Affluent location vs. less affluent?

[Robert Panian]

I own a rental house in a relatively affluent area, Bellevue, WA. It is worth about $700k. It rents for $2600/mo and has a $370k mortgage. I have made good money on the appreciation (on paper) but little to no income. I’m thinking about selling it and buying two rental properties in a less affluent area, like maybe Yakima, about 2 1/2 hours away. These houses would generate more income. But I would take at least a $56k hit in transaction costs with commissions, fix-up, vacancy, etc in the process. Appreciation in Bellevue has been nice but who knows if it will continue. I’m a few years from retirement. What would you do? Thank you.

[James Wong]

It is hard to answer your question without knowing your goals. But here are somethings I would ask myself if I saw in your position.

How much are you currently cash flowing after expenses? How much will you be cash flowing if you decide to split into two rental properties? Are you ready to manage two more rental properties? Selling seems like a good strategy. How about a 1031 exchange? How about a cash-out refinance and acquisition? 

Cheers!