It's a single-bedroom condo, owned free and clear in DC that I've had since I bought it 20 years ago. It's worth about $450k and cashflows about $19k/year in rent after all expenses - (a measly 4% return on cash, plus any appreciation).

I know I can do better, and urgently need to leverage up into other property to increase equity and/or cashflow. I'm feeling a lot of pressure to do something but finding it difficult to decide what I should do.

My goal is to increase cashflow with a long term hold on a larger property - in theory multi-unit, commercial, or perhaps a vacation rental where I now live on the Outer Banks of NC.

Questions:

1. Should I sell the property outright and 1031 exchange to leverage into a $1m - $1.2m property with better cashflow? Or better to keep it and cash-out refi to reinvest in more property? I did try this once (running the numbers to buy a vacation home similar to below, that had good cashflow) but the lender said my debt to income was too high and would not let me do it.

2. Would I even realistically be able to get a loan for a multi-unit property considering my lack of experience in that sector?

I've read a few multi-unit investing books, lurked on this forum for years, and like the idea of multi-unit and commercial property. But the reality I see is that finding a good deal on a multi-unit these days is next to impossible unless you've got insider track with property managers etc...There are zero multi-unit properties less than 2hrs drive from me. I've searched and considered locations around Virginia and NC - (it's unlikely that I would have the guts to buy my first multi-unit in a faraway state that I could not drive to in a few hours).

So that leaves me with something I know a bit about - local vacation homes on the Outer Banks. The appreciation picture for where I'm considering is favorable, cashflow after taxes would be a little bit better. Here's actual numbers on a property that works on paper for me if I sold the DC condo outright:

*The $96k income is last years rental numbers.


Property Information				Cost Information
Property XXX	XXX		Building Cost		$ 820,000
Location	lighthouse dr		Land Cost			$ -
Type of Property		Cost Basis			$ 820,000
Size of Property	3892sf		Less Mortgages		$ 420,000
						Equals Initial Investment	$ 400,000
						Amortization Period		27.5
Ratio Information
Loan to Value			51%		Mortgage Information
Cashflow / Initial Investment		5%			Balance	Payment	Interest	Loan Term	Amtz Period
Cashflow / Assets			2%		1st Mtg	$420,000		$(2,128)		5%	30	360
CAP Rate			6%

#	Description(All Figures are Annual)	Annual Amount	Notes
1	POTENTIAL RENTAL INCOME					$96,000		Total Potential Income if rented 100%
2	Less: Vacancy						$(450)		Assumed 2% Vacancy Factor
3	EFFECTIVE RENTAL INCOME					$95,550
4	Plus: Other Income						$-		Other Fees, charges, etc
5	GROSS OPERATING INCOME					$95,550		Total Revenue

OPERATING EXPENSES
6	Real Estate Taxes					$5,000			Property Taxes
7	Personal Property Taxes				$-
8	Property Insurance					$5,000
9	Off Site Management				$22,000
10	Payroll					$-
11	Expenses/Benefits					$-
12	Taxes/Worker's Compensation				$-
13	Repairs and Maintenance				$8,000
14	Utilities					$6,000
15	Accounting and Legal				$-
16	Licenses/Permits					$-
17	Advertising					$100
18	Supplies					$-
19	Lawn and Grounds Keeping				$2,500
20	Miscellaneous					$1,000
21
22
23
24	TOTAL OPERATING EXPENSES					$49,600		Sum of Line 6 thru 23
25	NET OPERATING INCOME					$45,950
26	Less: Annual Debt Service					$(25,537)		Total Mortgage Payments
27	CASH FLOW BEFORE TAXES					$20,413
28	Add Back: Principal Payments					$6,637		Principal Paid on Loan
29	- Depreciation						$(29,818)		Tax Depreciation on Building
30	TAXABLE NET INCOME (LOSS)					$(2,768)

What do you guys think of these numbers above?

I kind of hate to sell the DC condo. I'd be more diversified keeping it. On the plus side it's in a very desirable downtown neighborhood in Washington DC (Dupont Circle) so I only deal with very professional high quality renters. It's been rented for 15 years and I've never had a single day of vacancy believe it or not, nor have I even had to meet any tenants since the last 3 turnovers over about 8 years. I live in NC, so that's why I haven't met them!

The big vacation houses have added risk of a storm or something knocking out weeks of prime summer rental income, compared to a year-round tenants in multi-unit. But these vacation homes in the $800k and up are the only thing I see near me that even comes close to a decent cashflow situation.

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