First time home-owner — am I getting ripped off? [Chicago]

I'm a first-time home buyer and am afraid I'm making a huge mistake with my investment. Would love thoughts from more experienced home owners/investors!

I'm buying a 3-unit building and am planning to live in one of the units. If I don't live there, the CAP rate would be 3.4% — which is low (the average for this neighborhood is ~4.4%)

I'm afraid that means I'm overpaying, especially since this is an incredibly old and expensive building, so there may be surprise costs we haven't accounted for.

Because we've had a terrible time finding a place to live, we were really afraid to lose this and offered more than our initial budget because the selling agent said they had another offer. We also didn't push the sellers to fix all of the issues uncovered during inspection, like a few panels missing the grounding screw or some tuck pointing. On the bright side, we did appraise the building and it came in above our accepted offer–but I don't know if that means anything because there could be a bubble in the market, or perhaps the appraiser was not accurate.

We do like the place and want to live there for a long time. But I'm afraid that because we are paying so much, we won't be able to resell it at a profit if the time comes.

Is this just me getting cold feet as a first-time home buyer? Would you ever buy a place with only a 3.4% CAP rate? If you own a multiunit and live in one unit — what was your approach to choosing your property?

Thanks so much!

More real estate tips at Program Realty Wix site

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