BiggerPockets

I think we would need more information on the units to give the best answer. Specifically, how much rent do the 3 units bring in per month? My guess would be based on " standard" formulas (2% rule) as covered time after time in the forums, your units barely cash flow today if at all (would need to bring in $3k/month in rent). That means that if you try to refinance out some cash from this property, you will put this one in the red in an attempt to free up funds to invest elsewhere. In my opinion, robbing Peter to pay Paul doesn't make sense unless you have some *very good* alternatives for the cash that you're pulling out of house #1.

So, it sounds like you could rent the entire place for $2425/month. Less all expenses (50% rule), your NOI is $1213/month. Less mortgage of $1248 leaves you in the hole $35/month. If you refi to a lower payment and don't take any cash, you could be in a better position, but its never going to be a big money maker. If you compare the $2425/month income vs. the $425,000 you think its worth, then this is a terrible deal as a rental. Buy my calculation, somone paying $425,000 would be in the hole to the tune of $1500/month

Which is not to say you couldn't find a buyer.

Was you addition of the third unit done with proper permitting and zoning approval? If not, that will cause you significant grief when you try to sell. It could end up blocking a deal, and you could end up with problems if some prospective buyer started making phone calls. If I were a potential buyer, I would certainly call both the building and planning departments and start asking questions. In a case like this (duplex converted to triplex), I ask very specific questions: " Is the property at 123 Easy Street zoned for a triplex" . " Do you have permits on file for the addition of a third unit to 123 Easy Street." If it was not properly permitted and zoned, those sort of questions might result in unwanted attention.

What are your plans and financial situation? If you sell, you have closing costs, so you won't pocket $275K. Nevertheless, you will have a nice chunk of change. You say this is an up and coming area. Effectively, you have that money invested in this property. Compare what you think you will make on this one down the road vs. what other investments you could make with that money. Its about break even, so its not costing you much to hold it. So, I think this is really just a comparison of " this investment" vs. " some other investment" .

Jon

Sounds like you have a decent plan in the works. My thoughts are that selling would be your best best. If it's in a good area, and someone wants to owner occupy one unit and rent the others, they could definitely gain from this when you figure in the tax benefits even if there is some negative cash flow. One other option that you may check in to is cross collaterallizing your current property to get you into other rentals that may cash flow. You can refi this one to lower your payment, then use the equity as collateral for new rentals you're going to buy, or some of those flips you're planning to do, then keep the cash cows. You seem to be able to find properties at a discount, so there should be some cashflow around you somewhere. If not, consider other areas of the country, but do your homework. Do you research on the cross-collaterallizing as well. I don't know all the details on it, but have heard others have been able to use it to their advantage.