So I bought a home in Hawaii in 2005, rented it out from 2011 until this summer and sold it when my family moved to Lexington, VA. Thought that doing a 1031 made the most sense, but in the end felt kind of pressured to find a local cash flow property within the 6 month 1031 property identification window. Took what I thought was the best deal around, a $583k, 5-unit apartment building that brings in a gross $4315/mo.

Then I found Bigger Pockets...saw what everyone else was doing and feel like I need to reexamine my purchase. 

I put $268k down @ 5% amortized over 25 years, so this is what my cash flow looks like:

Rents: $4315 - (monthly payment: $1905; Insurance: $101; Taxes: $385; Vacancies: $259 ; Maintenance: $395; utilities: $150) = net cash flow:  $1120

This is not a whole lot of return for $268k, the upside is this is probably one of the better located units in the town, as it's walking distance to downtown, both universities in Lexington, and the local elementary school. I've been told the rents are a tad low for two of the units ($585 for 1/1, $785~ish for 2/1, and since both of those leases run out next summer I may be able to bump the total rents to $4415-$4450 without changing anything else.

The building is in incredible shape, so I don't think I can increase it's value by doing anything to it. The only way I've heard to bump up rents was a suggestion someone gave me to furnish all the apartments and pay utilities, which might allow me to add about $350/mo/unit for three of the 2/1 units. I don't know if that's reasonable.

I feel like I need to be aggressive based on my life circumstances, unexpected passing of spouse = halving of income; I have a well paying job, but it runs out in June 2023, after which I need to find more work or develop cash flow from real estate to support myself and my children. That 5% return on investment just doesn't feel aggressive..and definitely won't get me where I need to be in 30 months.

Looking for recommendations from others who may have jumped in before looking as well, how did you salvage it? Would it be better to turn around and get some of the equity out of the house at the expense of cash flow, just to have capital for better deals?

Thanks!

@Ryan Braman ,  Tha MF certainly isnt the worst deal I've seen out there.  If the property is in a good shape as you say you may find that the maintenance budget or the vacancy allowance have been over cast.  Add to that some nuisance rent increases and  maybe a refi to a lower interest rate and bam!  you've turned average into good and can hang on to it and let time work it's magic.  Because remember although it's not cash in your pocket yet, the tenants are also paying down the principle so that will come into play later as well.  

MF is about as heated a sector as anything and I'm seeing stupid prices everywhere for things. You may want to consider reselling. It might surprise you what you could get for it. Do another 1031 exchange and move into something or somethings where your ROI better suits your needs.

The problem with pulling equity is that your return is average now.  A refi could potentially damage that even further and you end up holding onto a dog of an asset just because it's giving you cash to purchase better assets.  In that instance you're better off losing the asset and simply 1031ing into new better properties.

Thanks @Dave Foster , that makes sense. I definitely feel like I'm overestimating the maintenance, but with no experience I didn't want to deviate from the norm yet. Hopefully I'll know enough in a year or so to help develop more realistic numbers for future analysis.

I've briefly thought about dumping it, but I've got the emotional part of me where it's like, I just met all the tenants, had great conversations with all of them, it's not like they're my friends but there'd definitely be some awkwardness there. I know that's a terrible perspective and I have to work on thinking of this more from a business mindset.

@Ryan Braman Maybe run a few units as short term rentals if the laws allow it? Or, sell it and move the equity into a better performing asset. The return on equity does not seem like it's optimized.