What to do with rental equity

Member since 2025 · 19 posts · 9 votes

I have a rental that is a single family home. It is worth about $375000. I owe 105,000 at 3.5%. It is under rented to my cousin at $1800. I could probably get around $2100 in rent max. I used to live in it and if I sell it this year I can avoid capital gains. My primary residence has a $308,000 mortgage at a 6.99% with only 5% equity. I am trying to figure out what to do. I told my cousin I need to make a change this year because I cannot continue to rent it at $1800. Should I sell it and pay down my mortgage on my primary? Should I increase my rent to $2100 and keep it. Should I sell it and reinvest the money into duplexes/quads to leverage the capital. I am a realtor so I can save the realtor fees. It is a hard decision to make. I am a little low on reserve funds because of moving and having to sink a lot of money into home repairs on my primary home. The rental also has room for an adu to be built in the back yard. The yard layout would work nicely for that. I don't have the funds to do that at this time. I looked into an HELOC or 2nd mortgage, but the rates are too high on a rental. The rental is in Medford, Oregon. It is a hard decision for me to make. Any advise is welcome. Thank you, Ginger Olinghouse

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Melissa JusticeBusiness Member

Rental Property Investor · Phoenix, AZ · Member since 2024 · 518 posts · 1k+ votes

@Ginger Olinghouse,

Hi Ginger, you’re in a complex situation, but it helps that you have several options and good equity in your rental. Let’s break it down:

1. Keep the rental and raise rent:
Current rent ($1,800) is below market ($2,100). Raising it would help cover expenses, but consider family dynamics with your cousin and the potential vacancy if they leave.

With a $3.5% mortgage, your cash flow is still likely positive at $2,100/month, but it won’t generate huge extra income.

2. Sell the rental and pay down your primary mortgage:
Selling at $375K with $105K owed would give you ~$270K before costs (though you save realtor fees as an agent).

You could pay down your high 6.99% mortgage, which is a guaranteed “return” by reducing interest costs. This could relieve stress, especially since you’re low on reserves.

The downside: you lose a cash-flowing property and future appreciation.

3. Sell and reinvest into duplexes/quads (or other rentals):
If your goal is to leverage capital for better cash flow, using the sale proceeds to buy small multifamily properties could make sense. Duplexes/quads often allow you to scale faster and increase cash flow while spreading vacancy risk across units.

You’d have to be ready for the learning curve, potentially higher management responsibility, and out-of-state considerations if you look elsewhere.

4. Consider a 1031 Exchange:
If you sell your Medford rental and reinvest the proceeds into another like-kind investment property, a 1031 exchange can defer capital gains taxes.

This is especially attractive if your goal is to scale into higher cash-flow or better-performing markets while preserving your equity.

Timing, rules, and proper guidance from a CPA or 1031 specialist are critical to execute this correctly.

Other considerations:
ADU potential is great for long-term value, but if you can't fund it now, it's more of a future option.

HELOC or second mortgage: As you noted, rates on rentals are high, so probably not ideal right now.

Taxes: Selling your former primary that has never been your current residence won’t give you primary residence capital gains exclusion, but since this was a rental, that may not apply anyway - something to confirm with your CPA.

If your priority is financial peace, lowering high-interest debt, and increasing cash reserves, selling the rental and paying down your primary could make the most sense right now.

If your priority is long-term cash flow and scaling your portfolio, consider selling and using the capital to acquire small multifamily properties that are cash-flow positive - either outright or through a 1031 exchange to defer taxes.

Raising rent is a moderate option if you want to keep the property without selling, but it may only marginally improve your position.

Given your flexibility and market knowledge as a realtor, you could likely identify solid small multifamily or even single-family deals that would make option 3 (with or without a 1031) a strong path for long-term wealth.

Always happy to share more on what's worked for other investors. Best of luck!

[email protected]313-221-8718

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Jaycee GreenePro Member
Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
1y
Quote from @Ginger Olinghouse:

I have a rental that is a single family home. It is worth about $375000. I owe 105,000 at 3.5%. It is under rented to my cousin at $1800. I could probably get around $2100 in rent max. I used to live in it and if I sell it this year I can avoid capital gains. My primary residence has a $308,000 mortgage at a 6.99% with only 5% equity. I am trying to figure out what to do. I told my cousin I need to make a change this year because I cannot continue to rent it at $1800. Should I sell it and pay down my mortgage on my primary? Should I increase my rent to $2100 and keep it. Should I sell it and reinvest the money into duplexes/quads to leverage the capital. I am a realtor so I can save the realtor fees. It is a hard decision to make. I am a little low on reserve funds because of moving and having to sink a lot of money into home repairs on my primary home. The rental also has room for an adu to be built in the back yard. The yard layout would work nicely for that. I don't have the funds to do that at this time. I looked into an HELOC or 2nd mortgage, but the rates are too high on a rental. The rental is in Medford, Oregon. It is a hard decision for me to make. Any advise is welcome. Thank you, Ginger Olinghouse

Hi @Ginger Olinghouse, welcome to the BP Forum! What is your #1 priority? Getting your reserve funds back up? Maximize monthly cash flow from the rental? Increase the equity in your primary residence?
[email protected]
2 Reply
- Ginger Olinghouse
  OP
  Member since 2025 · 19 posts · 9 votes
  1y
  Quote from @Jaycee Greene:
  
  Quote from @Ginger Olinghouse:
  
  I have a rental that is a single family home. It is worth about $375000. I owe 105,000 at 3.5%. It is under rented to my cousin at $1800. I could probably get around $2100 in rent max. I used to live in it and if I sell it this year I can avoid capital gains. My primary residence has a $308,000 mortgage at a 6.99% with only 5% equity. I am trying to figure out what to do. I told my cousin I need to make a change this year because I cannot continue to rent it at $1800. Should I sell it and pay down my mortgage on my primary? Should I increase my rent to $2100 and keep it. Should I sell it and reinvest the money into duplexes/quads to leverage the capital. I am a realtor so I can save the realtor fees. It is a hard decision to make. I am a little low on reserve funds because of moving and having to sink a lot of money into home repairs on my primary home. The rental also has room for an adu to be built in the back yard. The yard layout would work nicely for that. I don't have the funds to do that at this time. I looked into an HELOC or 2nd mortgage, but the rates are too high on a rental. The rental is in Medford, Oregon. It is a hard decision for me to make. Any advise is welcome. Thank you, Ginger Olinghouse
  
  Hi @Ginger Olinghouse, welcome to the BP Forum! What is your #1 priority? Getting your reserve funds back up? Maximize monthly cash flow from the rental? Increase the equity in your primary residence?
  
  Thanks for responding. I would like to do all of the above, but I guess my biggest priority would be to get my overall cash flow up in the short term. Right now I am spending more in interest on my primary home than I am gaining with my rental income.
  2 Reply
- Jaycee GreenePro Member
  Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
  1y
  Quote from @Ginger Olinghouse:
  
  Quote from @Jaycee Greene:
  
  Quote from @Ginger Olinghouse:
  
  I have a rental that is a single family home. It is worth about $375000. I owe 105,000 at 3.5%. It is under rented to my cousin at $1800. I could probably get around $2100 in rent max. I used to live in it and if I sell it this year I can avoid capital gains. My primary residence has a $308,000 mortgage at a 6.99% with only 5% equity. I am trying to figure out what to do. I told my cousin I need to make a change this year because I cannot continue to rent it at $1800. Should I sell it and pay down my mortgage on my primary? Should I increase my rent to $2100 and keep it. Should I sell it and reinvest the money into duplexes/quads to leverage the capital. I am a realtor so I can save the realtor fees. It is a hard decision to make. I am a little low on reserve funds because of moving and having to sink a lot of money into home repairs on my primary home. The rental also has room for an adu to be built in the back yard. The yard layout would work nicely for that. I don't have the funds to do that at this time. I looked into an HELOC or 2nd mortgage, but the rates are too high on a rental. The rental is in Medford, Oregon. It is a hard decision for me to make. Any advise is welcome. Thank you, Ginger Olinghouse
  
  Hi @Ginger Olinghouse, welcome to the BP Forum! What is your #1 priority? Getting your reserve funds back up? Maximize monthly cash flow from the rental? Increase the equity in your primary residence?
  
  Thanks for responding. I would like to do all of the above, but I guess my biggest priority would be to get my overall cash flow up in the short term. Right now I am spending more in interest on my primary home than I am gaining with my rental income.
  
  Hi @Ginger Olinghouse. Just to make sure I understand, do you mean you want to generate more cash flow (after you pay your debt service) from your rental than you pay in interest on your primary residence?
  [email protected]
  1 Reply
Jules Aton
MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
1y
Do you want to have a rental? How much is the owner occupied capital gains exclusion worth?
1 Reply
- Ginger Olinghouse
  OP
  Member since 2025 · 19 posts · 9 votes
  1y
  Quote from @Jules Aton:
  
  Do you want to have a rental? How much is the owner occupied capital gains exclusion worth?
  Yes, I want to have rentals. I want to have passive income streams. It looks like capital gains could be about $30,450 using Nerd Wallet's calculator for that.
  1 Reply
Ginger Olinghouse
OP
Member since 2025 · 19 posts · 9 votes
1y
Yes, exactly.
1 Reply
- Jaycee GreenePro Member
  Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
  1y
  Quote from @Ginger Olinghouse:
  
  Yes, exactly.
  
  @Ginger Olinghouse What was your NOI last year on the rental? This would be the number on your taxes after your taxes, insurance, repairs/maintenance before excludes your loan payment.
  [email protected]
  0 Reply
Ginger Olinghouse
OP
Member since 2025 · 19 posts · 9 votes
1y
It is either earn more cash flow through rentals than what I pay in interest for my primary home or pay down the primary to reduce the interest.
1 Reply
Ginger Olinghouse
OP
Member since 2025 · 19 posts · 9 votes
1y
I pay almost 1800 in interest every month on my primary home. I currently have about $800 above principal, interest, taxes, and insurance in cash flow on my rental.
0 Reply
- Jaycee GreenePro Member
  Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
  1y
  Quote from @Ginger Olinghouse:
  
  I pay almost 1800 in interest every month on my primary home. I currently have about $800 above principal, interest, taxes, and insurance in cash flow on my rental.
  
  @Ginger Olinghouse Is your actual monthly mortgage payment (interest + principal) around $2,047?
  [email protected]
  0 Reply
Ginger Olinghouse
OP
Member since 2025 · 19 posts · 9 votes
1y
2047 is around my mortgage payment with principal and interest for my primary residence. With principal, interest, taxes, pmi, and insurance it is $2250. NOI on rental was about 16000. I raised the rent from 1700 to 1800 in June so this will go up.
0 Reply
- Jaycee GreenePro Member
  Real Estate Consultant · St. Louis MSA · Member since 2024 · 3k+ posts · 727 votes
  1y
  Quote from @Ginger Olinghouse:
  
  2047 is around my mortgage payment with principal and interest for my primary residence. With principal, interest, taxes, pmi, and insurance it is $2250. NOI on rental was about 16000. I raised the rent from 1700 to 1800 in June so this will go up.
  
  @Ginger Olinghouse That's great. If you could refi the rental property for $170k (cash out ~ $65k), would that be enough to replenish your reserves?
  [email protected]
  0 Reply
- Ginger Olinghouse
  OP
  Member since 2025 · 19 posts · 9 votes
  1y
  Quote from @Jaycee Greene:
  
  Quote from @Ginger Olinghouse:
  
  2047 is around my mortgage payment with principal and interest for my primary residence. With principal, interest, taxes, pmi, and insurance it is $2250. NOI on rental was about 16000. I raised the rent from 1700 to 1800 in June so this will go up.
  
  @Ginger Olinghouse That's great. If you could refi the rental property for $170k (cash out ~ $65k), would that be enough to replenish your reserves?
  
  Yes, I could pay down my primary mortgage with 50000 and keep 15000 for reserves. If I pay down my primary by 50,000 I could refinance when rates come down.
  0 Reply
- Ginger Olinghouse
  OP
  Member since 2025 · 19 posts · 9 votes
  1y
  Quote from @Ginger Olinghouse:
  
  Quote from @Jaycee Greene:
  
  Quote from @Ginger Olinghouse:
  
  2047 is around my mortgage payment with principal and interest for my primary residence. With principal, interest, taxes, pmi, and insurance it is $2250. NOI on rental was about 16000. I raised the rent from 1700 to 1800 in June so this will go up.
  
  @Ginger Olinghouse That's great. If you could refi the rental property for $170k (cash out ~ $65k), would that be enough to replenish your reserves?
  
  Yes, I could pay down my primary mortgage with 50000 and keep 15000 for reserves. If I pay down my primary by 50,000 I could refinance when rates come down.
  Are you offering to do a refinance? I would be pretty concerned that my cash flow would be worse as I would loose my 3.5 interest rate, but maybe if it was lower than my 6.99 on my primary it might break even.
  0 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
If you are low on reserve funds buying another asset is an awful idea. Either increase the rent or sell it and pocket some cash. Really depends on your overall situation, ability to manage your expenses and how stable is your income
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1 Reply
- Ginger Olinghouse
  OP
  Member since 2025 · 19 posts · 9 votes
  1y
  Quote from @Chris Seveney:
  
  If you are low on reserve funds buying another asset is an awful idea. Either increase the rent or sell it and pocket some cash. Really depends on your overall situation, ability to manage your expenses and how stable is your income
  
  It was either sell it and reinvest, keep it and raise the rent, or sell it and pay down mortgage on primary mortgage. All of the selling options would include beefing up reserve funds.
  
  0 Reply
Melissa JusticeBusiness Member
Rental Property Investor · Phoenix, AZ · Member since 2024 · 518 posts · 1k+ votes
1y
@Ginger Olinghouse,

Hi Ginger, you’re in a complex situation, but it helps that you have several options and good equity in your rental. Let’s break it down:

1. Keep the rental and raise rent:
Current rent ($1,800) is below market ($2,100). Raising it would help cover expenses, but consider family dynamics with your cousin and the potential vacancy if they leave.

With a $3.5% mortgage, your cash flow is still likely positive at $2,100/month, but it won’t generate huge extra income.

2. Sell the rental and pay down your primary mortgage:
Selling at $375K with $105K owed would give you ~$270K before costs (though you save realtor fees as an agent).

You could pay down your high 6.99% mortgage, which is a guaranteed “return” by reducing interest costs. This could relieve stress, especially since you’re low on reserves.

The downside: you lose a cash-flowing property and future appreciation.

3. Sell and reinvest into duplexes/quads (or other rentals):
If your goal is to leverage capital for better cash flow, using the sale proceeds to buy small multifamily properties could make sense. Duplexes/quads often allow you to scale faster and increase cash flow while spreading vacancy risk across units.

You’d have to be ready for the learning curve, potentially higher management responsibility, and out-of-state considerations if you look elsewhere.

4. Consider a 1031 Exchange:
If you sell your Medford rental and reinvest the proceeds into another like-kind investment property, a 1031 exchange can defer capital gains taxes.

This is especially attractive if your goal is to scale into higher cash-flow or better-performing markets while preserving your equity.

Timing, rules, and proper guidance from a CPA or 1031 specialist are critical to execute this correctly.

Other considerations:
ADU potential is great for long-term value, but if you can't fund it now, it's more of a future option.

HELOC or second mortgage: As you noted, rates on rentals are high, so probably not ideal right now.

Taxes: Selling your former primary that has never been your current residence won’t give you primary residence capital gains exclusion, but since this was a rental, that may not apply anyway - something to confirm with your CPA.

If your priority is financial peace, lowering high-interest debt, and increasing cash reserves, selling the rental and paying down your primary could make the most sense right now.

If your priority is long-term cash flow and scaling your portfolio, consider selling and using the capital to acquire small multifamily properties that are cash-flow positive - either outright or through a 1031 exchange to defer taxes.

Raising rent is a moderate option if you want to keep the property without selling, but it may only marginally improve your position.

Given your flexibility and market knowledge as a realtor, you could likely identify solid small multifamily or even single-family deals that would make option 3 (with or without a 1031) a strong path for long-term wealth.

Always happy to share more on what's worked for other investors. Best of luck!
[email protected]313-221-8718
4 Reply
Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
1y
@Melissa Justice covered the options fairly well except
1) no need for the 1031 due to still qualifying for the owner occupied gains exclusion
2) the only reason the rental would cash flow is 1) the high equity position 2) the far below market interest. With $270k of equity even a money market can get at least $11k/year with a lot less work. In addition, I am unconvinced that the rental has positive cash flow even at $2100/month rent (meaning I am pretty sure it does not) when properly allocating for all expenses (PITI, vacancy, maintenance/cap ex, PM (allocate for pm even when self managing as your time has value), HOA?, misc (asset protection, book keeping, one off things like utilities associated with a slab leak, etc). The reality is a property worth $375 that can rent for $2100 max is always going to be a poor rental.
Using 50% expenses (50% rule)
2100 (rent) - $1050 (expenses other than mortgage) - $2047 = negative $997
You can see even at a 40% expense ratio, this would be negative) Even at 30% expense ratio this is negative. Same for 25%.
At 20% expense ratio (hopefully you being an agent you know how unlikely it is to have sustained 20% expense ratio)
$2100 - $420 - $2047 = negative $367/month.
I would sell using your OO gains exemption and invest the money in the best investment you can find and I think that is unlikely to be another property or paying down your current OO loan.
I know bigger pockets has become largely RE related, but it is possible that RE will not be the best option for everyone at all times.

good luck
2 Reply
Benjamin Louie
Property Manager · Erie & Millscreek PA | Maggie Valley & Haywood County NC · Member since 2024 · 264 posts · 118 votes
1y
Hi @Ginger Olinghouse, thanks for laying out all the details; it really helps paint the full picture. You’ve got a few good options here, and it really comes down to your priorities right now:
- Selling now: Since you can avoid capital gains this year, this is a unique window of opportunity. Selling would free up a lot of equity (~$270k before costs) that you could use to pay down your high-interest primary mortgage. That would immediately reduce your monthly stress and free up cash flow.
- Holding & raising rent: Even at $2,100, your cash flow isn’t being maximized relative to the equity tied up in the property. That low 3.5% loan is fantastic, but most of your wealth is trapped in the equity.
- Reinvesting into multifamily: If your long-term goal is building cash flow, moving that equity into duplexes/quads could give you stronger returns. The tradeoff is giving up the 3.5% mortgage and stability of your current rental.
- ADU potential: This could be great upside, but since you don’t have funds right now, it sounds more like a future opportunity than an immediate plan.
Given your low reserves and the high rate on your primary, one safe move could be to sell and improve your financial foundation first. That way, when the right multifamily opportunity comes along, you’ll be in a stronger position to act.
1 Reply
Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
1y
I agree with @Dan H. - cashflow from rentals is not really a thing until you get into at least medium portfolio size. So your life will not be better from 1 or 2 or 3 houses. If anything, you lack the scale to have systems and resources in place, so you'll just be stressed every time you need a repair. BP tends to tell you only offer one solution to every question, which is to buy more rentals. And that is often bad advice.

My vote: sell the house under the OO exemption, pay down and maybe even refinance your mortgage at current lower rates (I have seen a 5.8% yesterday at a Milwaukee Bank).

Closing one extra deal per year will give you more cash flow than a rental property. Who says you can't close one extra deal every month?
0 Reply
Aaron ZimmermanBusiness Member
Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
1y
I would say based on your comments above, you should sell the property and look to minimize capital gains tax.

If you are able to use some of the money for emergency funds, paying down mortgage, etc, I'd encourage you to invest in additional rental property when possible. The return on equity is not great and the upside is limited based on your comments of being able to raise rents $300
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Ginger Olinghouse
OP
Member since 2025 · 19 posts · 9 votes
1y
Thank you for all the thoughtful responses. It is so hard for me to sell this property because of its super low mortgage payment and the fact that I love this home. We have owned it for 10 years and lived there for most of that time. I could see myself moving back someday. We had to move because of my husband's job change. I think I probably need to sell it because we waste so much money in interest on our primary home every month, but maybe if I earn enough money in real estate commissions we can pay down the mortgage and refinance. I just got my real estate license. I have until fall of 2026 before capital gains kicks in. I will probably put it on the market in the spring if I don't find another solution.
0 Reply
Ginger Olinghouse
OP
Member since 2025 · 19 posts · 9 votes
1y
The mortgage taxes and insurance is $900 per month on the rental. It cash flows pretty well because of this. It is my primary home that is the problem. Its principal and interest is $2047. I think that is where you got that number, but you are right that the rental isn't performing that well in comparison to the equity that is in it.
0 Reply
- Dan H.Pro Member
  Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
  1y
  Quote from @Ginger Olinghouse:
  
  The mortgage taxes and insurance is $900 per month on the rental. It cash flows pretty well because of this. It is my primary home that is the problem. Its principal and interest is $2047. I think that is where you got that number, but you are right that the rental isn't performing that well in comparison to the equity that is in it.
  It appears you have more to learn about expenses than I believed as I thought being a real estate agent you would have some idea of sustained expenses.
  
  nationally it is estimated that sustained expenses and vacancy are 50% of rent (the 50% rule). There is a lot of variances in this. Typically high rent locations will need a lower percentage than low rent areas. HOAs can impact this. Higher property tax areas. How active is the LL with maintenance, do they employee their own maintenance team like I do? Lots of things can tweak away from the 50% rule, so it can be off substantially.
  
  there is likely no area in the country that a 20% expense ratio is sufficient expense ratio for a sustained hold. Your rental is negative cash flow with a 20% expense ratio. I can tell you with certainty that yo7 property, contrary to your belief, is cash flow negative on a sustained basis (meaning full life cycle of all cap ex items). I suspect no LL with significant experience would claim otherwise.
  
  some questions for you
  - how did you obtain the number you are using for maintenance/cap ex?
  - how did you obtain your vacancy number?
  - what rate are you using for PM duties?
  - did you allocate anything for misc (asset protection, utilities associated with items not the tenants fault such as slab leak, book keeping, taxes) expenses?
  
  I suspect I can guess at the responses.
  
  at a 20% expense/vacancy ratio, your property is negative $367/month. I suspect double this is more accurate than an impossible 20% expense/vacancy ratio. If you are reluctant to believe me, I suggest you create a post and ask LL with at least 5 properties and 10 years of experience to post their belief of their expense ratio. I believe the mean will be over 30% and less than 50%. Likely no one will state 20% or less (and your property is still negative at a 20% expense/vacancy ratio - you property would even be negative at 10% expense/vacancy ratiio). Stop thinking it has positive cash flow; it does not.
  
  Recognizing your rental is loosing money even at what you listed as market rent and your decision may be easier.
  Good luck
  0 Reply
Scott AllenBusiness Member
Real Estate Agent · Columbus, OH · Member since 2020 · 449 posts · 471 votes
1y
@Ginger Olinghouse personally, I would keep your single family rental and just raise the rent about $100-150 for when you renew the lease with your cousin. If it hasn't been updated for awhile - it's likely you would need to put some more money into it to get $2,100 a month if that is peak market rent. A HELOC would be a good option if you still technically lived in that rental - ideally, you want to open a HELOC before you move out of these properties so that you can have that line of credit as you move on to others like your current primary residence.
[email protected]614-698-1227
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Jeff Roth
Real Estate Consultant · Ann Arbor, MI · Member since 2022 · 462 posts · 252 votes
1y
Hi Ginger from Oregon-
You have a rental that is being rented below market rent to family and has a low interest mortgage and equity. Your primary has little equity and a higher interest rate.
Your question is how to best put the equity in the rental to work and you also lived in the rental so think you can sell without capital gains tax.
It is hard to find good cash flowing properties with a low mortgage rate like you have.
If you can comfortably afford to keep your primary without selling the rental, I would consider keeping both as they will be worth much more in the future with your payments mostly fixed. Raise rents to market rents on your rental.
Even though, as you state, the interest rate is higher on a Home Equity Line of Credit (HELOC) on a second home like the rental it does give you access to capital should you need it or find the right opportunity and it doesn't cost you anything until you use it. Plus, the blended rate between the HELOC and the primary is still relatively low historically.
To Your Success!
1 Reply
Henry T.
Member since 2022 · 1k+ posts · 1k+ votes
1y
I consider the tenant friendly west coast highly risky for landlords. Depending on only one tenant puts you in a danger zone. If you had an eviction it could take you a year. Either reinvest in a multi and spread your tenant risk, or pay off your house and enjoy the opportunities as a mortgage free investor. In addition to capital gains you would probably also have to pay the Obama 3.8% Net Investment Income Tax (NIIT). Take that capitol gain advantage now. If I were starting out as a landlord I would invest in Arizona or Idaho where the landlord has more control.(just my 2 cents). Congrats on your appreciation and good luck!
0 Reply
McFarlen Jean-Pierre
Member since 2024 · 14 posts · 3 votes
1y
1. Get a Heloc
2. Draw on it
3. Do a fix and flip
4. Call me to get it done 7864247296
0 Reply
- Ginger Olinghouse
  OP
  Member since 2025 · 19 posts · 9 votes
  1y
  Quote from @McFarlen Jean-Pierre:
  
  1. Get a Heloc
  2. Draw on it
  3. Do a fix and flip
  4. Call me to get it done 7864247296
  
  Seems risky and the heloc would have high interest rates. I don't think I have enough reserves for this idea, but thank your for the suggestion.
  1 Reply
Ginger Olinghouse
OP
Member since 2025 · 19 posts · 9 votes
1y
I have done almost all of my own maintenance and all of the management. There isn't an hoa. Noi last year was 16000. P.i. was 7379, but your right, I need to add in capital expenses because I know I dont want to do the roof myself when that comes up. We are very handy though. I probably do need to sell it.
0 Reply
Matthew Thornton
Member since 2025 · 104 posts · 37 votes
1y
Capital gains free if you sell it this year? I would sell it
1 Reply
Ginger Olinghouse
OP
Member since 2025 · 19 posts · 9 votes
1y
I have to sell by the fall of 2026 to avoid capital gains. Most people on the forum are saying to sell. I think it will list it in the spring. It was a hard decision for me because I have some emotional attachment and the interest rate is so good on it.
0 Reply
Mica Moore
San Antonio. Tx · Member since 2018 · 75 posts · 47 votes
1y
Switch houses with cousin & raise his rent on the new lease.

Or sell your primary, evict cousin & convert rental into your new primary.

If you do choose to sell the rental, check to see if loan is assumable -- that is something attractive to advertise in this buyer's market.
0 Reply
- Ginger Olinghouse
  OP
  Member since 2025 · 19 posts · 9 votes
  1y
  Quote from @Mica Moore:
  
  Switch houses with cousin & raise his rent on the new lease.
  
  Or sell your primary, evict cousin & convert rental into your new primary.
  
  If you do choose to sell the rental, check to see if loan is assumable -- that is something attractive to advertise in this buyer's market.
  
  The rental 50 minutes away from my husband's job and the kids school. The primary house is worth 315000 or so. The rental is worth 375000. If we sell the rental and put all the proceeds to the primary we will only owe about $50,000. I have thought about the option of moving back into the rental though. I loved that house and the yard. I don't think my cousin would move into my current primary home, especially at a rental rate that wouldnt be cash flow negative.
  0 Reply
Jackie Carmichael
Lender · Hinton, WV · Member since 2025 · 128 posts · 53 votes
1y
Ginger — thanks for laying out the numbers, this is exactly the kind of decision a lot of investors are facing right now. You’ve got strong equity in the rental but a tight spot with reserves and a high-rate primary, so the question is really about where that equity works hardest for you.

Option 1: Sell & Pay Down Primary

• Eliminates capital gains since you lived there.

• Frees up a big chunk of cash to reduce your 6.99% mortgage (a guaranteed return, in a sense).

• Downside: You lose the rental asset and its long-term appreciation/ADI potential.

Option 2: Hold & Raise Rent

• Even at $2,100, it’s under market leverage given the equity you have locked in.

• Great long-term loan (3.5%), but not much cash flow upside with current rent.

• You’re equity-rich but cash-poor, which makes scaling tougher.

Option 3: Sell & Reinvest

• Trade into duplex/quads where you get better cash-on-cash returns and diversify income.

• Since you’re a Realtor, you save fees, which makes this cleaner.

• This is the “scale” play, but you’ll want to shore up reserves first so you’re not stretched thin.

Option 4: ADU Long Play

• If you had capital, adding an ADU could transform the deal. But given reserves are tight, this feels like a “someday” option, not a today option.

My Take:

If you need liquidity and stability right now, selling and paying down your primary is the safe move. If you want to stay in growth mode, selling and rolling into a small multi could balance cash flow with long-term wealth. Keeping the house only really makes sense if you’re committed to it as a legacy hold.

On my side, I help investors explore financing paths like cash-out refinances, DSCR loans, and bridge-to-multi structures. That could give you a way to access equity and redeploy it into higher-yield properties without draining reserves.

Curious — are you leaning more toward shoring up your personal balance sheet (lowering your primary mortgage) or staying in growth mode with more doors and cash flow?
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- Ginger Olinghouse
  OP
  Member since 2025 · 19 posts · 9 votes
  1y
  Quote from @Jackie Carmichael:
  
  Ginger — thanks for laying out the numbers, this is exactly the kind of decision a lot of investors are facing right now. You’ve got strong equity in the rental but a tight spot with reserves and a high-rate primary, so the question is really about where that equity works hardest for you.
  
  Option 1: Sell & Pay Down Primary
  
  • Eliminates capital gains since you lived there.
  
  • Frees up a big chunk of cash to reduce your 6.99% mortgage (a guaranteed return, in a sense).
  
  • Downside: You lose the rental asset and its long-term appreciation/ADI potential.
  
  Option 2: Hold & Raise Rent
  
  • Even at $2,100, it’s under market leverage given the equity you have locked in.
  
  • Great long-term loan (3.5%), but not much cash flow upside with current rent.
  
  • You’re equity-rich but cash-poor, which makes scaling tougher.
  
  Option 3: Sell & Reinvest
  
  • Trade into duplex/quads where you get better cash-on-cash returns and diversify income.
  
  • Since you’re a Realtor, you save fees, which makes this cleaner.
  
  • This is the “scale” play, but you’ll want to shore up reserves first so you’re not stretched thin.
  
  Option 4: ADU Long Play
  
  • If you had capital, adding an ADU could transform the deal. But given reserves are tight, this feels like a “someday” option, not a today option.
  
  My Take:
  
  If you need liquidity and stability right now, selling and paying down your primary is the safe move. If you want to stay in growth mode, selling and rolling into a small multi could balance cash flow with long-term wealth. Keeping the house only really makes sense if you’re committed to it as a legacy hold.
  
  On my side, I help investors explore financing paths like cash-out refinances, DSCR loans, and bridge-to-multi structures. That could give you a way to access equity and redeploy it into higher-yield properties without draining reserves.
  
  Curious — are you leaning more toward shoring up your personal balance sheet (lowering your primary mortgage) or staying in growth mode with more doors and cash flow?
  
  I am leaning towards selling the rental. Although, I am kind of hoping that I earn enough in commissions between now and spring to pay down my primary home to waste less money in interest and be able to save my rental. We'll see what interest rates do and if I can get myself in an equity position on my primary home to be able to refinance it by spring.
  
  Thank you very much for the thoughtful response.
  0 Reply
- Dan H.Pro Member
  Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
  1y
  Quote from @Ginger Olinghouse:
  
  Quote from @Jackie Carmichael:
  
  Ginger — thanks for laying out the numbers, this is exactly the kind of decision a lot of investors are facing right now. You’ve got strong equity in the rental but a tight spot with reserves and a high-rate primary, so the question is really about where that equity works hardest for you.
  
  Option 1: Sell & Pay Down Primary
  
  • Eliminates capital gains since you lived there.
  
  • Frees up a big chunk of cash to reduce your 6.99% mortgage (a guaranteed return, in a sense).
  
  • Downside: You lose the rental asset and its long-term appreciation/ADI potential.
  
  Option 2: Hold & Raise Rent
  
  • Even at $2,100, it’s under market leverage given the equity you have locked in.
  
  • Great long-term loan (3.5%), but not much cash flow upside with current rent.
  
  • You’re equity-rich but cash-poor, which makes scaling tougher.
  
  Option 3: Sell & Reinvest
  
  • Trade into duplex/quads where you get better cash-on-cash returns and diversify income.
  
  • Since you’re a Realtor, you save fees, which makes this cleaner.
  
  • This is the “scale” play, but you’ll want to shore up reserves first so you’re not stretched thin.
  
  Option 4: ADU Long Play
  
  • If you had capital, adding an ADU could transform the deal. But given reserves are tight, this feels like a “someday” option, not a today option.
  
  My Take:
  
  If you need liquidity and stability right now, selling and paying down your primary is the safe move. If you want to stay in growth mode, selling and rolling into a small multi could balance cash flow with long-term wealth. Keeping the house only really makes sense if you’re committed to it as a legacy hold.
  
  On my side, I help investors explore financing paths like cash-out refinances, DSCR loans, and bridge-to-multi structures. That could give you a way to access equity and redeploy it into higher-yield properties without draining reserves.
  
  Curious — are you leaning more toward shoring up your personal balance sheet (lowering your primary mortgage) or staying in growth mode with more doors and cash flow?
  
  I am leaning towards selling the rental. Although, I am kind of hoping that I earn enough in commissions between now and spring to pay down my primary home to waste less money in interest and be able to save my rental. We'll see what interest rates do and if I can get myself in an equity position on my primary home to be able to refinance it by spring.
  
  Thank you very much for the thoughtful response.
  
  Convention home loan is the cheapest money available. In addition, on your primary, it is tax deductible. D&p lifetime return far beats your interest rate before including the tax benefits from the RE interest.
  Dave Ramsey preaches to the masses to pay down debt. He is correct for the masses. Most people have large credit card debt. Many own no homes. Their debt is burdensome and reduces the quality of life. In line with that thinking, he advocates paying down a mortgage.
  However, experienced investors recognize the power of leverage. Without leverage, stocks may have out produced RE for virtually every time period. Stocks are significantly more passive.
  If you are in a total (state & fed) 30% tax bracket and itemizing, your in effect interest rate is
  6.99 (Current rate) * 3 / 10 = 4.9%
  The returns I achieve from my investments far exceed this number.
  Being a realtor you should understand how leverage affects return. This magnification is especially true in the appreciation.
  if a property appreciates 4%, the return from appreciation on an unleveraged asset is 4% but the return from appreciation on a 80% LTV is 20%
  I will go so far as to say in the current low cash flow RE market (even high cash flow markets currently have poor cash flow) that there is no reason to invest in passive (residential LTR RE is not passive but is compared to flips, value adds, alternate rent models, etc) RE.
  Paying down debt is the Dave Ramsey way for masses who cannot manage money and gave little opportunity to invest in anything that is likely to beat their high credit card debt. However, it is a terrible approach for the RE investor who obtains highest return via leverage and the use of other people,s money.
  Prior to the recent (q2, 2022) rate hikes, I very actively worked to keep my leverage high I once closed 8 loans on the same day ;highly recommend against it, doc signings were almost 6 hours and increased opportunity for errors). I very much do what I preach on the leverage (at least I did before my current rates being less than half of the current rates).
  If you sell, look at the investment options available to you. Pick the best one. The best one should not be paying down your loan and reducing your leverage.
  
  Good luck
  1 Reply
Charles ClarkBusiness Member
Real Estate Broker · Milwaukee, WI · Member since 2020 · 306 posts · 209 votes
1y
@Ginger Olinghouse

That’s a tough but smart evaluation, Ginger. Selling to avoid capital gains and pay down your primary could relieve pressure, while raising rent or reinvesting could build long-term wealth. It really comes down to your cash flow needs vs. growth goals. Thanks for sharing your situation—curious to hear what others think too

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Ginger Olinghouse
OP
Member since 2025 · 19 posts · 9 votes
1y
Thank you for all the advise
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