What to Do: Value-Add, Partnership or Sell?

[William Brundige]

I'm new to real estate investing but I've been in real estate development as either an architect, contractor or both for almost 20 years. A couple of years ago my wife and I stretched our dollar, cashed out other investments and bought two duplexes that share a property line. We were lucky enough to get interest rates around 3.5% for each but the properties have been under market rate rents with the same tenants as when we bought them. My background as an architect and contractor was one of the big reasons why we bought them because we saw the value-add opportunity by adding more units (either ADU's or a slightly larger scale version). In my research on the local codes and ordinances, we have the ability to add (3) one-bedroom units, and (1) two-bedroom unit. With two existing detached single family homes already on the property that would bring our total unit count to (5) and approximately $10k gross in monthly rental income. Seems great on paper right?!

Here's where I'm looking for input.  We bought the properties in 2021 and at the price we purchased them we have some pretty good equity built in.  We don't have the cash to do the grandiose approach so we're looking at potential selling or finding a strategic partner (one that could bring in the capital to maximize the rental income potential).  NOTE:  we did have to borrow money from friends and family to buy these two properties and we want to get that money paid back right away.  Our dilemma is we see the longer-term potential buy doing the value-add and holding the properties but also need to get our friends and frailty their money back.  If we sold now we'd come close to a break even and maybe put a little money back in our pockets, but we aren't sure thats best for our long term plans.  

We're looking for input and opinions on what others have seen (good and bad), done themselves (good and bad) and suggest.  We're open to all possibilities at this point and want to make sure we're doing what's best now and for our future.

Thank you to anyone in advance that reads this, and/or offers their input!

Love & Light,

Bill