House near San Fran: Keep renting, or Like-Kind for a complex?

[James Woods]

About 15 years ago my uncle passed away and left his house in Oakland to my sister and I. Ever since we've been renting out the place with the help of a property management company. There's no mortgage and net annual income varies between $20,000 and $30,000.

I've recently been reading up more on real estate investing and I feel like my capitalization is really low. Am I totally off base or should we be looking for a way to leverage the property value into something more?

I'm looking for growth and I'm currently thinking it'd be great to do something like a 1031 exchange of the property as a down payment on a medium-sized apartment complex.

Other alternatives include splitting up the lot into two separates and building a second house.

Thanks for any advice and let me know your thoughts!

[Arlen Chou]

Really @Leslie Pappas your pitching again? Who uses CAP rates on a SFR? The property should be valued through comps...

@James Woods, it sounds like you have a great little property right now. Your basically getting $20k to $30k per year on zero initial investment! What part of Oakland is your property? With all of that cash flow I would assume you could use those funds to get into some good units near your home. If you really wanted a large lump of cash in one shot, I would go for a cash out refi and leverage the existing property. By leveraging the unit you will not be hit with any taxes nor will you be under the pressure of a 1031 exchange. If you can pull a HELOC on the property that would give you the most amount of "time" freedom to find another deal.

DI would not kill the goose that is laying golden eggs each and every month...