Converting equity into more cash flow

[Raymund Charfauros]

I have a few rental properties in San Diego where I have experienced some solid equity growth over the last few years. The properties have personal mortgages and I do the property management myself, I am getting decent cash flow on each unit and would like to convert that to additional monthly cash flow. I have been looking in others markets where I could get more units but would mean third party management and potentially commercial loans. I could 1031 exchange 1 or more of the properties but also like the idea of hanging on to San Diego real estate. Any suggestions on how to proceed and analyze would be helpful

[Kevin Fox]

Hey @Raymund Charfauros

I'd need to know a little bit more about how much weight you place on each metric and your target returns; but I am almost certain you'll find that your two goals (increased cash-flow, continuing to have an interest in San Diego RE) don't necessarily have to be mutually exclusive.

There are two factors playing in to your favor here:

1. Certain neighborhoods tend to offer deals which are more cash-flow-centric than upside-centric, so you can definitely find somewhere that offers a bit more of a middle-ground return-wise.

2. San Diego is a market where the economy of scale tends to be VERY significant, especially when it comes to cashflow.

So, I think your best bet would be looking in to the feasibility of selling one/some/all of your current rentals via 1031 and exchanging into one or more higher unit-count properties in a more cash-flow-friendly area.

I'll shoot you a PM so we can chat about this possibility in a bit greater detail.

Kevin