This ass-u-mes that there are no other good rental properties in the entire world. Say you’re getting 6% on the dollar on a rental in CA, have the option to buy a building that caps at 10% in Tucson. Or a fixer-upper locally that caps at 8% after all repairs are done.[/quote]
No, this assumes he doesn’t have rentals currently since he’s a move up buyer and didn’t mention buying other rentals.
If you have a 1/2 dozen or more rentals and you want to sell one to buy a better rental in another market go for it.
If you don’t have any other properties you managed and don’t have pretty extensive experience managing multiple properties, IMHO, trading for an out of state property is fools gold.
Also, keep in mind, his cap rate is actually determined by what he paid when he bought it, not what he thinks he can get for it today.
My answer was very much focused on you own one house, you bought a second and don’t need to sell the first, should you? The answer is no, your cost basis is hopefully much lower in the prior house allowing you room to learn the ropes of real estate without negatively impacting your cash flow.
