Need Advice on how to best use my equity.

[Jeff Shaver]

Current investment property in San Diego brings in $5K a month, my net after mortgage/PM/etc. is around $650. I have roughly $550K in equity and would like to use that equity to invests in more properties. I have tried to do a HELOC but I've recently retired from the military and haven't started another W2 therefore lenders don't want to approve the HELOC. Should I sell and 1031 the equity into a apartment complex where I can increase my net per month? Also, after I do a 1031, how long do I have to wait before I can cashout refinance? Thanks for the advice.

[Dan H.]

Quote from @Jeff Shaver:

Current investment property in San Diego brings in $5K a month, my net after mortgage/PM/etc. is around $650. I have roughly $550K in equity and would like to use that equity to invests in more properties. I have tried to do a HELOC but I've recently retired from the military and haven't started another W2 therefore lenders don't want to approve the HELOC. Should I sell and 1031 the equity into a apartment complex where I can increase my net per month? Also, after I do a 1031, how long do I have to wait before I can cashout refinance? Thanks for the advice.

 You do not indicate what your current interest rate is.  I assume most of the $550k equity came via appreciation.  This is relevant for multiple reasons 1) appreciation is where the real wealth is generated in RE 2) real estate has tax advantages over cash flow 3) in CA property tax increase is capped.  Large appreciation implies property tax savings versus a new purchase. 

Have you calculated your monthly appreciation?  I have San Diego properties purchased with good timing and properties purchased with poor timing.   My worse San Diego appreciation property appreciated $2700/month (I would be shocked if yours is worse than this).  My best appreciating property has appreciated over $10k/month.   Note with the current rules, I never plan to pay taxes on the appreciation. 

My point is cash flow is only one source of return on RE and in my opinion the least desired because it gets taxed annually.   To determine the quality of a property requires to evaluate all of its return as well as potential return.  Your current RE seems like a fine asset that I would not consider selling to enter most other markets.  

Good luck