Should I sell cash flowing property to buy 2 more with the cash?

[Sharon McCants]

Hi, this is my first post and I'd like some feedback from experienced investors. I'm considering selling my rental property in Atlanta to buy additional properties in the Pittsburgh PA area (using 1031 Exchange). My Atlanta property appraised for $320k and I owe $65k at 6 1/2% ARM (with 1% cap/yr). Rent is $2600 and cash flow is $1500/mth.

I initially tried to get a home equity loan on rental, but due to my DTI ratio I ended up with an offer for a DSCR loan at 9% for about $150k equity and over $17k in closing costs, which I turned down.

This rental property was totally renovated from a fire about two years ago and is basically a new home.  My model tenant (best tenant we ever had) will be moving Dec 1 so I'm looking at my options.  The property has had little to no maintenance and it's in a decent neighborhood with mostly homeowners. 

I've seen a number of turnkey properties in Pgh (my former hometown) in the $100k range, so I think I could purchase a multi-family or two single family houses and possibly double my cash flow. 

I'd love to get your suggestions on how to proceed. 

[Josh Bowser]

Hey Sharon - I hope you are well!

I'm originally from Western PA as well (Slippery Rock) and now reside in Atlanta.

Here is how I am looking at it along with the assumptions I am making:

1) I think the growth prospects are better in the Atlanta market than Pittsburgh from a pure demographics standpoint.
2) I estimate your return on equity at 7.2% currently

3) Over the long haul appreciation is going to take you further when it comes to net worth than cashflow will

4) Doubling of the roofs is doubling the expenses

Things to consider:

1) What is the year built of your Atlanta property vs. what you could replace it with in PGH?
2) 7.2% return on equity is pretty decent in today's market. Can you go out and increase that comfortably in pittsburgh?
3) Do you think you would like owning rentals in Pittsburgh more than Atlanta? The emotional / confidence factor does matter when it comes to conviction to hold over the longhaul.
4) Are you improving or decreasing in the quality of area you are going into in order to acheive this cashflow in PGH?

Would love to chat through this situation with you as I am always pulled to invest in Western PA when student rentals pop up near SRU. Shoot me a DM!