Sell or Keep or Cash out Refi

18 Replies

Hello! In need of advice from you smart RE peeps.

We have 4 rental properties plus our main house.

RH #1: Owe $13,000 - rented at $1200/month (long term tenant moving out May). We could easily rent this property for 1400 to 1500 a month right away due to the school district.

Monthly Expenses:

 Mtg: $530 (personal loan father-in-law at 3.25%).            
Taxes approx $300/month
Inurance,vacancy,repairs: $100

$1200 - 930 = $270 net

Original purchase in 2015 @ $52000 + approx $10,000 taxes and repairs (in PA seller pays commission yay!)  = $62,000 

The market in Philadelphia is insane right now - and prices are right back up to 2008 - 2011 prices. We could easily sell the property for about $133,000 or more in about one or two weeks. 

The other 3 properties have about the same monthly net. One will be paid off in 2, one in 3, and one in 7.

My husband is 46 and works full time from home in software engineering.  I am 36 and manage the rentals and our 2 and 10 month old. My husband is very handy (and slightly controlling) over the maintenance of the properties. We have been lucky - same tenants in all of the properties- no major repairs - on 1920’s row homes. 

Of course, Without kids - managing all this was easy. Now we certainly have our hands full and finding time to be good landlords and stay up with the “yearly - yes yearly” rental inspection can be stressful. And who needs MORE stress in their lives right now!?

My dream was to keep buying in that neighborhood- one a year - but that is not going to happen in the current market for us. We do have some debt - cars - some CC - and student loans. Altogether about $60k. The bulk of that is student loans at 6%. 

Long story short - 

Should we 1. Sell property number one for a cash net of approx $80,000 and pay off our debt.
130,000 - 6% RE Com - 6% Pa tax - (approx) $15,000 cap gain.

2. Sell them all and take the money and run (pay off all debt including main mortgage). And invest the rest until the market returns to “normal.”

3. Pay a management company. (Not my favorite option).

4. Hunker down and keep paying down the existing mortgages and deal with the stress! Note: 2 of the 3 tenants are lifers with no kids or pets (a landlord’s dream!!!) So management on those two properties is very minimal. 

6. Sell two and keep the two more desirable tenant properties?

7. Do a cash out refi of property #1 @4% for 10 years (approx $900/month) from credit union for 80k to pay off personal loan, and some of our debts. (Not my husband’s favorite).

My husband is pretty much on board for selling - but this is my little red wagon, so I need some outside perspective of our situation - and what would be the best investment strategy considering we have also started a family later than most. 

Thank you - and please let me know if you have any questions. 


You're losing a forever income stream and a tax write off if you sell a property and use the money to pay off debt. And with your current though process, the debt will come back. 

If you choose to sell one, it's a sneaky way of conceding to yourself that you want to take the money and run, and I'd like to highlight a theme in you post to the community: You have debt not tied to assets and are making choices to live up to and perhaps beyond your means.

As a husband, and as a father of three, I can relate to your time crunch. I work full time in a W-2, and I'm actively building my portfolio. The stress and the busyness can overwhelm. All your feelings are real, but if you sell now, you risk abandoning what could be a beautiful legacy for your and your children's future.

I'm guessing you don't like the idea of a property manager because PMs restrict cash flow, but given your stress, now is the time to find that property manager, use them well, and find areas in your current budget to cut spending slightly so you can buy another rental. Build the portfolio.

Choose the challenging path. You won't regret it.

Hi @Sara Finley , I'll second some of Jody's thoughts above and encourage you towards keeping the cashflowing assets as long as possible.  It seems to me that a cash-out refinance on one of the properties could be a prudent move -- giving you access to both capital today to pay off non-performing debt, AND retaining a cash-flowing asset.


I am trying to take your response with a grain of salt.

I don’t agree with your assumption that we live beyond our means - 40k in student loans for Masters Degrees and 10k in car notes and 10k on an interest free Home Depot PRO card is not ideal - but certainly not “living beyond our means.” We have 401ks and savings, you should probably get a better overall picture of someone’s assets before you throw that term around.

We have certainly been sacrificing- I left my very well paying job to care for our children. Not something we planned for in advance or really thought we would do.

I could lay out all the ways we are sacrificing- but that is besides the point and a boring part of the story.

The reason we are even considering any of this is to capitalize on the current market.

Our first tenant to move out in 6 years + that house almost paid off + getting x2 what we paid for us = no “unsecured debt”

3 rentals is just that much more less stressful + buying in the current market would be stupid as we all know the story of 2008.

We could save the leftover profit for our upcoming school expenses- or save it for when the market calms down.

My last point - yes going the hard road is often worth it in the long run - but the physical and mental effects that stress has on our lives and bodies is a very real thing.

My last last point - I would hope my children will be street - smart and hardworking enough to not need our financial support - and with less stress in our lives maybe we will be around to see it.

Thank you for your response it has given me some things to think about. Good luck in your journey!

@Will Fraser thank you! We are sort of leaning that way too.. I am just not happy with the 4% interest rate we received when rates are so low. I’m sure it has to do with the fact that it is a rental property. I appreciate your input and support!

The basic idea is you have more productive usage of the money post-selling than selling could be a good choice. Including paying off debts, etc.

In other aspects, the house price in your area is not insane at all. Your area has the most cash-flowing possibility in the area. In our area we're reaching 1 percent cap rate due to massive appreciation. So we may need to be accustomed to the new reality that the house is expensive and will keep going up.

Hi Sara,

I agree with the others that this will end up being a personal choice but taking folks opinions is a great place to start.

I would say first off your own mental well being should be put at the very top of the list. If managing these rentals is really weighing you down, its not worth it IMO.

One thought is to try out a management company for a year and see how you like it. Maybe it relieves all your stressors or maybe it doesn't.  Run the numbers and if they work out and your stress is gone its a win-win. 

Also I'd recomend talking to your CPA before doing anything, especially selling off multiple properties. I know there is a housing shortage in our area and prices are high, but Im not sure that's going away anytime soon. It seems like if you could offset a property or twos gains by stock losses/putting more into a savings account/etc it might be a good way to keep your taxes lower then selling them all in the same year and taking a huge hit. 

@Sara Finley I would really like to weigh in but honestly I’m not sure how helpful that would be. I know what I would do but not sure what you should do. It depends on your priorities, goals, etc. I like either 1) selling everything and wiping out all of your debt including your primary. Then you can take a season of rest if needed and focus on your kiddos and really jack up your savings rate with no mortgage or 2) Selling one property and wiping out all debt except for your primary and continuing to hold the other 3 properties and/or sell and 1031 into some even nicer assets. I don’t personally like to sell an asset unless I know there’s a better opportunity waiting for me if I do sell. Imo it’s a good idea to continue to hold some RE assets so you benefit from the likely continuing inflation of asset prices and rent appreciation due to current monetary policy, etc. Do whatever gets you and your husband closer to your goals. Only you two can define those. Good luck!

@Sara Finley No expert here, but I'll give you my initial thoughts. Can you do a HELOC and pay off student loans?

Then take the amount you were paying in the student loans and throw it at the HELOC. Let your renters pay off the HELOC. And I personally like a property manager,( as long as they are good), to take the phone calls, inspection, background checks etc.

It wasn't my intent to provoke you, and I am sorry for any assumptions I made. You know your situation best, and you came to the community for insight, so I gave it my best, no ill intent.

With that in mind, I wonder what you have against generational legacies. You mentioned that you hope your kids are street-smart enough not to need your financial help almost as if its more honorable to be self-made. That view of wealth would seem to suggest you believe the struggle to obtain money is among the most important struggles in life.

For my children, I want them to benefit from my abundance. I'd rather they struggle to find the money to build a museum than struggle to find the money to buy a single-family home, like I am today. I'd rather they have a chance to found a bank rather than grovel to a bank like I am today. I would prefer the challenge of teaching my children financial wisdom with much over financial wisdom with little.

I would find it an honor to know that my children and grandchildren could pursue any dream because they had the support of wealth behind them.

@Sara Finley

Have you talked to a lender at all about this and what you’d qualify for? Any ideas what your née rate would fall at? You’d also have to factor in closing costs and how long it would take to recoup the difference. Just a few thoughts....

@Jody Sperling - You didn’t provoke me - I was just explaining why its irresponsible make negative assumptions about people who are asking for your advice - when you don’t have all of the information. 

I think you missed the part where I said thank you for your response and you gave me some things to think about.

Out of my entire reply all you gleamed from it that I was trying to insult you in some way. Once again you are making assumptions about me and my point of view of the world, wealth, and how to raise a family. 

Just because I want to raise my family one way is not a slight on your way in any way.  Why would you even think that? If everyone lived the same journey life would be pretty boring.

Anyway - this has strayed way off topic. We can continue the conversation further offline if you would like.

@Robert Tinker I have nothing against property managers... but like you said, you have to find a good one!! I don’t even know how much they are supposed to charge and what all they do.  We do all of our own repairs, etc so I am not sure really what I would be paying for.

And about the HELOC, that is a good idea. I am looking at rates now to see what I can get.

@Brian Gerlach Thank you for your response! I am liking option #2... That would give me a little reprieve in the rental area b/c the last 3 tenants are lifers and very easy to manage.

And thank you I now know what a 1031 is, so there’s that. :)

One thing that's very unique and favourable in your case is the following:
-Bryn Mwr,PA is one of the highest CoC in the country
-Your husband is very hands on and still have good W2 job
-Your property is located near your primary

You have the best combination recipe for successful real estate investors. So I don't know in your case but it seems you're doing perfectly so far.