Sell, refinance cash out, or hold

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Sell, refinance cash out, or hold

Joshua Davis
Member since 2022 · 7 posts · 5 votes

I have a house rented cash flowing 10 years left on a 15year at 4%. Home value $225k with owed at $135k. I want to invest more sooner then later and want to weigh my options. With the market the way it is atm. I can keep saving up to get a multi family as primary residence, sell the house to invest cash for more investments properties, or refinance with a higher rate to break even and use cash out to invest?

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Denise SuppleeBusiness Member
Realtor · Willow Grove, PA · Member since 2017 · 991 posts · 646 votes
11mo

Hi @Joshua Davis. You’re in a strong position with equity and a low rate, so be cautious about giving that up. Selling could give you quick capital, but you'd lose a cash-flowing asset with favorable terms. Refinancing at today’s higher rates would likely hurt cash flow unless the new investment significantly outperforms. If your goal is long-term growth, the smartest move may be to keep the house, continue saving, and buy a multi-family as your primary with low down (owner-occupied financing). That gives you more leverage, better rates, and keeps your existing equity working.

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  • Jules Aton
    MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
    11mo

    If it is cash flowing and interest rate is decent would be hard for me to justify the settlement expenses and hassles of 1031. 

    0Reply
  • Denise SuppleeBusiness Member
    Realtor · Willow Grove, PA · Member since 2017 · 991 posts · 646 votes
    11mo

    Hi @Joshua Davis. You’re in a strong position with equity and a low rate, so be cautious about giving that up. Selling could give you quick capital, but you'd lose a cash-flowing asset with favorable terms. Refinancing at today’s higher rates would likely hurt cash flow unless the new investment significantly outperforms. If your goal is long-term growth, the smartest move may be to keep the house, continue saving, and buy a multi-family as your primary with low down (owner-occupied financing). That gives you more leverage, better rates, and keeps your existing equity working.

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  • Filippo SeraciniPro Member
    Investor · Indianapolis, IN · Member since 2024 · 22 posts · 14 votes
    11mo

    Can't you take a heloc on that? This way you can get some equity out of it while preserving the cash flowing asset

    1Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    11mo

    @Joshua Davis

    I’ve been in your situation before and have no regrets taking that equity out to buy more cash flowing rentals for a higher interest rate. It’s all about getting a better return on your equity than just sitting there doing nothing for you.

    However, unless you have a home run of a deal waiting for you, I’d probably not do a cash out refi to pull out $ in exchange for a 6.5-7% interest rate on it. I’d leave that alone especially since it’s on a 15 year mortgage and you’re 5 years into it. Your principal pay down each month is a lot at this point.

    Find $ for your next deal somewhere else. I've bought five houses with 401k loans up to 50k. Can you do one of those? I've bought a few with a HELOC off my primary. Can you do that? I've bought a few houses from consumer lines of credits from random banks. And have done at least 5 or 6 credit card loans up to 20k with 0% interest for a year to buy properties. See if you can get creative in other ways. But I'm a fan of cash out refis if you think you can crush it by tapping that equity. I have bought 14 houses for free basically by doing 5 cash out refis over the last 7 years to scale up. I would pull out the cash then put 20% down on good cash flowing rentals. So I'm ok with it. But make sure you're getting a good deal if you're giving up that 4% rate. Good luck!

    1Reply
  • Elealeh Fulmaran
    Specialist · Member since 2025 · 483 posts · 270 votes
    11mo

    Keep the 4% 15‑year if it's cash flowing and don't trade it for a higher‑rate cash‑out just to "do something." If you want more doors fast, stack a HELOC for flexibility, only draw against it when a specific deal pencils with full expenses and reserves, or house hack a small multifamily as your primary to access better terms. Selling is last if returns elsewhere clearly beat the after‑tax proceeds and you have a real pipeline. Next step: underwrite one live deal at today's rates; if it still cash flows with a HELOC draw, move, if not, keep saving toward a house hack.

    1Reply
  • Joshua Davis
    OP
    Member since 2022 · 7 posts · 5 votes
    11mo

    @John Morgan

    Thanks for advice. Is there a company I can go with to take a loan out against my 401k as I have 2 from previous employer I need to combine to a new one which would be helpful if I could use that to pull cash against.

    0Reply
    • Jay HurstBusiness Member
      Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
      11mo
      Quote from @Joshua Davis:

      @John Morgan

      Thanks for advice. Is there a company I can go with to take a loan out against my 401k as I have 2 from previous employer I need to combine to a new one which would be helpful if I could use that to pull cash against.


       are you currently employed with a company who offers a 401k? 

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    • John MorganPro Member
      Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
      11mo
      Quote from @Joshua Davis:

      @John Morgan

      Thanks for advice. Is there a company I can go with to take a loan out against my 401k as I have 2 from previous employer I need to combine to a new one which would be helpful if I could use that to pull cash against.

      Check with your current employer’s 401k. You can take out 50% or up to 50k for most 401k plans. Maybe throw your old company’s 401k $ into your current plan. That’s what I did. Then I’ve used my 50k 401k loans like an ATM to buy good cash flowing rentals. Then I use all my rental $ to replenish the loans. Then repeat next time I need 50k or whatever. Same with 0% interest for a year credit card loans. Or consumer lines of credit if you can take out a HELOC. 
      0Reply
    • Marcus Auerbach
      Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
      11mo
      Quote from @Joshua Davis:

      @John Morgan

      Thanks for advice. Is there a company I can go with to take a loan out against my 401k as I have 2 from previous employer I need to combine to a new one which would be helpful if I could use that to pull cash against.


      Yes you can transfer your old 401k's to a self irected IRA with for example Equity Trust and then buy real estate with those funds. If you need a loan you can use NASB (North American Savings Bank). Book: Leverage your IRA by Mathew Allen. Fair warning: low LTV ratio, because it has to be a non-recourse loan and stirct rules and extra paperwork.

      Maybe a great idea/time to do that, considering PE ratios on the stock market.

      0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    11mo


    @Joshua Davis, A refinance rarely improves the production of a property. So keep that in mind.

    If you do decide to sell, you also have the option to do a 1031 exchange, which would allow you to defer all of the tax and depreciation recapture and reinvest it into other investment real estate. This would allow you to scale into multi-family using all of the tax you would normally pay, and mitigate the leverage your RE portfolio is under.

    Do you own the property you live in now? If so, you could sell that and take advantage of the primary residence exemption, which would be tax-free up to $250K if single and $500K if married. If you meet the 2-year residency requirement. That would open up even more choices.

    And if you want to get a small multi as a primary residence, then the 1031 will still work for you as long as the amount of the property that you are using for investment is equal to or greater than the net sale of your old property.

    So the ultimate scenario could be

    1. 1031 the old property into a 2,3, or 4 unit replacement with primary financing (more favorable financing).

    2. Move into one of the units and sell your current home tax-free. And you now have a free place to live with tenants paying the mortgage (I love this option for investors starting out).

    3. Take the tax-free dollars and combine them with the money you save in payments (or rent if you don't own now). And purchase your next property that much more quickly.

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  • Joshua Davis
    OP
    Member since 2022 · 7 posts · 5 votes
    11mo

    @Dave Foster

    I lived In the house from 2017-2025 spring and we moved out for me to do travel work and have someone renting out with positive cashflow

    1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    11mo

    @Joshua Davis, That's great news for you!  You can sell that house and take the first $250K ($500K if married) of profit tax free.  If there is more profit than that you can do a 1031 on the remainder since it is being used as investment.

    You'll get some tax-free and the rest tax-deferred.  That's going to make your decision much easier.

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  • Joseph TadresPro Member
    Real Estate Agent · Columbus, OH · Member since 2025 · 184 posts · 179 votes
    11mo

    Hey Josh, I would save the money that you're getting from the cash flow and use that to buy another property.

    1Reply
  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    11mo

    I would probably keep this property is it's cash flowing and management is easy. You can maybe get a heloc from this property. 

    How far off are you from buying your next property? How much would you need to save?

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    11mo

    From a tax perspective, here’s how to think through it.

    If you sell, you’ll owe capital gains tax and depreciation recapture, unless you use a 1031 exchange to roll the profit into another investment property. That’s a good move if you want to scale without triggering taxes.

    If you cash-out refinance, you won’t pay tax on the money you pull out because loan proceeds aren’t taxable. You’ll just have a higher payment, so make sure the new investments produce enough to cover that.

    If you keep saving, you’re missing out on leverage and depreciation opportunities, but it’s the safest path.

    Tax-efficiently, a cash-out refi or 1031 exchange usually gives you the most growth with the least tax hit.

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  • Nadeem Alamgir
    Real Estate Agent · Member since 2023 · 831 posts · 577 votes
    11mo

    @Joshua Davis

    If you want to scale faster, the smarter play is probably to save and house hack a small multifamily as your next primary. You’ll get favorable financing, build equity quicker, and keep that 4% loan working for you. Selling can make sense if the equity can be put into multiple deals, but only if the numbers clearly outperform what you already have.

    0Reply
  • Cesar S.
    Investor · Jersey City, NJ · Member since 2016 · 84 posts · 11 votes
    6mo

    I built a tool for these type of decisions and still testing it. If you want, DM me and I can run it through the tool. All I ask for is feedback as I continue to tweak it. Thank you.

    0Reply
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