Keep or Sell Single Family Home?

Question

Hi all,

I'm new to RE investing, and I have a specific question about my situation, and I'm hoping some folks here can give me some perspective that I might not have considered.

I own a SFH that we bought as our primary residence in 2018. We refinanced when rates were low so I'm at ~2.37% right now. We moved out 7/2023 and began renting it out. My first tenants have now moved out and we now live six hours away, so I hired a company to manage the property. They are taking applications now for new tenants.

The problem is that rents have gone down since 2023, and it's in a high-insurance area, so my mortgage has gone up. With management fees I'm essentially in a zero or slightly negative cash flow situation.

So my question is, do I sell it and use the ~150k profit to finance a cash-flow-positive property, or do I borrow against my equity to finance my next investment property?

Some additional info: it sits close to a military base, we bought it as a new-build, so it's only an 8 year old property. Also, it's in a VA loan, so the low interest rate is assumable.

Any advice would be greatly appreciated.

Drew Sygit · Answer

BIGGEST QUESTION - where are you going to reinvest the $150k and get a BETTER SIMILAR RISK investment?

You've probably got at least a Class B+ rental right now.

Any better cashflowing properties you chase will probably be Class C, Class B-minus if you search hard AND will be older with more maintenance issues.
- There will be more tenant & maintenance headaches, which may cause you to be negative cashflow if not managed well!

You should have taken out a HELOC while you were still living in it. Getting one for a rental property is difficult & expensive.

You didn't share what your current living situation is - are you renting or did you buy again?

Ryan D. · Answer

I have same question as @Drew Sygit. How can you finance your 150k into a positive cashflowing property in today's environment?

Your 2.37% VA loan is worth a lot in today'ys environment. So you should really make sure it is a way making your situation better rather than the other way.

It really boils down to what you foresee the future. If you believe the long term value of this property near the base and believe that rate will go much lower, then hold it for a couple of years to revisit the scenario may not be a bad idea. But your 150k profit maybe deal breaker here.

You mentioned that you had 150k profit which I assume is from this property. If you moved out in July 2023, you only have till July 2026 to qualify for 100% of the capital gain on self residence if I am not mistaken here. I recalled it was first 2 years of the last 5 years which will push your day to July 2026. After that you may have to do 1031 if you don't wanna pay tax on that 150k. 1031 is a different animal and lots of factors and timing stuff got involved. If you prefer simplicity, then sell it now may not be that bad an idea.

Lindsay Davis · Answer

@Christopher Moore,

I want to pose a question I haven’t seen other commenters ask yet: Cash flow aside, is your former primary residence in a favorable market with strong potential for appreciation?

A few folks here are telling you to sell. My take, though, is that if you believe you own a good asset, you should keep it around, especially since you say you can pull equity from it to finance a new purchase anyway.

Sure, that’ll put you in a cash flow negative position on this property, but some of the positive cash flow from the new deal you acquire can help you offset some of that.Just one alternative to consider.

Randy Charboneau · Answer

Some good advice on this thread!   If it were me, I'd be talking to a tax accountant and a local Realtor so I understood my options.   The tax ramifications can be big if you don't do this right.  Also, the smart move might end up being selling both houses and then buying the most expensive house you can afford as your primary.   Again, some local experts will give you some good direction here.  Your market and their knowledge will make a huge difference in the quality of advice.

Ashish Acharya · Answer

Hey Christopher, this is a tough decision and you've gotten some good answers so far. Dave made a good point about looking at how you redeploy the equity rather than just focusing on the current property. That’s really what drives the decision here.

From a tax standpoint, since this was your primary residence converted to a rental, you may still qualify for partial Section 121 exclusion if you sell within the timing window (like Dave mentioned), which can reduce capital gains. If you hold longer, that benefit phases out and more of the gain becomes taxable, plus depreciation recapture. Although, you could still consider a 1031 exchange. On the other hand, your 2.37% rate is a very strong asset, and giving that up has a real cost.

Another angle to think through is whether you actually need the management company. If you can place a strong long-term tenant, especially near a military base where demand tends to be steady, you may be able to self-manage even from a distance with the right systems. Dropping that fee alone could improve your cash flow.

From a tax perspective, if you continue renting, make sure you’re fully leveraging everything available. Expenses like repairs, insurance, taxes, and even travel tied to the property can add up, but the biggest lever is depreciation, which often helps offset income even in tighter cash flow situations.

You might also want to consider whether the property has short-term or mid-term rental potential. Given the location, there could be an opportunity to generate more income with a different strategy, and if structured correctly, it may even open the door to using losses more efficiently against other income.

Before making a final call, it may be worth adjusting how the property is operated first, sometimes that alone can change the outcome.

Good luck and happy to connect!

Christopher Moore · Answer

@Ryan D. Shoot, you are right. I was thinking I had more time before we could take advantage of the 121 exclusion. Thanks.

Christopher Moore · Answer

That is the question. I don’t know enough about the market to know whether I can invest that 150 somewhere else better or not.

We’re renting right now. We have our last primary home on the market (same city as the rental) and plan to buy with those proceeds. Open to house hacking in our new city, but not sure we could find one that works for our family of 5.

Jeff Roth · Answer

Hi Christopher-

Great question! You asked if you should sell a single-family house with a low interest rate on the mortgage if expenses with property manager were break even or slightly negative and go buy a better property that cashflows or keep it?

A single-family house is a binary investment. It is rented or it is not rented. When it is not rented, it can become a financial alligator.

Think about selling the property and buying a cash flowing value-add duplex. This way you should always have a rent check coming in and you can add value to the property and rents.

There are many markets in Michigan where you can do this.

To Your Success!

Caleb Brown · Answer

I'd sell. Doing a refinance would further put that property in the negative. If it won't cashflow at that cheap rate then refinancing would make it much worse. You can do a 1031 into something else

Alan Asriants · Answer

Theres no real right or wrong answer here and it ultimately depends on your goals and situation.

If the property is newer and doesn't need much maintenance then breaking even is not so bad. Your mortgage is being paid by someone else while the property grows in value. That being said if you can pull that equity from a sale and buy something in a better location with more perspective for growth and cash flow that is also a really solid play.

Pull equity out will likely lead you to cash out refi and lose your low rate - making you cash flow negative.

My one recommendation is to never panic sell. Sell if you have a strategy that works better than a current one and not because you are just nervous about current cash flows etc.

Look in your current area, run the numbers, see how values increased historically and come up with a game plan.

Keep or Sell Single Family Home?

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