Hold and Collect or 1031... If so, Bigger or Smaller?

[Anthony R.]

So I lucked upon a four family a few years back. When it appraised, it appraised for $20,000 more than the purchase price. Though fully rented it was collecting half of what it could at market value. Minimal repairs < $2,000. 

Fast forward three years. Based on comparables in the area and the increased rent I think the property has appreciated by $50,000. Couple it with the equity I have in the property and I believe that I can get a $75,000 profit from a sale.

The property currently cash flows very well. I have a 55 GRM and after principle, interest, taxes, insurance, water and capital expenditures I end up with a 600-800 profit each month if there's no repairs. Most months there isn't.

Alright, all that being said, I need some sage wisdom. If I keep the property then I will eventually pay close to double for it because of interest. However, it's self sustaining so, who cares right? However, if I sell it and use a 1031 exchange I might be able to put a hefty down payment on something BIGGER, or I can buy something smaller outright. 

Question #1:

To hold and collect, or to cash in and 1031?

Question #2:

Trade up and use the money as a down payment for something bigger? Advantages? Disadvantages? 

Questions #3:

Trade down and use the money to buy something outright? Advantages? Disadvantages? 

My rationale:

Holding - I have a good, cash flowing, property. Cash flow is king. It will appreciate and it will be paid off one day. (VA Loan so low interest rate and no PMI) However, as I mentioned above, I am essentially paying almost double for the building because of interest. Though I agree interest is a necessary evil to getting started, I firmly believe that I can do better with that money than the bank.

1031 | Trading up - Cash in, take the profits and continue to grow the business. It's more debt, it's a new building, it's more units, BUT it's more rent and more wealth building. Assuming it appreciates and I do well with it, it's one more step on building a rental empire. 

1031 | Trading down - Cash in, take the profits and buy a duplex outright. No mortgage, no interest, just the tax man, insurance and repairs, all of which I can write off. My cash flow would increase and my annual income would come down so it's easier to make it into a lower bracket. I would also have less repairs, less capital expenditures and less expenses because I will have half the units. 

So those are the options. Whhhhhattt to do.....