So Cal - Orange County Property - Sell or Hold

[Bo McCoy]

Hell BiggerPockets!  New member here and this place has been a treasure trove of information.  I am hoping you can help my wife and I.

My wife and I are both new members to BiggerPockets.  We've been researching investing in the multi-family market for a few months and are beginning to look around now though out of state.   Everything I've read, here and elsewhere, has indicated that the Southern California (especially the OC) market is not ideal for cash flow investing but more so for appreciation.  There are deals to be found, but they are harder to come by than other areas.  California is a huge state, so if I am looking in Northern California I might as well look out of state.  

We presently own (have mortgages) on two homes.  The first is a town home in Foothill Ranch that was our first home.  We bought close to the peak (shudder) in 2005 and the value has now recovered such that the value is around 8% more than we bought it for.  We have a 15-year, 3.2% (IIRC) mortgage with 13 more years to go (we recently re-fied to 15 years to catch the interest rate).  Right now we have around 50% equity in the home.  We got lucky in 2010 and bought a much larger home in Diamond Bar and are renting out the town home in Foothill. 

We decided to rent the place in Foothill because at the time we would have taken an absolute BATH and would have had to pay around $75k to $100k to get out from under it.

The rent in foothill is below market (now) but at the time it was commensurate with the surrounding area.  The tenants are outstanding though the rent does not cover the mortgage at this time.

Now we are looking at investing in multi-family properties but we are questioning what we should do with the place in Foothill.  So I am asking for some insight.  

• Do we hold onto it, re-fi to 30-years and treat it like a traditional rental?  
• Do we continue with the current mortgage and next year upon rental renewal, bite the bullet and do a market adjustment?  
• Do we sell the unit which will help free us up regarding potential additional residential multi-family loans (we have 2 right now).
• ??????

Any thoughts you may have are appreciated.

Thank you.