No rent comps within 15 miles of the duplex I'm trying to buy

Question

Small town market, two-unit frame building, asking 145k. Both sides are 2/1, in-place rents are 700 each and I think market is closer to 750. With 3.5 percent down I'm financing about 140k, and with taxes and insurance I'm penciling roughly 1,150 a month all in. One tenant's rent covers a bit over 60 percent of that, which is exactly the manageable-payment outcome the guide describes, and I'm fine with that.

The problem is documentation. My lender wants a rent schedule from the appraiser to use any of the rental income for qualifying, and the appraiser I spoke with said there are almost no rented two-unit comps in the county. Most rentals here are single family houses rented by handshake and never listed anywhere. I'm also looking at a one-unit place with a permitted basement apartment where the new ADU income policy would help me a lot on qualifying, and that runs into the same wall: no market rent evidence.

So what do people do when the rent exists in reality but not in any database the appraiser will accept? And does the answer differ between the two-unit and the ADU case?

Rena Expert · Accepted Answer

Two different mechanisms, so separate them.

On the two-unit, the rent schedule the appraiser produces is a form with a small grid of comparable rentals plus the appraiser's opinion of market rent. Appraisers in thin markets routinely reach outside the immediate area and adjust for location, and they can use signed leases, property manager surveys, and rentals they know of that were never publicly listed. Your job is to hand them evidence rather than hope they find it. In-place leases at 700, a written statement from a local manager on what a 2/1 rents for, and any listings you can screenshot from the nearest town all go in the file. If the appraiser still won't support market rent, ask your lender in writing what they'll do with the actual executed leases at 700, because guidelines and lender overlays differ on whether in-place rent alone can be used.

The ADU case is tighter. The Fannie policy lets projected ADU rent count toward qualifying income on a one-unit owner-occupied purchase, capped at 30 percent of total qualifying income, and that projection has to be appraisal-supported. No supportable market rent means no income, and the cap means a big number wouldn't rescue you anyway. Confirm the current version of the rule and the lender's own overlays before you write an offer that only works with that income.

The thing that would worry me more than either is your vacancy math. At 1,150 a month all in, one unit empty in a county where you might wait 60 to 90 days for a tenant is a real hole, and a permitted basement apartment can also collide with local occupancy or egress rules that don't care what the appraiser wrote. Verify the ADU's permit status with the building department yourself.

karen_whitfield · Answer

Thin comps cut both ways and I'd sit with that before I solved the qualifying question. If there's no rent data, there's probably not much sale data either, and a 145k two-unit in a county with four transactions a year is a hold, not a thing you sell when you need to. I own land in markets like this on purpose. The math works and the exit is measured in seasons.

brandonlee36 · Answer

Adding to the evidence pile idea: I've had luck asking the local housing authority for their payment standards. It isn't market rent, but it's a published number tied to unit size and county, and appraisers here have used it as a sanity check when the private-market grid is empty. Worth a phone call, costs nothing.

renee_dubois · Answer

700 in place versus 750 market on a rural 2/1 is a 7 percent gap and I wouldn't buy on it. Half the time the reason in-place rent is under market in a small town is that the tenant has been there nine years and the shower valve is original. Get both leases, get the ledger if there is one, and price a turn on each side at 3k to 5k because you'll be doing them sooner than the pro forma says.

tonyv88 · Answer

One more file item for the appraiser: I keep a rent roll summary for the units I manage with unit type, square footage and current rent, addresses stripped. Appraisers have accepted that as a manager survey. If there's anyone managing anything in @hollow's county, that document exists in their software and takes ten minutes to export.

tylerbrooks9 · Answer

Honestly the two-unit sounds like the calmer of the two options. Both sides already rented, income you can see, and you're only asking the appraiser to confirm something that's happening. The ADU route needs a permit check, an appraisal opinion and a policy cap to all line up before you even own it. I'd rather have the boring building at 1,150 with 60 percent covered.

No rent comps within 15 miles of the duplex I'm trying to buy

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