Turning my million dollar building into more cash flow

[Account Closed]

Im a young investor - relatively new to the game. I have built up to acquire a 16 unit apt complex worth roughly a million. Here are the numbers

Gross rents - 13200/month 158,400 /yr
Operating costs avg range-82-88k /yr
Net - roughly 67-75k factoring in 2% -5% vacancy range

The mortgage is at 200k at 2% over 10 years so about 24k a year bringing my net down to 43-51k

The building is in MA and I'm currently living in Texas- I'm managing remotely using people for books, repairs and rentals (my net factors in their pay). I have about 80k in stocks and 50k in cash on hand and am renting in Texas.

My question is this: what are my best options in my position to parlay what I have into something more. Should I trade up to a bigger property? Should I leverage it to buy a few smaller fixer uppers in Texas to rent? (Austin area) I feel that with my situation (800k roughly equity- 50k passive cash flow-130k cash) I could be doing much more and generating higher returns. Aggressive ideas, medium risk ideas? Thanks!

[Steve Babiak]

Have you considered and evaluated the prospects for converting the utilities to being individually metered per unit and then paid by the tenants? That is usually one of the things to consider when looking to reduce expenses / improve net income.

For the purposes of 1031 exchange, you should consider what your basis is in this property. Let's say for example that it is now worth $800K; if you paid $800K or more (total basis, not just purchase price), then there is no capital gains for which you would be seeking deferment, so no point to the 1031. If your basis is way less than value of a sale, then a 1031 makes sense to consider. You could 1031 from that one building to many single houses, but that could be really tough to do within time constraints limits for a 1031 exchange (especially if you really are holding out for good deals to buy).