Lots of New Equity - Cashout Refi, or Trade Into Larger Property?

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I own a storage property with a much-improved NOI over the last couple of years, and with the aggressive money chasing storage right now, we have the opportunity to either sell the property at a big profit (and probably 1031 into a new, bigger commercial property) or refi and use some cash to add another, smaller property. Rates are about 150 bp better now than when we purchased, so we'd get some improved financing terms on the existing storage property as an added benefit. Rough numbers are $2m new cash to 1031 with if we sell, or as much as $600k cash from a refi.

The storage property is in a small tertiary market. We have received an LOI on the property for basically max value - even if cap rates stayed the same, we don't think we'd get much more money for it a year from now as there wouldn't be a whole lot of upside left on it for buyers. The property currently cash flows at about $8k/m, and has about another $2k/m cash flow upside as the rent increases we've instituted stabilize over the next year or so.

If we cash-out refi, we'll have the chance to add another property to our portfolio (probably NNN in the $1.5m range) and keep a stabilized, cash-flowing asset; we'd cash flow maybe $1k more a month when all is said and done and diversify our holdings a bit. (We could even just park that cash on the sideline for a bit, or get it into securities.) Or we could just refi (no cash-out) and improve our cash flow by $2k/m. Both these options get us to about $12k/m cash flow in two years with not much upside beyond that, and we'd likely preserve the $2m equity in the property.

If we sell it, we'd get almost max value (and 3x our equity in 3 yrs) and have the opportunity to trade up into a bigger commercial property. We could buy into NNN (a couple good single tenant or one MT strip) with stable cash flow about 50% more than our current situation: This option gets us from our current $8k/m up to $12.5k/m or so right away, with the possibility for modest equity appreciation.

We've also identified an off-market lease-up storage facility with big medium-term upside (break even cash flow for YR 1, $5k/m YR 2, $13k/m YR 3, $15k/m YR 4; we could cash flow better the first couple of years with interest only terms, which we could probably get).  So deferring cash flow for a couple of years, with much improved cash flow down the road.  This option gives us a good chance for nearly doubling our cash flow from $8k/m to $15k/m in four years, and the possibility of having significant appreciation potential for our capital if it goes well, say from $2.0m to $3.0 m in four years.

We have relatively modest W2 salaries, so cash flow and equity preservation are important to us.  We are in our mid-40s, with 4 kids and college costs beginning in two years.  I know there isn't a "right answer" to this question and it will depend a lot on individual goals and risk tolerance.  But I'd love any feedback or impressions anyone might care to share, personal experiences, where you see the risk, whatever.  I'm struggling a bit with some decision paralysis...

@Christopher Brown as you pointed out CAP rates are at a peak right now. The best time to sell is when everyone is buying and cashing in at the top is key.

You can scale your portfolio much faster by selling and trading up or flipping and developing commercial properties.

It’s a personal goal centered decision but in terms of growth you can compound the cash faster than the equity.