Fork in the road- HLOC or sell and reinvest

[Stephen Roche]

What's up BP? So I have been a member for a while but really hesitant to take the leap and I am finally there. I will be relocating to the Raleigh Durham NC area this summer and am searching for a multifamily(duplex to fourplex) to house hack. Here is my question..... I currently own 2 single family homes in New Orleans La. I have 100% equity/ zero mortgage on both. House 1: 3 bdrm 2 bath 1500 sqft- appraised at $120000. House 2: 3 bdrm 2 bath 1900 sqft- appraised at $160000. Total equity: 280k. My overall goal is to buy and hold with aggressive 10-15 year mortgages. Cash flow is not priority initially but when the properties are paid off(target age :50) then I will retire. That wasn't a question. So I am stuck between pulling out a line of credit on both properties and buying a multifamily or selling both and putting the capital into a larger complex. Thanks for your help. Ps. I cannot wait to get back to North Carolina. Thanks BP -Stephen

[Greg Jeanfreau]

@Stephen Roche I have some questions/comments:

How long ago did you purchase and how much did you pay for them? And therefore, what kind of capital gain and/or depreciation recapture will occur if you sell? (Ask your CPA) Or did you live in either (or both) of them 2 of the last 5 years? If so, then you could (and probably should) sell now with no gain. I agree to take into account being an absentee landlord. There are countless nightmare scenarios that can happen to absentee landlords. I also agree with the 1031 exchange idea with the caveat of making sure that you have your ducks in a row on the selling side and be knowledgeable of what you want that is realistic on the purchasing side. 45 days to identify is not a long time and if you identify first, then you need to make sure that you can sell the NOLA properties in a reasonable amount of time. What area(s) are the the two properties in? This could make a difference whether to hold or sell if there is a chance for appreciation (or not).  

I do think that the multi-family vs. single family strategy really depends on the market area. Personally, I stick to historic, small multi-family properties for middle/working class tenants that could be converted to singles and sold if it makes sense. Some people don't want to live in the large complexes, but can't afford to buy or rent a whole house. The large apartment building market definitely seems to be getting a little to overheated these days, so I try to stay in my easily understood wheelhouse with good cash on cash returns. FYI, I am on the same 15 year Am retire around 50 plan.