MOD NOTE: Merged duplicate topics.
I am wondering if any real estate investors could weigh in on my situation. I bought two triplexes in SF about 14 years ago. They both needed a lot of work, which has been done over the years and they are now in good condition. I am wondering if it may be time to sell one or both. Here are the numbers.
Property 1 - San Francisco Triplex
Market Value: bank appraisal 3 million
Original Purchase Price: $950,000
Mortgage Amount: $860,000
Interest Rate: 4.375 %
Mortgage Term: 30 year fixed with 27 years remaining
Rents: $16,500 per month
Principal and Interest: $4448.63
Taxes: $14,390/yr
Insurance: $4400 /yr for homeowners/landlord/umbrella policies
Deferred Maintenance Notes: building was built in 1909 but has concrete foundation from 1995. It has new electrical service and mostly new plumbing. 2 of 3 units were remodeled in the past 5 years. When the remaining long term tenant moves out, that unit will need updates to kitchen and bath. The roof is old but not leaking and should be replaced in the next year or two.
Financing Notes: Both properties were purchased with ten year interest only loans. Refinanced to 30 year fixed.
Property 2 - San Francisco Triplex
Market Value: bank appraisal 3.3 million
Original Purchase Price: 1,200,000
Mortgage amount: 1,175,000
Interest Rate: 4.25%
Mortgage Term: 30 year fixed with 27 years remaining
Rents: $19,400 per month
Principal and Interest: $5,986
Taxes: $17,316.31/yr
Insurance: $5500/yr for homeowners/landlord/umbrella
Deferred Maintenance Notes: building was built in 1895. Per pest and general contractor inspections, the building is in good shape. 2 of 3 units were remodeled in the last three years. The remaining unit is partially remodeled but needs new kitchen cabinets. The building sits on bedrock. Structural engineer recommends partial foundation upgrade which would cost about 75k. Building had electrical service upgraded in 2004 and has mostly new plumbing. Roof has another 2-3 years per inspector.
My question is whether I should consider selling one property to pay off the mortgage for the other, sell both, or keep both. My concerns are (1) whether the rents justify the equity that is now sitting in the buildings; (2) my financial exposure to the real estate market as I have little invested elsewhere and (3) the possibility of a natural disaster like an earthquake.
I have considered earthquake insurance but am tempted to put resources into getting the partial foundation upgrade to building two and getting EQ policies on my home and building one. I am relatively cash poor as I have put a lot of money into remodeling the units.
Also, I am a single parent with a teen child who has a disability that affects his ability to work. I would like to create a trust for him that will support him when I pass away. I am not sure that leaving these two buildings in the trust is the best way to do that.
Any feedback would be appreciated!