I need advice on whether I should continue to hold onto my investment property or sell and "buy up".
Here is the scenario. I own a condo in Brooklyn, NY, which I purchased at the end of 2008 for 940k. Today it is worth 1.65M, so it has appreciated roughly 10% a year. My positive cash flow is 2k a month. My current equity in the property is 845k, which makes my return on equity a miserable 2.8%. I ran numbers on if I sold it and repositioned that equity as a 25% down payment on new property. After commissions and fees, I'd probably walk away with 750k, which would buy me 3M in real estate. If I purchased the new 3M investment at a 10% cap rate, my pre-tax cash flow would be roughly 13k a month. I'm also leveraged into 3M in value, so if the market goes up 10%, I make 300k on paper vs. 10% on my condo, which would be 165k. Selling seems like the smart move, but I hesitate because of the possibility of continued strong market appreciation for the area of Brooklyn my condo is located in. Am I crazy to continue to let all this equity sit and only generate 2k a month?