Sell To Acquire Multiple, Better Cash Flowing Properties?

[Dalton Thornsberry]

I'm in a bit of a unique situation here, but maybe not so unique as I'd imagine many investors are in something similar right now with recent appreciation, inflation, etc. 

Situation: 

I currently own one rental property in the Bakersfield, CA market that I purchased in 2017. Made some minor improvements and house hacked basically until I relocated for work. I now live in San Diego (my market here is impossible right now imo). The property is now worth almost double what I paid for it. 

Access to the equity in the property is extremely hard to come by right now as HELOCs on investment properties are suspended from any lender I've contacted. I want to gain some working capital to acquire additional real estate in a neighboring market. Cash flow is around $200 a month right now (rent is slightly below market rate as I've had a long term tenant in place). 

I could cash out refi this property but with the rates being what they are and lenders charging pretty ridiculous closing costs, the amortization schedule would not make sense and it would destroy the cash flow I do have in the property (I've worked with multiple lenders and brokers to run the numbers). 

Question:

Do I sell the property, take my $120K in capital and 1031 exchange that capital into multiple, higher cash flowing properties with slightly lower appreciation potential? 

A note: I do have a business partner willing to match that and all together we'd be in control of around $250k liquid capital. With that I do believe we could acquire 4-5 much cheaper properties outside of the existing Bakersfield market (ideally multi-family) and produce a real income to scale much faster (velocity of money and all that jazz). 

HELP!?

Also, I understand this may be the best dilemma ever to have but I want to maximize my use of this equity in one way or another, if the market in CA does cool it would be a great selling point as well. I do think the existing property has more long term potential for appreciation as the area is an up and coming hub in Bakersfield, also close to the University there. 

[Joe Villeneuve]

You may not believe this, but you're actually losing money.  The higher the equity percentage a property has, the more it is losing money.

The true value of the equity isn't the face value of the equity.  The true value is what that equity represents in property value and cash flow.  In a very rel sense, your equity is what you are buying the property for, and your PV & CF is what it is buying.

Here's an example:  Typical property worth $200k at the time of purchase
A)  Purchase
  1 - PV = $200k
  2 - Cost (DP) = 20% = $40k
  3 - CF = $8k/year

...property value increases to $240k doubling the original equity

B)  Selling property, and accessing $80k in equity (now cash).  Buy new property  
  1 - PV = $400k
  2 - DP (cost) = $80k
  3 - CF = $14k/year.

...you would have lost $160k in PV...not gained $40k...

...and, if either choice is repeated, that gain/loss is exponential with each repetition.