Should I Sell My First Property?

[Aaron Araujo]

Hey BP!

I've been contemplating this idea in my head for a few weeks now so I figured I'd take it to you guys. 

I bought my first property this past August; a 3-unit in Massachusetts. I've been collecting rent on 2 units while renovating the third unit up until this point and I'm approaching the finish line. I bought it with the intention to hold long term, but I'm now contemplating selling. 

Let me give a bit of context first. My goal is to own cash flowing real estate, enough to eventually reach financial independence and beyond (original, I know). I don't particularly care how I arrive there in regards to my distribution of units. Whether I have a bunch of 3-unit buildings or one 24 unit building is not a limiting concern. I just want to get there as efficiently as I can.

So, here I am with this 3-unit that I just bought. To better help with the discussion, here are my options in a nutshell:

A) Keep It 

If I decide to keep it, I will rent out all three units an implement property management. After accounting for expenses and reserves I will net cash flow between $300-$400. Not a screaming deal, but I am into the property fairly light so my cash on cash is decent. 

B) Sell it

Based on comps, if I were to sell I the near future I could make an initial gain of $60-75K. Not bad for a first flip if I go that route. Any profit from a sale would then be parlayed into another investment, ideally a larger building with greater cash flow potential. (via 1031 exchange)

An investor friend of mine opened me up to the idea that I could either hold it for 3-4K a year, or sell it and make 15 years of cash flow in one fell sweep. Obviously this doesn't consider equity gain or tax benefits, but it is an interesting perspective that I hadn't considered prior. It's like time travel!

C) Refinance 

I could refinance and lower my mortgage payment slightly, getting rid of PMI. However, since my LTV is around 80%, I wouldn't be able to pull any cash out to use towards another deal. I would simply gain about a 100 bucks of monthly cash flow.

So, I come to you, asking for insight and guidance. What would you guys do? Should I take the profit and grow my portfolio by finding something bigger and better? Or should I stick it out and wait until I have the funds to buy another one? 

Thanks for any feedback!

Aaron