Considering 1031 into multifamily

[Santiago S.]

I have a condo in San Diego that has appreciated nicely over the years. Owe ~220 and can sell for (who knows in this market) somewhere between 650-700k, leaving me with ~400k to deploy. I've never had an issue getting good tenants, current tents are 3k and probably push that 10% if they move, but they have been there for ~4 years. 

I have time to manage a more active rental if it can increase my income and continue appreciating. Looking for suggestions, whether it's to just stick with it or not because it feels like that equity could be doing something more for me, and it pains me to think about it just sitting there doing nothing.

Thanks!
 

[Dan H.]

Quote from @Santiago S.:

I have a condo in San Diego that has appreciated nicely over the years. Owe ~220 and can sell for (who knows in this market) somewhere between 650-700k, leaving me with ~400k to deploy. I've never had an issue getting good tenants, current tents are 3k and probably push that 10% if they move, but they have been there for ~4 years. 

I have time to manage a more active rental if it can increase my income and continue appreciating. Looking for suggestions, whether it's to just stick with it or not because it feels like that equity could be doing something more for me, and it pains me to think about it just sitting there doing nothing.

Thanks!
 

Your rent to value ratio is bad even for San Diego. SFR have worse ratios than MF.

I believe you can definitely get a better rent to value ratio with MF. However, you likely have a great prop 13 property tax. If you have not refinanced in the last 3 years, which from your LTV it seems highly likely you have not refinanced recently, your current rate is likely far less than the current rate.

Because of the combination of the prop 13 discount and loan rates that may be less than half what you could get for a new MF purchase, I recommend you continue to hold your current property. I also recommend you keep your rent near market rent. M you never know when rent control might be enacted on SFR.

Is there any way you can keep your current investment and still scale into MF.   have you looked into equity loans?

If you do sell to purchase a MF, look into whether a 1031 exchange is beneficial.  there are multiple 1031 intermediaries on BP.   both the 2 I see post most often on the subject seem very knowledgeable on the topic (way more knowledgeable than I am).

If you buy a MF or any new investment property, analyze if you can benefit from accelerated depreciation/ cost segregation.

Good luck