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Started By
Message
Rental Property: should I keep or sell?
Posted on 3/31/25 at 7:38 pm
Posted on 3/31/25 at 7:38 pm
Details:
1500 sqft single family home, 3B 2BA, former primary residence
Purchase price: $185k
Current market value: $250k
Equity: $132k
Refinanced in 2020: 2.75% 30 year fixed, no escrow, monthly note is $543 (lol, I know). Payments are right at 50/50 principal/interest.. this is actually the first month that the principal payment exceeds interest (by a few cents).
Other monthly expenses:
Insurance (including Umbrella): $253/mo
Property Taxes (Unincorporated EBR): $251/mo
HOA: $42/mo
Misc (average based on actual expenses incurred last 2 yrs): $88/mo
Total Expenses: $1,177/mo (includes principal pay down)
Rental Income: $1,900/mo
Cash Flow: $723/mo
This probably sounds great, and it has been, but there are a few things on my mind:
1. Capex: The roof is 20 years old, the AC is 9 years old.
2. It’s been less than 3 years since I’ve lived here, so I can still take advantage of the “2-out-of-5” rule and sell without owing capital gains taxes.
3. Probably remodeling current home bathroom (~$20k) and buying a new vehicle (~$35k) in the next year. Do not have cash on hand for this and would need to finance at market rates.
My ultimate goal is to increase networth long term. Do I keep the rental and keep chugging along, or do I sell it and deploy the tax free gains elsewhere? Any thoughts on what would be the better financial decision?
1500 sqft single family home, 3B 2BA, former primary residence
Purchase price: $185k
Current market value: $250k
Equity: $132k
Refinanced in 2020: 2.75% 30 year fixed, no escrow, monthly note is $543 (lol, I know). Payments are right at 50/50 principal/interest.. this is actually the first month that the principal payment exceeds interest (by a few cents).
Other monthly expenses:
Insurance (including Umbrella): $253/mo
Property Taxes (Unincorporated EBR): $251/mo
HOA: $42/mo
Misc (average based on actual expenses incurred last 2 yrs): $88/mo
Total Expenses: $1,177/mo (includes principal pay down)
Rental Income: $1,900/mo
Cash Flow: $723/mo
This probably sounds great, and it has been, but there are a few things on my mind:
1. Capex: The roof is 20 years old, the AC is 9 years old.
2. It’s been less than 3 years since I’ve lived here, so I can still take advantage of the “2-out-of-5” rule and sell without owing capital gains taxes.
3. Probably remodeling current home bathroom (~$20k) and buying a new vehicle (~$35k) in the next year. Do not have cash on hand for this and would need to finance at market rates.
My ultimate goal is to increase networth long term. Do I keep the rental and keep chugging along, or do I sell it and deploy the tax free gains elsewhere? Any thoughts on what would be the better financial decision?
6
Posted on 3/31/25 at 8:01 pm to PhiTiger1764
Man, with that cash flow I would keep it.
You could put a couple hundred a month from the cash flow into a roof/AC account and start saving for that future cost.
For financing the new costs, at least for the car, most dealerships have special financing so you could get a really low interest rate on a new car.
You could put a couple hundred a month from the cash flow into a roof/AC account and start saving for that future cost.
For financing the new costs, at least for the car, most dealerships have special financing so you could get a really low interest rate on a new car.
Posted on 3/31/25 at 8:03 pm to PhiTiger1764
I’d keep it until you die, seriously.
Posted on 3/31/25 at 8:24 pm to PhiTiger1764
You have an asset that cashflows 60% a month and has $75k of equity and you want to sell it to buy a car? And you frame the question as how to increase your net worth 
Posted on 3/31/25 at 8:54 pm to Mingo Was His NameO
god damn you are such a troll. You just can’t have a normal conversation and must stay in douche mode at all times. quote:
You have an asset that cashflows 60% a month
I am aware that it’s been great investment, thanks.
quote:
has $75k of equity
Nope.
quote:
you want to sell it to buy a car?
Wrong again. I am buying the car regardless, you dolt.
Posted on 3/31/25 at 9:53 pm to PhiTiger1764
I would hold onto it. Especially now that you've crossed the threshold of more going to the principal You could use the cash flow to pay the car note.
Do you have any other options for the bathroom renovation like utilizing a HELOC? Or can it wait until you have the cash saved up? That's just 2.5 years of cash flow on the rental to pay for the bathroom renovation.
Do you have any other options for the bathroom renovation like utilizing a HELOC? Or can it wait until you have the cash saved up? That's just 2.5 years of cash flow on the rental to pay for the bathroom renovation.
Posted on 3/31/25 at 10:11 pm to Powerman
quote:
Do you have any other options for the bathroom renovation like utilizing a HELOC? Or can it wait until you have the cash saved up?
Our shower is falling apart, it’s time. I left it out of the OP because it was long enough. I have a HELOC on the rental (from when it was my primary). No balance and $53k available. Current rate 7.5%… I can tap it but at the end of the day it’s still just a mechanism to finance.
Back of napkin math.
Keeping it:
- Continue to cash flow $723/mo
- Build $3,300+ equity per year, increasing each year
- Tax benefits
- Appreciation (hopefully)
- Pay 5-10%?? interest to finance roof (~18k?), AC (~$8k?), bathroom (~$20k), new to me car (~$35k). So about a total of $80k+ to be financed in the next 1-5 years. Cash flow could/would go toward this to pay down.
Selling it:
- Net ~$120k from sale
- Buy bathroom and car outright and pay no interest
- Invest remaining $65k and earn ~8% interest passively in index fund long term
Just a lot of assumptions… idk. Keeping it is probably still the best option all things considered..
Posted on 3/31/25 at 10:23 pm to PhiTiger1764
if it's good people renting, keep it
Posted on 3/31/25 at 10:23 pm to PhiTiger1764
quote:
Keeping it is probably still the best option all things considered..
I'd look at the math on a ten year horizon. Even with a modest 2.5% annual appreciation you're looking at the home being worth $320K in ten years. That's a 70K increase in equity without even taking to account paying down the principal. That alone is greater than all of your projected capex
I know it's tempting to have all of that cash on hand but you'll have the ability to get a much bigger chunk of cash 10-15 years from now.
Posted on 3/31/25 at 10:26 pm to PhiTiger1764
What are you doing with the cash flow currently? Are you putting it into a HYSA or investing it? A 20 year old roof should get you another 5 years or more depending on where you live and the material. That's over $40k pre interest in cash flow that you can put together to easily buy a roof and more. Do you not have enough savings from the cash flow to knock out your bathroom now since that seems to be most urgent? You don't have to take a loan unless you want to because you're making a killing on earning with it. If anything do a low interest car loan and the rest in cash. Make sure to earn points/miles as much as you can. I wouldn't sell the property. I would've suggested a 15 year refi instead of 30 since it sucks to reset years like that, but too late for that now. I did a 15 year 2.49% on my rental and it makes it hard to get rid of the property and i'm not making the cash flow you are right now because its a condo and a 73% HOA increase last year killed me.
Posted on 4/1/25 at 6:07 am to Sho Nuff
quote:
What are you doing with the cash flow currently?
Up until now it was going towards my HELOC. I used the HELOC to fund the down payment on my current house and kept my old house as a rental.
I’ve just recently paid off the HELOC. So now cash flow will go towards HYSA to save for my upcoming expenses.
Posted on 4/1/25 at 9:24 am to PhiTiger1764
I would keep it. Use the cash flow wisely.
Posted on 4/1/25 at 11:06 am to PhiTiger1764
quote:
Cash Flow: $723/mo
3. Probably remodeling current home bathroom (~$20k) and buying a new vehicle (~$35k) in the next year. Do not have cash on hand for this and would need to finance at market rates.
Given your mortgage rate and cash flow if your goal is to build long term wealth, I'd keep it and use the cash flow to offset those two purchases.
Once those are paid, you will continue to build wealth.
Posted on 4/1/25 at 2:34 pm to PhiTiger1764
quote:
Refinanced in 2020: 2.75% 30 year fixed, no escrow, monthly note is $543 (lol, I know).
This cant be a serious question. If you need cash get a HELOC
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