In San Diego- sell 5 unit place and 1031 into larger rental?

[Melinda Pajak]

I'm new here --we bought a 5 unit rental property in Hillcrest (San Diego, CA) for $411k in 1999. It has a positive cash flow now as we've remodeled and raised rents over the years. I manage the property and we live nearby. This is our only real estate investment property besides owning our house. It has come to a point where we need to spend maybe $100k or more to fix up the two standalone cottages at the back of the property. We are having trouble deciding whether it makes sense to try to buy an 8 or 10 unit place on a 1031 exchange here in San Diego or just keep the buy and hold strategy on this one and undertake the remodeling project. Any thoughts? 

We own the property outright but have a large mortgage on our own house (we combined both mortgages a few years back when interest rates were low but it will take us another 20 years to pay it off). Our son will be going off to college in a few years so positive cash flow would be beneficial. 

I read on some other discussions here that positive cash flow in San Diego is a dream on any new properties so does our current strategy of buying and holding still make sense here? Any thoughts are appreciated.

Thanks,

Melinda Pajak

Landlord/Owner

San Diego CA