Are you getting an appraisal? Is your contract contingent on the appraisal? I have no idea of what property values are in your area, but and appraisal should be able to give a close idea.

"Am I overpaying for the two-family property? "

No one here can tell you that. We would have to see both properties and their appraisals.

I agree with lyfia on the appraisal. In addition, is the upstairs apartment currently rented out? The amount of rental income and length of existing lease would factor into your calculations, as would the less easy to calculate headaches of being a landlord, especially if you've never been a landlord before.

Also I'm assuming when you say "legal two family house" that you would own the whole building, and that the two units aren't divided into separately owned condos.

The others are correct, that we don't know for sure. But one way to do a quick swag is to compare the price per square foot. If they're significantly different, then the one you like probably is overpriced.

An actual appraisal is a bit more complicated than that, but that'll give you a starting point.

It sounds like you are looking at a duplex: two family homes under 1 roof. We call them duplex, triplex and quadplex here. (Bigger than 4 plex, the rules are quite different because you cannot get FHA financing.) For multiple family housing, the market price is determined by the rental income, not necessarily what the price per sq ft for single family homes are. However, the appreciation for multiple family homes is not as rapid as the single family homes. This is something you should be aware of when buying a multi-family home. The appraisal and comps are based on other duplexes, not single family homes of same size.

If the upstairs rents out for $1000/month, the rental income more than easily pays for the mortgage difference of $250,000 at 3.5% interest. (where I live, $1000 for 1 bed apt would be mid to low rent.) Of course, you maybe living in a smaller place since they split up the place into two.

Price per sq ft is meaningless where we live because of the quality of the properties are vastly different. If you are in Queens, then the property that you are looking at is probably quite old, going on 100 years old or more. You need to look at what infrastructures have been upgraded on the properties in question.

In my city, we have $300/sq ft properties side by side with $150/sq ft homes all the time. We recently bought a duplex that was a rebuilt 1906 property. There was nothing left of the old except the original framing. Thye even poured new footings... They rebuilt it so that it still had the 'charm'... This type of rebuild does not appease the old house purist but we did NOT want a 1906 building with knob and tube wiring :)

We were able to insure the house as a 'new' structure. Insurance premium is signifcantly different for old versus new structures in my city.

Most people hugely underestimate the cost of 'well done' renovation of old homes. This is where the risk comes in. If you are buying a poorly done renovation, it's not worth much. Well done renovation is worth the $ you are paying.

Well done renovations should have upgraded the infrastructure of the house; electrical, siding, windows, insulation, plumbing etc. It's not just about replacing faucets and cabinets and calling it a kitchen remodel.

Realtors often are not knowledgible on the quality of renovation. We use a contractor that we have used often and trust to view the house with us.

If you are thinking of buying a duplex, you should do some reading on being a landlord and how to do the math to know if you are making money or losing money on your investment.