Increase Cash Flow with Refi or Sell with 1031 Exchange

[Rhonda Davis]

I am having a raging debate with myself over selling a condo using a 1031 exchange to buy a better cash flowing property – or – refinance down from 4.625% to 3.375% to get it better cash flowing.

The condo is in a very nice, expensive area but not the best for cash-flow which is less than $50/month. I used $150k from a 1031 exchange to purchase it in 2006. A few years later as the housing bubble burst it went down in value. It’s steadily going back up but would sell for about $75k less than I paid. Ironically, I would walk away with what I put in - $150k.

I would like to buy a SFH or preferably a duplex where the monthly cash flow could be about $150 - $200. Numbers from my banker show that a refi for 30yr fixed would result in me cash flowing about that same amount. But that is extending my debt and I am not sure it's the smartest thing to do.

It’s a good time to refinance. It’s a good time to sell. But it’s a bad time to buy. I feel like I have brain fog and keep going in circles.

I would greatly appreciate someone telling me how they would analyze this and what do they think they might do in this situation. Thanks in advance!

[Chad Duncan]

Would the duplex cost more than the condo? I'm guessing most likely. If so, then the condo would be less total debt. It's usually a good idea to have a lower fixed interest rate. As well, it would take a good amount of time for you to get another property, and having a cheaper condo with the same cash flow, and no additional work makes more sense. Keep it simple, and try not to stress about getting more property. It can make you desperate and that can mean a bad investment.