What Would You Do?

[Shane Benner]

Need some advice.  I have the opportunity to purchase a four-plex in an 'A' area for $290k.  The property needs $200k - $300k in renovation to make it rent ready (so in it for $500k - $600k).  There are 2 (2bd/1ba) units and 2 (1bd/1ba) units.  Once rehabbed the 2 bd units will rent for $1,800 each and the 1 bd units will rent for $1,200 each, for a total of $6k a month in rents.

I currently own four condos in a very good area (also 'A' rated) in the same town.  I am considering offering 2 of the condos, which are each 2 bd / 1 ba that rent for $1k a month each as a real estate exchange + $50k cash to purchase the four-plex. The comps on the condos are at $120k each.

My reasoning is that the condos have a $160/month HOA with each of them so I am taking a hit on my income every month, which I would not be on the four-plex. The HOA will also most likely go up over time, not to mention special assessments. The negatives are the condos are in a great area and are appreciating at a minimum of 3-5% a year, with a re-sell market as SFR where the four-plex would only appeal to investors (mostly). My intent is to keep the four-plex for the long haul for the appreciation and resale aren't big factors for me right now.

To do the rehab work I would have to sell the remaining 2 condos and invest the $200+ in revenue into the rehab. Total project time would be 6-9 months as well. The net net is exchanging 4 condos with HOAs and a monthly income of $3,200 (after HOA and prop mgmt) for a four-plex with $5,800 a month income (after property mgmt). Please reply with thoughts and other things I should be considering - all insight is appreciated, thanks.