Selling old house to buy new

Member since 2024 · 2 posts · 1 vote

I have property that has about 100k in equity, I was thinking of selling it and buying a newer one with a 100k down payment. The new property wouldn’t cash flow much but neither is the old one I have. This was really an accidental property that I’ve been renting for 8 years now to the same tenant. I would be about 160 dollars in debt again, the old house is 38k from getting paid off. My worry is the old house might be too much of a hassle to fix latter down the road and increase rent.my thought are that buying a newer one would save me remodeling hassels. The new house is a 2020 built and the old one is 1960. I’m just seeking for some input from the community and this is my only rental even though I do dream of becoming a real estate investor by acquiring rentals.

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y
Run the numbers, but if the 1960s home hasn't been maintained, you may have some expensive repairs coming up. I'd also look at other things like the size of the home (and rooms), layout and size of the lot. It is regional, but I find some of the newer homes where I am have more open living areas, but the bedrooms are smaller as are some of the lot sizes.
To get a new mortgage, your rates are likely going to go up, but if the new home was well built, you shouldn't have to worry about things like new windows or a new roof for a while.
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Drago Stanimirovic
New to Real Estate · Miami, FL · Member since 2024 · 1k+ posts · 465 votes
2y
Hi Abdiel,
It sounds like you're at a crossroads between keeping your current property and reinvesting in a newer one. Since your goal is to build a portfolio of rental properties, you’re right to weigh both the financial and practical aspects of this decision. Here’s some input to help you think through it:

1. Equity and Cash Flow Considerations:
- Old House (1960, near payoff): With $100k in equity and only $38k left on the mortgage, you’re close to owning it outright. Once paid off, your cash flow would increase significantly since you’ll no longer have a mortgage. That said, the rental income may not be great without improvements or rent increases.
- New House (2020): While the new home would require a $100k down payment, it wouldn’t cash flow much, and you’d be taking on a new mortgage that leaves you $160/month in debt. The advantage is that a newer property would likely come with fewer maintenance issues, which can save time and stress.
2. Maintenance vs. Cash Flow:
- Older Property: Yes, an older home might need costly repairs down the road, such as roofing, plumbing, or electrical upgrades. But if you’ve managed to rent it for 8 years with minimal hassle, it’s worth considering how much additional work is truly needed to keep it going for a few more years. With the right improvements (even modest ones), you could increase rent and make it a more profitable rental without starting over with a new property.
- Newer Property: The appeal of a 2020 build is understandable—fewer maintenance headaches and potential for more stability. However, newer properties don’t always cash flow well, and you’re giving up significant equity in exchange for a home that might not provide you much financial gain immediately. The low cash flow could become more challenging if your aim is to expand your portfolio.
3. Debt and Long-Term Strategy:
- Old House, Nearly Paid Off: By keeping the older property and paying it off within a few years, you could use the increased cash flow to either fund repairs or reinvest in more properties. With no mortgage payment, even a modest rent increase could turn this property into a cash-flowing asset. You could also explore using a home equity line of credit (HELOC) or a cash-out refinance to tap into the $100k equity and use that capital to invest in additional properties, all while keeping the current home as an asset.
- Newer House with Debt: If you sell and buy the newer home, you’re essentially starting over with a new mortgage, and that $160/month in negative cash flow may restrict your ability to save and reinvest. The downside here is that, despite having a newer home, you’d be more tied up financially, limiting your ability to build a larger portfolio in the near term.
4. Investment Goal:

Since you dream of becoming a real estate investor, ask yourself:
- Cash Flow or Appreciation?: If you’re more focused on cash flow, sticking with the older house (and increasing rent over time) may be a better long-term play. It will soon be mortgage-free and could become a strong source of income. On the other hand, if appreciation or avoiding future hassle is more important, then selling for a newer property might make sense.
- Portfolio Growth: Keeping the old property and leveraging the equity (through a HELOC or refinancing) might give you more flexibility to buy additional properties. A newer house with a mortgage will take longer to build up equity, which could slow your growth as an investor.
5. Potential Middle Ground:
- Consider Renovating: Instead of selling, you could do a light renovation on the older property to increase its value and attract higher rent. Even modest upgrades (kitchen, bathroom, fresh paint) can make a big difference without requiring a major financial investment.
- Keep and Leverage: Another option is to keep the current property and use the equity to buy a second property. This way, you keep the cash flow from the old property while growing your portfolio with another rental.
In Summary:

Selling the older property for a newer one seems appealing from a maintenance standpoint, but it may limit your financial flexibility and growth potential. Keeping the older property, especially with its nearing payoff, provides an opportunity to increase cash flow and potentially use that equity for further investments.

If your long-term goal is to build a portfolio, sticking with the property that’s almost paid off and exploring ways to leverage it (or improve it for higher rent) might be a better strategy. If you need help exploring financing options for leveraging your current equity, feel free to reach out→ I’d be happy to assist!
Best regards,
Drago
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Abdiel Ocampo
OP
Member since 2024 · 2 posts · 1 vote
2y
Thank you for your advice, I appreciate you guys taking the time to reply.
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