Single family investment property to multifamily

[Ray Lam]

I have a single family home investment property that’s located in the Bay Area about 20 miles from San Francisco proper. I have a huge chunk of equity build up over the years in this investment property. I am debating if I should do a 1031 exchange, take a equity line of credit, refi at a higher interest rate than my current interest rate and take some equity out or simply sell my investment property. My goal is to get into multifamily properties hopefully one closer to San Francisco. Also this investment property is under very low interest rate and generating over 100% cash flow of the mortgage payment. Any suggestions?

[Spencer Hilligoss]

@Ray Lam - sounds like a great problem to have! 

sounds like you've created a few options for yourself. Here are a few suggestions, since you asked: 

• #1 - Identify what you're solving for and set clear goals to achieve it. Based on what you wrote above, it's unclear why you want to continue expanding your portfolio. Setting a clear goal can help inform you strategy

• #2 - HELOCs are great. I'm biased, because we've had an awesome experience opening one to tap the equity built up in our bay area home (we're in Alameda). A key advantage of this approach is that you'll leave your first mortgage in tact (with that great rate and cashflow). If you did a cash out refi, you might lose awesome rate (as @Aaron K. pointed out). Even though some of the investor tax benefits of HELOC have has been reduced in 2018, i think they are still excellent products. Just watch out for those variable interest rates as we're in a rising-rate environment in the coming year(s)

• Sidenote: Are you hard set on investing in multifamily in California, specifically? there's lots of opportunity elsewhere, as well. 

Alternatively, you can tap the equity in the form of a HELOC and invest as a Limited Partner in a handful of apartment syndications. That would require very little time, offer you geographical/market diversity and you'd still reap the benefits of apartment ownership on low/no income-tax, thanks to depreciation!