I refinanced my house in November and gained 70k in equity in 5 years and knew there was money to be made here somewhere.

I am thinking of selling one my properties in California that has 200k in equity in order to to a 1031 exchange and purchase a MFR.

I see no compelling evidence that buy and hold forever can produce real returns on capital north of what can be had in equities markets with very few exceptions.

I think the smarter play is to sell them all, do a 1031 exchange, and consolidate into a larger multi-family apartment complex.You'll get all of your equity (not just what you can refi out), gain economies of scale, and simplify your management going forward.With ~$1.155mm in equity you can reasonably look at $3.5-$4mm properties.

You have to have both a buyer and a seller that are both willing and able to close in order to create a transaction, and price and terms are the market mechanisms for equalizing supply and demand to create transactions across a market of buyers and sellers ... inefficiencies can occur when there are distortions in the market that limit the number of buyers or sellers or otherwise creates an inequality between buyers and sellers that cannot be easily resolved by the usual market mechanisms of price and terms.Inefficiencies can have a dark side, as eluded to in comments above ... if an inefficiency is artificially created so that a more sophisticated operator can rip off a less sophisticated, weaker, and/or desperate person, that may be profitable and even legal, but can also be morally appalling IMO ... this never gets discussed in polite conversation here on BP but think it is important to understand.

This is based on the simple 50% rule.Now with regards to the car and refinancing: Have you considered taking the $40k in equity and using that to purchase a true investment property?

One that you are getting a true investor discount on (i.e. 150k houses that you are all in at 105k to 110k).Choosing this option, here is what you would have.1) 2 houses worth 120k and 150k = 270k, that you owe 250k or so on (so plus 20k in equity)2) Net income of roughly $50 a month or so. (600/yr)3) Principal paydown of 300/mo or so.  

r2d246 - I've done the 2 flips that you mention and have generated ~ 100K in equity.

The option terms can encompass both the upside potential in equity as well as capturing a part of the cash flow.This would again be attractive to an IRA investor that does not really mind waiting for their return on investment.Happy InvestingDerek Dombeck

That 2% does make a huge difference, probably about a 12 month difference in equity for my loan if paying down principal at the normal rate.