Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 16%
$32.50 /mo
$390 billed annualy
MONTHLY
$39 /mo
billed monthly
7 day free trial. Cancel anytime
BRRRR - Buy, Rehab, Rent, Refinance, Repeat
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated about 2 months ago on . Most recent reply

User Stats

8
Posts
2
Votes
Aurelie Slegers
  • Investor
  • Norwood, CO
2
Votes |
8
Posts

Should I sell my house, or rent it out?

Aurelie Slegers
  • Investor
  • Norwood, CO
Posted

Hi BP community,

I bought this house in Southwest Colorado for 365k in 2017. Put about 200k in renovations over the years. Refinanced at 3.25% in 2020 and now owe 405k. I could sell for about 825-850k right now. Not sure if it makes more sense to rent it out and be happy with the $1,000/mo in cashflow, or sell and buy better cashflow rentals with the 375k net proceeds? When I use the BP calculators is comes out with about 6-7% Cap Rate and about the same for Cash on Cash return. From what I understand, those numbers are not that great... Would love some help from more experienced investors to help me decide what to do! I will be moving to a different area and buying another property there. My 5-year goal is to invest in cashflowing properties and replace my 120k income.

Thank you!

Most Popular Reply

User Stats

76
Posts
114
Votes
Lauren Robins
  • Attorney
  • Salt Lake City, UT
114
Votes |
76
Posts
Lauren Robins
  • Attorney
  • Salt Lake City, UT
Replied

You're at a critical decision point with your property in Southwest Colorado, and the choice between renting it out or selling largely depends on your long-term investment goals. Since you purchased the home for $365,000 in 2017, invested around $200,000 in renovations, and now owe $405,000 after refinancing at a low 3.25% rate, you have significant equity. With the current market value estimated between $825,000 and $850,000, selling could provide approximately $375,000 in net proceeds. However, renting the property would generate about $1,000 per month in cash flow. The key question is whether holding onto the property is the best use of your capital, given your five-year goal of building a cash-flowing portfolio to replace your $120,000 annual income.

If you decide to keep the property, you’ll benefit from a relatively low mortgage rate, continued appreciation potential, and tax advantages such as depreciation. The $1,000 monthly cash flow is solid, but with a cap rate and cash-on-cash return in the 6-7% range, it may not be the best vehicle for achieving your income replacement goal quickly. Managing the rental remotely could also introduce challenges, including the need for a property manager and potential maintenance costs that may eat into your profits. While this option allows you to maintain a growing asset, it may not provide the scalability needed to reach your financial independence target in the next five years.

On the other hand, selling the property and reinvesting in higher-yield rentals could accelerate your path to financial freedom. With $375,000 in proceeds, you could potentially acquire multiple properties in stronger cash-flowing markets, each generating $750 to $1,000 per month in income. This approach could get you closer to $3,000 to $4,000 per month in cash flow, making significant progress toward replacing your $120,000 salary. Additionally, utilizing a 1031 exchange would allow you to defer capital gains taxes and preserve more of your equity for reinvestment. The downside is that you’d be giving up a property with strong appreciation potential and would need to carefully identify new investments that provide both stability and returns.

Given your goal of achieving financial independence through cash flow, selling and reinvesting in stronger rental markets seems like the more strategic move. While keeping the property may offer long-term value, it doesn’t provide the level of income you need to scale quickly. If you're open to exploring high-cash-flow markets and a 1031 exchange strategy, this could be an excellent opportunity to transition your equity into a portfolio that better aligns with your long-term financial goals.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Loading replies...