The pictures may be off a little bit on scale, cause when I'm actually standing in the space, it feels more crowded to me than maybe it looks in the drawing. 

@Javier Guandalini put it into a multifamily asset and create scale for yourself. scale=protection 

Build efficient systems to scale up.

Adding up, scaling up, zoom-zoom-zoom in the one way I'm using to make money off real etate.By the time you get to that point, you're always buying assets with one hand and selling assets with the other.

Option #2 Sell both and use profits as a nice DP to scale up to a better quality property.

Going from a taxable income of $1237 to a loss of $4591 would be an income reduction of $5828 resulting in $2039 in tax savings in the current year assuming a 35% tax rate ($2307 at 39.6%).This is a small example, but these numbers scale up and generally become more favorable with larger properties over $500K. 

I caveat that with, if the market does something and gives you an opportunity that seems to good to be true ( and you verify that everything as it should be ) it may be time to pool resources, scale etc.  

If I scale further up, then it might require an actual Property Manager, because I can't be there to screen that many tenants.  

I have to say, as a numbers guy, the economies of scale you're taking advantage of makes a lot of sense to me.

You seem to indicate that portfolio loans are a bad thing.So then if I don't use portfolio loans, how am I supposed to scale my acquisition of properties to any appreciable degree?