Add Unit or 1031 Exchange?!

[James Lee]

I own a 3-unit property in San Diego on the edge of trendy North Park. It's always rented and has great cash flow and probably around $800,000 in equity. I purchased it as a single family with a VA loan and used the BRRR strategy. We still have the VA loan at about a 2% interest rate. There is space for an additional 1 bed/1 bath unit (possibly a 2 bed). We have access to capital to build the unit, but with the market slowing down, there is a possibility that we could 1031 exchange into an apartment. However we would temporarily lose cash flow. Where should we be focusing our efforts?

[Dave Foster]

@James Lee, If you love the property.  But want to jump into something larger.  Maybe the answer is to hold the property but don't build the adu.  Put that on hold and keep that money in the war chest for an apartment when it comes available.    That way you don't lose cash flow or a good property or that incredible loan rate.