@Ginger Olinghouse,

Hi Ginger, you’re in a complex situation, but it helps that you have several options and good equity in your rental. Let’s break it down:

1. Keep the rental and raise rent:
Current rent ($1,800) is below market ($2,100). Raising it would help cover expenses, but consider family dynamics with your cousin and the potential vacancy if they leave.

With a $3.5% mortgage, your cash flow is still likely positive at $2,100/month, but it won’t generate huge extra income.

2. Sell the rental and pay down your primary mortgage:
Selling at $375K with $105K owed would give you ~$270K before costs (though you save realtor fees as an agent).

You could pay down your high 6.99% mortgage, which is a guaranteed “return” by reducing interest costs. This could relieve stress, especially since you’re low on reserves.

The downside: you lose a cash-flowing property and future appreciation.

3. Sell and reinvest into duplexes/quads (or other rentals):
If your goal is to leverage capital for better cash flow, using the sale proceeds to buy small multifamily properties could make sense. Duplexes/quads often allow you to scale faster and increase cash flow while spreading vacancy risk across units.

You’d have to be ready for the learning curve, potentially higher management responsibility, and out-of-state considerations if you look elsewhere.

4. Consider a 1031 Exchange:
If you sell your Medford rental and reinvest the proceeds into another like-kind investment property, a 1031 exchange can defer capital gains taxes.

This is especially attractive if your goal is to scale into higher cash-flow or better-performing markets while preserving your equity.

Timing, rules, and proper guidance from a CPA or 1031 specialist are critical to execute this correctly.

Other considerations:
ADU potential is great for long-term value, but if you can't fund it now, it's more of a future option.

HELOC or second mortgage: As you noted, rates on rentals are high, so probably not ideal right now.

Taxes: Selling your former primary that has never been your current residence won’t give you primary residence capital gains exclusion, but since this was a rental, that may not apply anyway - something to confirm with your CPA.

If your priority is financial peace, lowering high-interest debt, and increasing cash reserves, selling the rental and paying down your primary could make the most sense right now.

If your priority is long-term cash flow and scaling your portfolio, consider selling and using the capital to acquire small multifamily properties that are cash-flow positive - either outright or through a 1031 exchange to defer taxes.

Raising rent is a moderate option if you want to keep the property without selling, but it may only marginally improve your position.

Given your flexibility and market knowledge as a realtor, you could likely identify solid small multifamily or even single-family deals that would make option 3 (with or without a 1031) a strong path for long-term wealth.

Always happy to share more on what's worked for other investors. Best of luck!