Selling 5 plex for larger portfolio

[Timothy Hotchkiss]

Hello BP, I currently own a 5 plex and I’m hoping to expand my portfolio and put myself into a better situation. 
Move owned this 5 plex for about 3 years now, I Owe 152k and I believe it to be worth $300-$350k maybe more. Obviously I have a ton of equity in the property, which i’ve been thinking about as using as a large down payment on a portfolio of properties or a larger property/ something that produces more income. I was thinking I could do a 1031 exchange, which would be a huge advantage of buying a larger property with more units or something bringing in more income. Currently it cash flows about $2000 and I could increase the rents a bit more and I occupy one of the units so technically i’d be cashlowing about $3500 per month if I didn’t live in the unit. There’s also available space for storage on the property which could also be turned into more units down the road and it sits in 2.5 acres. 

My other option is to cash out re-fi but I just locked into a 7 % intrest rate with a 3 year balloon mortgage with sellers financing. 

Hope to hear some great advice thank you. 

[Alecia Loveless]

@Timothy Hotchkiss Hi Timothy. I’m not sure where you’re located but for me being able to live somewhere plus being able to cash flow $500/unit for the other 4 units is a PHENOMENAL property.

Before you go any further I’d do a little looking around at some other properties that you might be interested in buying with your boot from a potential 1031 exchange and see if they’ll get you anywhere near your current rate of return.

If you say you could get $3500 in cash flow if you moved out that would be $700/unit/month and that’s a grand slam for most parts of the country.

It might be better if you could try to save up for another down payment for a second building and do an owner occupied 3.5-5% down payment and move into a 2-4 unit and keep the 1st property because I really feel like you’ll be very hard pressed to find another deal that will cash flow that well again.

Recently I paid cash for a property because it had such poor management that I couldn’t get financing for it and now 9 months later it cash flows $500/door/month but only because it has no mortgage. In today’s market a property with a mortgage cash flowing that much is a rare gem with interest rates as high as they are.