Should I stay the course, refinance, or 1031 exchange my equity

[Bruce Coleman]

Dear BP Community,

I’ve been a buy and hold investor of single family townhomes for 3 years now.  My goal is to earn enough passively to quit my day job.  If I have to pick a team on whether I invest for cash flow or appreciation, I have to side with cash flow.  In practice however, I’ve tried to acquire both.  After the initial purchase and rehab, it’s against my religion to invest any more of my earned income into a property.  Having said that, I have enjoyed quite a bit of appreciation on my first townhome investment.  Here is the good problem I have…

What should I do with this equity?  Should I sell or refinance and extract cash?

I have about $50K in equity in one townhouse. After all expenses (mortgage, ins, taxes, HOA, maintenance and such) I'll realistically earn about $3,300 in cash flow this year. The homes in the area have been appreciating at around 5% annually. The home's current value is $100K. I have great tenants that always pay on time and they have indicated they would be interested in purchasing the property within 1-2 years. Lastly, I self-manage this home.

It may only be my experience, or lack of experience, but I don’t see myself earning enough passively to retire within a time horizon I would like (5-8 years) via single family homes.  I am considering buying multifamily.  Quads are fine, but I am open to commercial multifamily (5 units or more).  I don’t discriminate.

What information can the BP Community share with me concerning quads?  Specifically, what type of tenant rents this type of place in general?  What kind of credit scores should I look for when screening applicants?  What percentage of expenses should property management comprise?  Do Quads appreciate in close alignment with the SF homes in the area or are they based on NOI like commercial multifamily properties.  What good resources are there for assessing how much to charge in rent?  What don’t I know that I haven’t asked about…?

Selling something that has made me money for several years heretofore has been also against my religion, but I think I could convert to a new faith if I saw the upside of moving on up.  Feel free to challenge my assumptions.  I'm looking for enlightenment.  I value your input and thank you for your time.