2 multi family properties in SF

[Ben Palmer]

Hello, I am new to this community and hoping to get some advice. I own 50% of 2 multi family properties in San Francisco. These properties were passed to me by my dad about 4 years ago. one is 4 units, the other is 6 units. My cash flow is about 40k and 60k with outstanding mortgage of 145k and 75k respectively. When my dad passed them to me, the CA property tax basis remained in place, as did the capital gains tax basis. he purchased each of them for roughly 300k close to 30 years ago. The current assessed value is around 500k for each.  I am guessing they are worth between 2 and 3 million now. The depreciation schedule is just about complete, so I am wondering if there is a way to leverage these buildings to expand my portfolio. I am not that familiar with 1031 exchanges, and trying to learn more about that process. I am concerned that selling these properties will give up my substantial property tax advantage. I would like to potentially purchase more 4-8 unit buildings, but they dont have to be in SF, or even CA. My main goal is to create a consistent revenue stream for my retirement which will be in about 10 years. As it stands now, these properties fit the bill, but I wonder if perhaps I can use these to create more opportunities. 

thank you!

[Mike Paolucci]

Hi Ben! Welcome to BP. I'm originally from San Francisco - born in North Beach. Nice to meet you. 

Keep the San Francisco properties, plain a simple. Doesn't make sense to sell them off when they're still building equity for you and will be a great asset going into the future. Look into what kind of cash a HELOC could free up for you + the interest rates for paying it back before you decide to do anything with it. If the SF properties are paying for themselves, and you have some money left over to cover the HELOC, then you're basically working with free money at that point.

Midwest has some lower berrior of entry properties that should fit what you're looking to do. It's a much differety way of living but should still do just fine if you buy the right properties in the right locations. 

Happy to connect further and share some of my experiences.