Advice on selling a cash flowing rental property

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Advice on selling a cash flowing rental property

Nathaniel Tant
Member since 2020 · 20 posts · 6 votes

Hello Everyone,

I currently own three homes, two rentals and a primary residence that has a guest house in the back, which I also rent out. The wife is worried that we are over leveraged and sought help from a financial advisor. The advisor advised us to sell the rental with the highest interest rate because it wasn't worth keeping, even though it's cash flowing. Given the information below, would you sell Property Two? I'm finding it difficult to sell it because it's cash flowing. Looking for some advice from real world warriors out there!

Rental one: 
Mortgage is $560.00 and we owe $85,000.000 on it.
Interest is %3.5 and is currently worth %205,000.00

Rental two:
Mortgage is $950.00 and we owe $83,000.00 on it. Cash flow is around $400.00/month. 
Interest is 8% and is currently worth $140,000.00

Main residence:
Mortgage is $2800.00 and we owe $360,000.000 on it. We rent the guest house for 2k a month.
Interest is 6.7% and is currently worth $435,000.00

Student loans equal $190,000.00, gotta love the medical field.

We have no credit card debt and one car note that'll be paid in a couple of years. 

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Account Closed
Accountant · NY · Member since 2025 · 39 posts · 41 votes
1y

Here’s how I’d think about it:

Rental Two:
Yes, 8% is steep, but you're still cash flowing $400/month. That means it’s covering the mortgage and putting money in your pocket. Selling it would give you a decent chunk of equity ($57K before closing costs), but then what? Paying off a portion of student loans or reducing debt is smart, but are you giving up a good long-term asset to do it?

Main Residence:
Renting the guest house for $2K on a $2,800 mortgage makes this a smart house hack. You’re essentially living for $800/month. That’s a win.

The Bigger Picture:
Your portfolio is performing. You're leveraged (68% LTV across the portfolio), but not irresponsibly. If cash flow is positive and you're not relying on credit cards to survive, you're managing it. Student loans are a big number, but if you're in the medical field, income potential over time can offset that.

My 2 cents:
I’d only sell Rental Two if you need the equity to ease cash flow stress, or you can immediately reinvest it into something with a better return or lower risk.

Otherwise, I’d hold. Between your $800 housing payment and the cash flow from both rentals, you basically live in your house for free. I would focus on using your income to pay down student loans, since there is no asset on the other side of that liability. 

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  • Account Closed
    Accountant · NY · Member since 2025 · 39 posts · 41 votes
    1y

    Here’s how I’d think about it:

    Rental Two:
    Yes, 8% is steep, but you're still cash flowing $400/month. That means it’s covering the mortgage and putting money in your pocket. Selling it would give you a decent chunk of equity ($57K before closing costs), but then what? Paying off a portion of student loans or reducing debt is smart, but are you giving up a good long-term asset to do it?

    Main Residence:
    Renting the guest house for $2K on a $2,800 mortgage makes this a smart house hack. You’re essentially living for $800/month. That’s a win.

    The Bigger Picture:
    Your portfolio is performing. You're leveraged (68% LTV across the portfolio), but not irresponsibly. If cash flow is positive and you're not relying on credit cards to survive, you're managing it. Student loans are a big number, but if you're in the medical field, income potential over time can offset that.

    My 2 cents:
    I’d only sell Rental Two if you need the equity to ease cash flow stress, or you can immediately reinvest it into something with a better return or lower risk.

    Otherwise, I’d hold. Between your $800 housing payment and the cash flow from both rentals, you basically live in your house for free. I would focus on using your income to pay down student loans, since there is no asset on the other side of that liability. 

    2Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    1y

    I would not say you are overleveraged but I would focus on clearing your car note and paying down the medical school debt. The only caveat I would say is if you don't have cash set aside for these properties aka an emergency fund. If that is slim then property #2 would be the best candidate to sell. I would definitely not add anymore properties until you clear out some of the consumer debt, personally that'd be something I would not want sitting there

    1Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    1y

    @Nathaniel Tant

    You’re in a solid position overall, and I can understand why you’re hesitant to sell Rental Two—it’s still cash flowing. That said, with an 8% rate and limited equity, it’s not the most efficient asset long-term. If selling it would significantly reduce risk, free up capital, or help tackle high-interest debt like student loans, it might be worth considering. But if your cash flow is stable and you’re playing the long game, holding could still make sense—especially if rents or values are trending up.

    Good luck!

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

    Hi Nathaniel,

    Thanks for sharing your situation you're definitely not alone in facing this kind of decision, and it’s great that you’re thinking it through carefully. Here simple breakdown to consider when deciding whether to sell Rental Two

    It’s cash flowing: You're making around $400/month after expenses, which is always a good sign.

    You already own it: No transaction fees, no closing costs, and no need to go property hunting again.

    High interest rate (8%): This is likely eating into your long-term profits. Over time, a high interest rate can reduce your total return even if you're cash flow positive now.

    Equity isn’t growing fast: Compared to your other rental, this one has less potential in terms of appreciation.

    If you plan to use the profits to pay off student loans or reinvest in a better property, that could increase your long-term financial health. Also, managing multiple properties, especially with debt, can add pressure. Sometimes simplifying your portfolio helps you sleep better at night. In any portfolio, sometimes it’s smart to let go of the least efficient asset and focus on strengthening the rest. At the end of the day, the decision comes down to your personal comfort with risk and your long-term goals. If Rental Two feels like it's holding you back or not performing as well as it could, it might be time to sell. But if it’s easy to manage and you’re in this for the long haul, holding can also be a reasonable choice.

    Hope this helps give you some clarity as you weigh the options.

    Wishing you and your wife the best in your journey!

    Warm regards,

    Priyanka

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    1y

    Neither of those mortgages on the rentals is that high.  How much have you invested in the rentals?  Look at your annual rate of return on those just from the rent and ask her and the advisor if they'd be able to get that same return in a low risk investment and remind them the house value is also going up as will rent.

    Depending on what you do (medical field is pretty wide), you probably have a good income.  Your biggest expense is your family home and by renting the guest house, you've done a smart thing and decreased the costs on that.

    8% is high, but you can always work on paying that down faster as it isn't that big of a mortgage.

    0Reply
  • David Krulac
    Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
    1y

    When I was starting out I had little to no cash, and college debt, albeit not medical. The first 11 properties that I bought were all financed 100% in one way or another.  I can say for anybody else but for me, if I wasn't able to finance properties, I would not have been able to grow the portfolio.  I told myself to borrow as much as I can for as long as I can.  The first property was 9% interest; the second property was 9.5% interest and the third property was 15% fixed to 30 years. I owned the first property for 24 years, the second for 37 years and the third property for 23 years.  Although I did refinance #1 and #3 three times each to cash out and lower the interest rate.  I can't tell anybody what they should do, I can only say what I actually did. 

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  • Andre Brock
    Investor · Cleveland, OH · Member since 2013 · 120 posts · 77 votes
    1y

    Just me personally I would keep all of all three but with specifically property #2 that would be the first one I would off load.  I would want to keep it a little  before I have to make any major cap ex repairs  also maybe use this time to get debt free in any other aspects of your personal life. Good luck. 

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  • Ko KashiwagiPro Member
    Lender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
    1y

    Hi Nathaniel,

    8% on rental 2 is steep but it doesn't seem like a terrible investment at all - what's the appreciation outlook on this one?

    $400 cash flow on 140k property is not bad and the cost of reallocating capital by selling is likely not worth it unless you have a very good opportunity based on risk adjusted returns. You can sell it if you start feeling tight on finances. You can also reduce risk by actively paying down mortgage

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  • Allan C.
    Rental Property Investor · Member since 2018 · 826 posts · 810 votes
    1y

    I don't think you're at a decision point, so you likely won't have to make a decision in near future.

    Everyone keeps targeting the 8% interest loan, but I'll ask you to look at this differently - how much would that property cash flow if interest rate dropped to 6%? Do you have any reserves now, or can you set up a HELOC? Being over-leveraged isn't the issue - it's not having sufficient reserves.

    You also didn't mention the interest rate for your student loan - you likely don't want to pay that off if you have relatively low rates. You do have a fair amount of debt, but get some paper and do analysis to figure out how exposed you are. Then develop contingency plans for those scenarios and see if that makes you more comfortable. 

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