deal.   

It pained us as this may be a good deal but we didn't have faith in how good the deal was vs. how leveraged we'd have to be (most of our capital would have gone to the down payment and closing costs).  

I have numbers from my property analysis and can add if folks are interested.  

Would love to hear some critique of this deal and of the decision to pull out. 

Thanks!

[Amit M.]

I don't know how anyone could have given you decent advice without even knowing what city this property is located in. Judging by the flipped sales price, this was perhaps in Cupertino, or another highly desirable city in the valley. If so this could have been a great long term buy and hold. Think what the rents and value would have been 5-10 years from now.