Scaling In and Out of Markets, buy low sell high?

[Lindsey Andrews]

Question:  Do people generally scale in and out of the market, i.e. take profit, buy low, sale high sort of strategies or always buy and hold.  If you turn over properties and convert gains to cash how do you set your targets or calculate when an investment has run its course?  I don't see a way to scale down in a market without paying capital gains, is there a strategy for that? 

I converted a primary into a rental in 2013 in King county east of Seattle, has been very hot. Will be 4 years this summer so am past the 2yrs in last 5 point of not paying capital gains :-(. Market has been very hot and am considering liquidating to pay down debt on new primary residence.

Being debt free is on my personal side I think is important to wealth creation.  Getting liabilities paid off. 

I'm considering my CAP rate on my rental is getting very low due to hot market and even increasing rents doesn't seem to keep up. Seems like rents are not close to keeping up with appreciation. Do folks usually calculate a running CAP rate on what their assests are worth and scale in and out of the market? If so my cap rate on the rental is approaching the loan rate on the primary and am wondering if it is worth carrying the risk of having a rental when my cap rate is so low. I'm at <4% cap rate now and I think my rents are in line with the market, (perhaps a tad bit low for a super tenant). Wondering if I should lock in gains, pay off debt and wait for a more advantageous market.

Is there a philosophy with increasing cash flow and paying down debt while the market is a sellers market?

Thanks in advance for lending advice to a newbie.