Sell rental or HELOC (old primary residence)

4 Replies

I currently have my old primary residence rented out of the last year. Lease is ending and the renters are moving out. I cant decide if I should sell now and avoid cap gains or HELOC it and rent it out again. Its in a highly sought after area, could sell it for 239k and the mortgage is 123k. My plan was to always keep it and leverage it to buy another rental, but with the prices high its hard to pass up the tax free equity while I can get it. Not sure what the best move would be. Mortgage payment is 720 and rent is 1400. Its a small house so the rent cant really increase much more.

Break-even analysis! How many new properties can you acquire with selling the home vs. a HELOC. With a HELOC you can still keep that existing home but use your current equity (not sure how much you've paid in) to acquire new homes. With a 1031 exchange, I'm under the impression that you can only buy up to 3 properties. My goal is to always leverage other people's money to cash flow and keep as many properties as possible. So, if I were in your shoes I would keep renting (keep the cash flow), acquire as many new properties as possible using a HELOC as down payments, and have multiple cash-flowing properties. You have to go back to what your end goal is and see if any decisions can be eliminated according to your goals. Hope this helps!

@Randy A Crowe you have to of lived in a primary 2 of the last 5 years when selling to get the sec 121 capital gains exclusion. Sounds like you can hold several more years before selling and still benefit from this tax exclusion if you choose to. Consult your tax professional. Do what lines up best with your long term goals.

Randy,

Depends on your long term goals.

I don’t know many(any) buy and hold investors who say” I should have sold that house” I do however hear them say” wish I still had that one”

If the property produces positive cash flow, why not keep it?

Just because one lender said no due to your DTI ratio doesn't mean you can't. Keep looking for other options.

Best of luck.