Looking for advice on currently held properties

[John K.]

This is my first non-intro post, so hoping this is the correct place. Quick background. We bought our condo in 2001. We kept it as a rental when we moved to our current house in 2008. We are currently in the process of buying a new home. We are in southern California, so it's very hard to get something to cash flow here. I'm looking for some advice on what you would do with these two properties.

Condo

Current value is approximately $415k. We put down about $10k and currently owe about $170k with a $936 mortgage. Appreciation has been excellent! Rent is $1800 but we're under market by about $300. Maybe more. We've been lazy about increasing rent because our tenant is so good. HOA is high at $435. Maintenance has been low for many years. It's cash flowing, but not by a whole lot. I don't see this property appreciating quickly going forward, so focused on cash flow.

One idea is to sell and roll into a few more properties via 1031. If we did this, we would not reinvest in this area. I have family in New Hampshire and that is one possibility. However, selling means we lose $25k just in RE commissions. The new places would have to cash flow significantly more to make up for that. There is a chance our tenant might want to purchase, which would mean saving the commissions.

Another idea is to get rents up to market as quickly (and legally). It would still cash flow, but the ROI is pretty poor considering the equity sitting there. However, considering we only put down $10k, maybe I'm looking at it wrong.

Building on the second idea, we could also pull some money out to reinvest elsewhere, keeping the condo.

House

Current value is in the $650k-$700k range. It's a high end home in not the greatest city, so comps are very hard. We put down $120k and currently owe about $427k with a $2150 mortgage. We could refinance and get it to around $1850, but haven't done so because not sure if we're keeping it. I think we could easily get rent in the $3300-$3500 range.

One idea is to sell and use proceeds for down on our new house. Pretty straight forward, but if we sell we lose $42k in commissions. 

We could hold on to it and rent. It could cash flow, but again, the return seems awfully small.

For either property, we don't need the cash out right now. We have capital for additional properties as well even without a sell of either. But I want to ensure my money is working best for me. What would you do?

[Charlie Fitzgerald]

Deoending on your age and time horizon for investing in RE, keeping them both and refinancing and getting 70% of your equity out might be the best play. If you are in this for the long haul, marginal cash flow and depreciation and appreciation in up cycles is what creates long term wealth. I am a buy hold investor with my personal REI. To me, selling houses to buy other houses is like selling fish to get worms to go fishing. Your timeline and eventual exit strategy and your "why?" For investing at all have to be considered. For me, I'm keeping them both, stripping equity and growing my portfolio for long term hold.