The Double edged sword

[Sharee Paulino]

Hello BiggerPockets, I have a Dilemma I would love to get some input on.

I purchased a screaming deal in June of 2017.

All in with rehab, the cost was $75k (including furnishings).

It has been on Airbnb for nearly 2 years now.

After all expenses including management the property effortlessly nets around $3k/month consistently (according to my Trailing 20) which is in the 45%+ cap rate range.

It is a condo that has proven nearly impossible to (re)finance (due to mostly investor ownership in the community).

Now it has a market value of roughly $150k+. Even with the new valuation the property is still preforming at a 23% plus cap rate.

I will buy 20+ caps (B class properties) all day, but the lack of leverage presents a problem when one is trying to scale.

I have however, been able to reinvest the cash flow directly into a couple small multi family deals.

On the other hand, In my market the extra $150k down can absolutely get me a larger multi family, which is my desired trajectory.

This begs the question; To sell, or not to sell?

(A) Sell a 45+ %+ cap rate property, take the double up on investment and 1031 to a bigger deal.

Or,

(B) Keep property and scale accordingly via reinvesting cash flow + savings.

Any/all input would be greatly appreciated.

Thank you in advance.

[Danielle Wolter]

It seems like a pretty good thing you've got going if you are netting $3K/month IMO. I would sock away the cash flow + savings to scale up. Also, I know portfolio lenders sometimes will lend even if the owner occupancy is low in a building. You'll pay higher interest, and likely won't be able to take out as much equity, but that may be an option to look into.