Refi or 1031 my Hawaii condo?

Question

Hello all!  I'd love some feedback on my situation.  I have a good amount of equity in my condo and am trying to figure out how to best use it!  The condo doesn't currently cash flow (it's not negative!) but the appreciation has been awesome.  I am a buy and hold investor and am trying to build a portfolio.  I don't have a lot of experience but have read a bunch of books, listened to podcasts and watched webinars.  I have a full time w2 job that pays well.  I do think the condo will continue to appreciate.  Renting it has been very easy and has had only minor repairs.  The price to sell the condo is currently at a 30 year high.  Decisions, decisions!!  Thanks in advance!

Royce Talbo · Answer

@Chris Johnson there is not enough info to go on here, but assuming you never refi before and your int rate is somewhere in the 6% range and you have a bunch of equity.  I would refi for a lower rate so that you can cashflow a little like $100 or so and take out some equity.  Use the equity from the refi to reinvest in another property.  My reasoning is that Hawaii will always appreciate, sure there are some bumps in the road but it never takes a hit like the mainland and has a nice upward trend because our land is limited. Lots of people go after cashflow, but that is the beginners game where you have to own lots of properties and deal with all the head aches of have many.  Hawaii is the end game where it is more passive, you have a few properties, less head aches, better tenants, and they keep appreciating.

JR T. · Answer

If you can lock in gains now I would recommend doing a 1031 to get a portfolio of rentals local to you in Oregon/Washington. Be careful you pick new properties that dont make you pay back your depreciation. Consult a professional who is good enough to charge you for their help.

Lots of decent returns in Oregon within an hour of you. I know nothing about the markets in Washington. If you are happy with the cash you're getting back as a percentage of what you invest. Try to be free and clear within 7 years of the exchange. There's no benefit to enriching bankers in retirement.

Christine Johnson-Sundby · Answer

Thanks Royce for the recommendation.  I am leaning towards refinancing...I did refi a couple years ago so my rate is good.  I agree with you about the HI appreciation...in another 20 years it will be paid off and who knows what it will be worth!  I may be able to retire on that alone, lol.  Mahalo!