Selling first investment property or to keep it

Fort Collins, Colorado
Buying & Selling Real Estate
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Selling first investment property or to keep it

Chelsea Gardner
Member since 2025 · 4 posts · 1 vote

I have a condo that has gained significant equity as I bought it at 255k. I have about 50k invested into it for repairs and are discussing putting it on the market for $540,000. I’m still in the sweet spot as capital gains will not hit me until May of 2026. If everything were to go perfectly and after taxes, I imagine I would walk away with around 200k. What I’d like to do is invest this into two more rental properties over the next two years in a surrounding community as we are priced out of Durango where the condo is located. The mortgage is $1350.00 at 2.7% interest for the condo and I can rent it out for at least $2000/month so there’s some decent rental income. The neighborhood is great with wonderful schools and the city is investing, significant funds to improve the main street area two blocks from the condo. It’s really been a phenomenal opportunity and I worry that I may be selling just because I’m afraid of capital gains. Even if I do a 1031 exchange the inventory in our area seems to be a little slim and obviously come with more risk than the condo that I currently have. I would really like investors that have experience and their opinion on how they might move forward. Thank you for your time. 

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
1y

@Chelsea Gardner You’re in a great position, and it’s smart that you’re thinking through the long-term impact of your decision. Based on what you’ve shared, here’s how I’d think about it:

  • First, since the condo is not your primary residence, you won’t qualify for the Section 121 exclusion, so any capital gains would be fully taxable—including depreciation recapture. That makes the tax piece more significant if you sell.
  • On the flip side, you’ve got a 2.7% mortgage on a property that’s cash flowing at $2,000/month against a $1,350 payment. That’s a solid spread, and in today’s interest rate environment, that loan alone is an asset worth holding onto.
  • You’re also sitting in a great neighborhood with strong fundamentals—schools, city investment, and long-term growth potential. That kind of location tends to age well over time and usually performs better than average.
  • Now, if you do decide to sell, a 1031 exchange could defer your capital gains taxes, but you’ll need to identify new properties quickly, and it sounds like inventory is tight where you’re looking. That could lead you to settle for a lower-quality asset or market, which could ultimately reduce your returns.
  • Instead, you might consider a cash-out refinance or HELOC to tap into your equity while keeping the condo. That way, you can use the funds to invest in new properties without giving up a well-performing asset or triggering a taxable event.

Unless you have a very specific plan for those replacement properties, I'd lean toward holding the condo, locking in the cash flow and appreciation, and using a refi or HELOC to fund the next phase of growth. Then when you're ready, you can still use a 1031 or sell strategically when you've got the right deal lined up.

Definitely talk to a real estate CPA before you pull the trigger, they can walk you through the capital gains, depreciation recapture, and run side-by-side scenarios to help you make the most tax-efficient decision.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

[email protected]941-914-7779
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  • Alex Olson
    Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    1y

    In short, I would not focus on the interest rate you currently have. Assuming you have owned it for 5 years so have 25 years of payments left on it. In year 29 you will still have a 2.7% rate on the condo but have, what a $1mm in unused equity? As a real estate investor, that is bad use of equity if you want cash flow. Just trying to put it in perspective. I sent you a DM as well

    0Reply
    • Chelsea Gardner
      OP
      Member since 2025 · 4 posts · 1 vote
      1y
      Quote from @Alex Olson:

      In short, I would not focus on the interest rate you currently have. Assuming you have owned it for 5 years so have 25 years of payments left on it. In year 29 you will still have a 2.7% rate on the condo but have, what a $1mm in unused equity? As a real estate investor, that is bad use of equity if you want cash flow. Just trying to put it in perspective. I sent you a DM as well


       Thank for the reply! I appreciate your perspective with the interest rates. I replied back to your message. 

      0Reply
  • Bob Avery
    Investor · Saint Paul, MN · Member since 2024 · 28 posts · 16 votes
    1y

    What would the tenant class be in the surrounding area? Would you be trading one easy property for two major headaches?

    1Reply
    • Chelsea Gardner
      OP
      Member since 2025 · 4 posts · 1 vote
      1y
      Quote from @Bob Avery:

      What would the tenant class be in the surrounding area? Would you be trading one easy property for two major headaches?


       Good morning Mr. Avery,

      The tenant class tends to be upper to middleworking class in the surrounding area. I’m having a hard time analyzing the rental market in the region of Mancos Colorado. I’m curious as to what people are using besides social media groups in the standard real estate sites for looking at the rental market.Durango, where are the condo is located has really boomed into one of the more desirable locations in Southwest Colorado. The only chance of an investment property would be in neighboring communities which are probably middle to upper working class and with a lot of agriculture. The part that I fear is the types of properties that I would recently be able to invest in for a rental may attract the lower end of that population so you’re totally right it may attract a few more headaches

      0Reply
  • Bob Avery
    Investor · Saint Paul, MN · Member since 2024 · 28 posts · 16 votes
    1y

    Yeah, well there's definitely a whole camp of folks with Alex's position, which is that you maximize profit by maximizing your leverage per equity, and math-wise they have a point.

    At the same time there is another camp which tries to balance profit and quality of life. Its a personal decision which one fits your needs best.

    0Reply
    • Chelsea Gardner
      OP
      Member since 2025 · 4 posts · 1 vote
      1y
      Quote from @Bob Avery:

      Yeah, well there's definitely a whole camp of folks with Alex's position, which is that you maximize profit by maximizing your leverage per equity, and math-wise they have a point.

      At the same time there is another camp which tries to balance profit and quality of life. Its a personal decision which one fits your needs best.

      Well said Mr. Avery! 

      I’m curious what are the strategies that investors utilize to reduce the tax hit when selling a property besides a 1031 exchange? I’m in the 2 in 5 so I don’t have to worry about Capital Gains but according to CPA would owe approximately 60k if I was unable to invest in property in 2025. 

      I appreciate everyone’s input. Thank you!
      0Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    1y

    I'd worry about the cap gains implications given the increase in property value.  While it won't take effect until next year, if you rent it, you're locked into a 1 year lease.

    Do some quick calculations of what it would look like if you held on to it for 5 years, if you sold it and bought another rental (or two) or sold it and put your money elsewhere.

    With a condo you have unknown expenses -will there be a special assessment, will condo rules change, will condo fees go up.  Look at single family homes. Yes generally speaking, the property taxes are higher, but you don't have the condo fees which can add up really fast.  Also look at interest rates-how much can you get if you put that into a high yield savings account for 5 years?

    0Reply
  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    1y

    @Chelsea Gardner You’re in a great position, and it’s smart that you’re thinking through the long-term impact of your decision. Based on what you’ve shared, here’s how I’d think about it:

    • First, since the condo is not your primary residence, you won’t qualify for the Section 121 exclusion, so any capital gains would be fully taxable—including depreciation recapture. That makes the tax piece more significant if you sell.
    • On the flip side, you’ve got a 2.7% mortgage on a property that’s cash flowing at $2,000/month against a $1,350 payment. That’s a solid spread, and in today’s interest rate environment, that loan alone is an asset worth holding onto.
    • You’re also sitting in a great neighborhood with strong fundamentals—schools, city investment, and long-term growth potential. That kind of location tends to age well over time and usually performs better than average.
    • Now, if you do decide to sell, a 1031 exchange could defer your capital gains taxes, but you’ll need to identify new properties quickly, and it sounds like inventory is tight where you’re looking. That could lead you to settle for a lower-quality asset or market, which could ultimately reduce your returns.
    • Instead, you might consider a cash-out refinance or HELOC to tap into your equity while keeping the condo. That way, you can use the funds to invest in new properties without giving up a well-performing asset or triggering a taxable event.

    Unless you have a very specific plan for those replacement properties, I'd lean toward holding the condo, locking in the cash flow and appreciation, and using a refi or HELOC to fund the next phase of growth. Then when you're ready, you can still use a 1031 or sell strategically when you've got the right deal lined up.

    Definitely talk to a real estate CPA before you pull the trigger, they can walk you through the capital gains, depreciation recapture, and run side-by-side scenarios to help you make the most tax-efficient decision.

    This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

    [email protected]941-914-7779
    INVESTOR FRIENDLY CPA®4.9242 Reviews
    WebsiteView Page
    TaxMD® | Tax Planning Software
    WebsiteView Page
    2Reply
  • Jeb Durgin
    Lender · South Lake Tahoe, CA · Member since 2019 · 109 posts · 36 votes
    1y
    Quote from @Chelsea Gardner:

    I have a condo that has gained significant equity as I bought it at 255k. I have about 50k invested into it for repairs and are discussing putting it on the market for $540,000. I’m still in the sweet spot as capital gains will not hit me until May of 2026. If everything were to go perfectly and after taxes, I imagine I would walk away with around 200k. What I’d like to do is invest this into two more rental properties over the next two years in a surrounding community as we are priced out of Durango where the condo is located. The mortgage is $1350.00 at 2.7% interest for the condo and I can rent it out for at least $2000/month so there’s some decent rental income. The neighborhood is great with wonderful schools and the city is investing, significant funds to improve the main street area two blocks from the condo. It’s really been a phenomenal opportunity and I worry that I may be selling just because I’m afraid of capital gains. Even if I do a 1031 exchange the inventory in our area seems to be a little slim and obviously come with more risk than the condo that I currently have. I would really like investors that have experience and their opinion on how they might move forward. Thank you for your time. 


    Hey Chelsea, this is a super common and tough spot, so you're definitely not alone in thinking this through. You've got a fantastic problem on your hands with that condo!

    Seriously, that 2.7% mortgage at $1350/month with $2000+ rent is phenomenal cash flow on an incredibly low, irreplaceable interest rate. Combine that with a great neighborhood and city investment nearby—you've got a true cash cow that's also appreciating. My immediate thought is: don't let the fear of capital gains push you out of a golden goose.

    You're right to be wary of a 1031 exchange; inventory is slim, and those can be a real headache. Instead of selling and trying to find two new deals in a tougher market (and potentially overpaying or settling for lesser properties), have you considered leveraging the equity in the condo without selling it?

    A HELOC might allow you to tap into some of that equity for a down payment on one new rental, while keeping your current cash cow and its amazing low-rate mortgage. This lets you grow your portfolio without abandoning a proven winner or immediately incurring capital gains.

    It's a tough call because avoiding capital gains is tempting, but the quality of the asset you currently have is hard to beat. Are you selling because it's genuinely the best strategic move, or mainly because you're worried about a future tax bill on an asset that's performing incredibly well?

    0Reply
  • Priyanka Verma
    Investor · TX · Member since 2025 · 31 posts · 22 votes
    1y

    Hey Chelsea, you’ve clearly made a smart move with that condo good buy-in price, solid improvements, and a great fixed mortgage rate. You're in a strong position.

    Here’s how I’d look at it based on what you shared:

    You’re cash flowing around $650/month before expenses with a 2.7% mortgage, that’s not something you’ll easily replace in today’s market. Plus, the location sounds like it’s only getting better, which usually means more appreciation and stronger tenant demand long-term.

    That said, I get the temptation to sell and redeploy the equity. But the key question is: can you find two new properties that will give you better risk-adjusted returns than the one you already have? And are you okay giving up the stability of a property you know for the uncertainty of new ones in possibly weaker rental markets?

    Inventory being tight and the pressure of timing a 1031 exchange can backfire. You don’t want to rush into a mediocre deal just to save on taxes. Sometimes it’s better to wait, even if it means paying some capital gains later especially since you still have time before 2026.

    Personally, unless I had very specific properties already in mind that outperform the current one, I’d hold for now. You’re in a good spot. And remember: selling just to avoid a future tax bill usually isn’t the best reason the deal has to make sense on its own.

    0Reply
  • Hope Sawyer
    Realtor · Westminster, CO · Member since 2022 · 15 posts · 5 votes
    1y

    @Chelsea Gardner

    You’re in a great position—strong equity, low interest rate, and solid rental upside. With that 2.7% rate, holding and renting could offer excellent long-term returns, especially with local development boosting value. If you’re not pressed for liquidity, I’d lean toward holding unless you find two high-cash-flow properties that clearly outperform the condo. Selling just to avoid future capital gains might be premature—run the numbers both ways. Happy to chat further—DM me and I’ll help you think it through.

    All the best!

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