Tough decision- To keep my current rental or1031 it into another?

[Chris B.]

I have a SFH (Single Family Home) in Tucson, AZ and the tenant just moved out. I've cleaned it up, re-tiled downstairs and its in great shape and in a good school district on the edge of town. Current mortgage with PITI is just under $1k. Rent value is just over $2k. HOA is $35 a month. Once rented I'd be bringing in about $1100 a month after listed costs. Home value is about $360K. 1031 Exchange proceeds would be roughly $200k after paying agent and old mortgage off.

I'm considering doing a 1031 into a SFH property in the vicinity of Gilbert, AZ (much closer to me). Purchase price would be in the area of $450 - $500k. Lets assume $500k. That would equal a $300k mortgage. I was quoted a 6.25% interest rate with the $200k down. I'm calculating a mortgage at this rate would be about $1850 monthly. HOA would be about $100 a month. Rent would be around $2200. Profit before other expenses would be about $350 a month.

So the current situation in Tucson is bringing in a lot more profit from rent.  However, appreciation in Gilbert of a $500k home is likely to be greater than a $360K home in Tucson over the next 10 years.  I'd like to keep the property for 10 years minimum either way before I sell it.

Does anyone have any advice on this decision?  Maybe factors I'm missing, or a strategy I haven't thought of yet?  what do you think will be the best investment 10 years from now?  Thanks in advance!