Weird problem here. My rental property in the NYC area, bought cheap, owned for 18 years, long mortgage-free, has appreciated to the point where Zillow now values it at $1.3 million and I suspect the value is more like $1.6 million. According to my CPA, the $1.6 million level is the magic number at which I clear $1 million after paying taxes, paying back depreciation, broker fees, etc. Rents are $2000, $1650 and $1900 per month -- definitely below market but excellent longstanding tenants. The place only costs about $1200 a month to run (property taxes are low), though I also put a big chunk into a reserve fund every month. There is some deferred maintenance (masonry) which I've been saving up to address ($24,000 job). The $1900 unit is actually a storefront that is being used as a legal residence/artist studio but could be converted back to commercial use (it hasn't been commercial since I've owned the building), which would probably garner at least $4000 per month, maybe as much as $6000 if I'd be willing to rent to a restaurant (I probably wouldn't). Also, the place is only a couple blocks from the river, which worries me. The city's new flood maps show it as not in a flood zone (and it did not flood at all during Sandy, though a few parts of the neighborhood did), but there's no reason to think there won't be more, possibly worse, Sandys in the future. So, the question is, what do you do when an asset has appreciated to the point where it is taking over your portfolio? I am uncomfortable with having nearly all my eggs in this one basket. Is "rebalancing" -- selling -- called for, since my return on all the capital locked up in this house is not that large? Or should I double down and do the commercial rental (which I'd need professional help with, since I know nothing about negotiating commercial leases) and just be more businesslike about running the place? I've considered a 1031 exchange for a rental property or properties nearer to my home but they seem overpriced. Please, MMM wizards, help me figure this out.