1031 Exchange or Hold

[Alison Zywicke]

I have a rental property in Denver, CO that has appreciated 300K since I bought it in 2011.  I have a great property management company and great tenants, I take home $500/month of rental income.  It is an old house (1924) in a neighborhood where original homes are being torn down and condos are being built all around it.  I'm ready to start seriously investing in real estate and feel like this property will allow me to start big.  Should I  1) hold onto the property and take equity out to reinvest in another real estate venture (leaning towards MHP) or 2) sell the property and 1031 exchange 3) contact the investors that are building around me and see if I can partner?  

[Bill B.]

Assuming this property is worth $600k, you’re making 1% per year. You might as well put the money in the bank and collected the $500/mo. Then you don’t have to worry about a 100 year old house in snowy Denver. 

That being said, I don’t necessarily have a better real estate investment area for you, I’m just saying it worked out better as an appreciation play than cashflow. Maybe this is the time to buy a couple $300k properties or a newer/better cashflowing $600k property. Have you talked to your property manager at all? (About both knowing a buyer for you or someone possibly selling something you’d be interested in.)

Think if you sold and collected the $300k profit, paid $50k in taxes on it and then had $250k in your hand (plus original equity and loan pay down of course) you have 500 months of rental income in your hand with no liability or repairs.