100k in equity on rental property... what would you do?

[Account Closed]

Hi BP!

New poster but longtime lurker/reader/researcher.  I live in Aurora, CO and currently manage two properties:

• A 2/1 condo in Golden, CO owned by my family
  • Purchased in 2006, I lived in one room during college while we rented out the second; that tenant is actually still there 13 years later so we continue to rent the bedrooms separately
  • This property is not super relevant to this post except to show that I have a decent history of landlording and setting rental rates etc. I'm familiar and comfortable with having rentals.
• A 2/1 townhouse in Lakewood, CO that I purchased in 2015 and lived in until June of last year when I purchased my current home (which I will stay in for a long time) and started renting the townhouse out.  
  • Purchase price was 171k, I put something like $7k down on a 3.65% 20 year loan, and it rents for $1600/month with $230 monthly HOA fees (sewer/water/grounds maintenance/exterior maintenance including roof/trash; these fees have increased each of the last 2 years).  
    
  • It's cash flowing at ~$300/month 
    • This is straight up rent minus mortgage minus HOA
    • It does not include deductions for maintenance or repairs or account for vacancies.  I think the furnace will go sometime in the next few years because it is really old, and windows will also need replaced at some point.  I do have a home warranty, but even so, a new furnace will wipe out at least half my years' cash flow when it happens.
  • If I sold it now, it could sell for $280+ and I would net over $100k
    • This would be capital gains free since I lived it for more than 2 of the last 5 years
  • After a lot of weird issues with the current tenant (who I vetted thoroughly and felt good about), and living clear across town with a full+ time job plus caregiving for my mother on the weekends, I have learned that I am not interested in hands-on managing this rental property anymore.  So, if I keep it, I will bring on a PM company who will charge 9% of the rent, reducing my cash flow to ~$150/month.

So - it's definitely cash flowing, which is great!  However, after a lot of research and number crunching, I think the equity that has built up in it over the last few years could work for me a LOT better than sitting locked up in the townhouse.  So, I'm considering many options:

• Keep, do nothing different except adding a PM to it (after all, it does cash flow, and should continue appreciating in the long term.  I don't want to bank on appreciation, however, and believe we are at or nearing the top of the cycle so IMO things will not continue appreciating as much as they have been and may plateau or even go back down a bit... Who knows).
• Keep, HELOC or cash out refi to get a portion of the equity out
• Sell when the lease is up this summer and use the equity to:
  • Purchase a cheap ($100k ballpark) condo free and clear in Aurora (or other Denver surrounding area), fix up as needed, and increase my monthly cash flow to $5-700 ish after HOA and PM. Equity still locked up in this case, just in a better cash-flowing property.
  • Leverage the equity to purchase 2-3 rentals ANYwhere - there are a lot of $100-200k condos in the Aurora area which should rent for $1000-1500 so that's an option; potentially looking at CO Springs where properties are not as crazy as Denver area; even open to a long distance purchase in a cheaper market. The idea here is turning my 1 into 2 or 3 by selling and then leveraging the equity.
    • I would love one of these properties to be a Summit County (Colorado's Ski country) vacation property. Need to crunch more numbers because they have astronomical HOA fees up there and 30% (of rent) short-term-rental management fees so that might kill all profit - but if I can find something that cash flows even a small amount after all that and it's also something I can get enjoyment out of, I would really like that to be one of the properties I acquire with this equity.
• Pay down my primary home mortgage by about a third to save on interest long-term; wait to buy further rental properties until I have a down payment saved up.
• Buy something to fix and flip, repeat (This has always intrigued me, although I'm not as comfortable with this as buying a rental simply due to familiarity and lack of time to do repairs myself; for the right numbers and if I built a network of contractors to help, it could be fun. Definitely an option.)
• Buy tax liens (again, always been interested in this but not familiar and need to research, but definitely an option!)
• Put it into crowd funded REI for decent, passive returns
• Some combination of the above
• Some option that I don't even know about!

My long term goals are simply financial independence and to be debt free on anything that doesn't pay for itself (i.e. pay off my primary home). I don't want some company to own my time and thus my life for 40 years.  I think I will be using PM going forward for rentals, as the 9% is worth it to me not to have to deal with dramas and emergencies; in other words, I'm leaning more towards passive rather than totally active. I have some DIY improvement skills, but not necessarily time.

I wanted to give as much info as I could to get the best advice and suggestions so this turned out long - thanks for reading to the end!  There are so many options and probably they are all good paths forward with no super wrong or right answer, so I do feel very lucky to be in this position.

I'd love to hear the perspective that you all have on this. So, my question is: what would you do in my situation, and why?

Thanks so much for any input!