6 Unit Mixed Use - Hold or Cash Out and Move Up

[Herb Lichtenberg]

Sorry for this long winded story but it will provide good context and then I'll get to my questions.  My wife and I purchased a 6 unit mixed use building 3 years ago for $325,000 with the owner financing the deal.  The deal came with an apartment building on a sizeable lot with a storage garage in the back of the property and it also included an empty city lot.  We knew that the property was under valued to begin with and one of the units required about $20,000 in rehab costs to make it rentable and safe...so we are all in at $345,000 plus some minor upgrade money here and there.  Two of the units are commercial and four of the units are residential.  It is on a main street in a quiet small town but close to large cities with plenty of job opportunities.  Since buying it, we have upgraded one of the units as mentioned above and did a minor bathroom countertop/sink replacement with a fresh coat of paint and hardware in the kitchen of another unit.  We are waiting for the tenants to move out in order to do the renovations so we don't really know when we are going to get to the other units.  The rents on four of the units are way under market for the area and we are making a small adjustment this month on those.  I'm not going to claim that I'll get top dollar but just on the numbers with a $35,220 NOI and approximately a 6% cap rate, that property should sell somewhere in the neighborhood of $475k-$550k plus we would get an additional $60k-$75k for the lot.  There is plenty of meat on the bones of this property if we fully renovate each of the apartments, get market rates on all of the units including the two commercial units, and get some additional income by renting out the garage in the back of the property.  I believe we could increase rents and other income by $1200-$1500. Finally...questions to my savvy investor friends. Would you sell off one or both properties now and invest the money into another deal somewhere else? Would you hang on to this property a little longer, continue to add value, and then sell? Would you continue to add value and hold?  Or is there some other thing I'm not thinking of?  I'm sure I'll get lots of "it depends" answers but to help that, my wife and I are looking to pay off our primary residence which we're getting close on (around $100k) and maybe find another better investment like a multi-family apartment or mobile home park to move into another category/size of investment. I can add more details so fire away if you have more questions.