1031, RefiCash out, other? What would you do?

[Andy Bates]

Hi, I recently discovered BP and have been listening to the podcasts and reading the forums.  It's such a knowledgable community and I could use some feedback/suggestions on what a savvy investment move may be.  

I was very lucky and was able to buy a duplex in an up and coming area of LA 10 years ago. I "house hacked" there up until a year ago. I now am living with my long term partner in a house she owns so the duplex is now my investment property. Currently, one unit has a new renter and pays market rate. The other unit renter is long term, with no interest in moving and pays a third of market rate. This duplex is under LA rent control ordinance so the the rent increase on units is limited to around 4% per year. The rent control ordinance also makes STR of a unit impossible. I currently cashflow close to $1k. FYI, If long term tenants were to move and I could charge market rates to a new renter I would cashflow closer to $3k month.

I have close to $600k equity in the duplex.  

My question is.  Should I sell and 1031 into another market that is more landlord friendly and buy more units that cashflow more?  Or, cash out refi around $250k and use the current cashflow to pay loan increase.  Then use that $250k to buy another rental property in another market?

Or something else?

I am a new investor.  I am self employed so cashflow does help when there are slow years in my work.

I appreciate any advice you have to offer.  Thank you!

[Danielle Jackson]

It's great to have options. While you certainly could 1031 exchange and buy into a more landlord friendly area.. cash flowing $1k even with a unit under rent control, isn't bad at all. I guess the bigger question is what are your goals? Given your goal for cash flow to supplement self-employment income, I'm guessing acquiring more doors? 

Given the amount of equity and what you are currently cash flowing, I would probably take some cash out, find a property in a landlord friendly/growth market, and build my portfolio. 

Either way you go...best of luck!