Sell to buy appreciation or to buy cash flow? what do you think?
I'm curious to know what you think?
We have a rental condo collecting very little cash flow ($200 per month).
The reason why we kept it, was bc it used to be our primary home and we can sell it until the end of 2023 and NOT pay capital gains on the profit.
We have about $200k sitting in it (equity). I have done the numbers back and forth and my debate is:
1. Do I take the proceeds and go buy 5 rental properties at 20% down- in lower priced markets where I would be cash flowing about $350 per property or about $1500 per month?
or
2. Buy here in CA where I can buy a home for $800k then improve the home and add an ADU with the same amount of money and end up with about $1k per month in cash flow (net after expenses) and increase the value of the home by around $200k (purchase for $800k put $200k in improvements: $1 million total and home's ARV would be $1.2)
Then refinance it and get back about $150k of my total investment and go do it again.
I have done this already, so I know it works, but it does require a lot more time and effort.
I do want to start building more 'Passive' income and start enjoying profits from it, but I know that buying in appreciation markets now can help dramatically in the future when I sell to buy in less expensive areas.
What would you do?
Thanks