Hold or Sell - Thoughts?

[George Pauley]

Hi BP'ers!

I am planning on selling my 3 AZ rental properties and wanted to put my thoughts on why and how up for review, critique and alternative thoughts.  :)

All three properties are in the Phoenix AZ area, and were bought between 2009-2011.  I'll tag them by their street names.

Superior:   Purchase:  $142k   Down $40k   Owed $101k   Sell $280k   LifeCoC  $-17k

DragonTree:   Purchase $147k   Down $35k   Owed $103k   Sell $240k   LifeCoC $0

Trellis:   Purchase $155k   Down $35k   Owed $114k   Sell $260k   LifeCoC $-7k

   
My motivations for selling are, first, I've bought other, much better cash flowing properties in the meantime.  (Though I'm not seeing near the appreciation.)  Second, I'm hoping to retire in the next 4-5 years and figure I should get my appreciation cash out while the getting is good.  I think Phoenix is a solid market with plenty of room for more growth, but you think about these things a bit differently as you get close to retirement.  Finally, I would like to get rid of the negative/flat cash flow properties before retirement.

Thoughts, comments?  Are there compelling reasons to hold on to these properties that I haven't considered?  The appreciation on these properties rocks, and maybe that's worth more than the horrid cash flow?

I see the deal as $780k total sales price. Minus 10% commissions/fees. Minus $320k mortgage payoffs. Leaving me about $350k cash afterwards. That's a profit of $240k in 7 years on $110k invested. A bit more than 10% ROI. Any problems with my calculations?

Finally, taxes.  If I take the cash, my accountant is estimating $70k in taxes, leaving me $280k in pocket.  I am vacillating between just taking the $280k, putting it in Patch of Land, or other equivalent vehicle, and getting my 9-10% a year without having to deal with properties, managers and tenants in my retirement.  (At least on these properties)

The other (mathematically better) option is to go through my first (mother of all) 1031 exchange and buy about 10-15 properties in more favorable markets (midwest) each cash flowing about $200/month.

I'm interested in everyone's thoughts on these two options.  Mathematically 1031 is the way to go.  But does impending retirement and the idea of getting my equity safely out of properties that may experience a down turn mitigate the math?

No right or wrong answers here.  Just looking to see what kinds of creative input this group comes up with.  Thanks much!