Would love some advice on next steps

[Aileen Ouyang]

Hi all,

This is my first post on the BP forum and would love to get some advice here. Thank you for engaging!

I own a condo in Apple Valley, MN that is currently a long-term rental property. Currently evaluated at 300k. I owe 180k on it and it is cash-flowing $200/month. I will be able to pay it off in 13 years (2.3%, 15-year conventional loan). My primary home is a townhome, 380k, and I just bought it with 20% down and moved in a month ago. It might have appreciated some since I moved in since I got it at a discount and I just saw the builder listing the same floor plan now at around $400,000. 

I have some 401k and emergency savings that I don't plan on spending for my next investment property. and the amount of HELOC that can be pulled from my current property is pretty limited. In your opinion, what would be a reasonable strategy to consider if I want to acquire my next investment in the next couple of months?

Thank you!

[Joe Villeneuve]

Quote from @Joe Villeneuve:

Sell it.  Do the math.  You're losing money right now by the fist full.

You're equity is what you are paying for your property.  As your equity grows, so does the cost of your property to you.  When you buy a property, and put 20% down, you are buying a property worth 5 times what you are paying for it.  As your property valued grows, it grows equally with your equity, on a 1 to 1 basis.  So, as you property value and equity grows, you are paying more and more for your property, and getting less and less for the cost...to you.
In your case, you have a property value of $300k, and equity of $120k.  That means you are buying the property at 40% of its value.  If you were to sell the property, and use that equity as a DP on the next, that equity could be buying you over $500k in property value (assuming closing costs on sale of $20k).  That's almost twice the PV you have now.  I bet with the added PV, additional cash flow would also come with it.
Refinancing isn't the same thing.  You won't pull out as much in cash from the refi, and your original property's CF will go down due to the higher mortgaged amount.

Don't fall in love with properties.  Fall in love with your cash (cash flow and equity).  Your cash works for you, as long as you keep moving it forward.  When it sits on it's a$$, doing nothing but getting fat (equity), it loses you money.