Should I Sell My 4% Mortgage Rate Rental Property? ($300K Equity)

Episode #1,055

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Should you keep, refinance, or sell your rental property? If you’re sitting on a low mortgage rate and plenty of equity, you’ve probably asked yourself this once or twice within the past year. Most people who bought a rental property before 2020 have seen unprecedented appreciation and rock-bottom interest rates and are likely sitting on a war chest-sized home equity position. But that equity could be better spent investing in new properties than keeping your old ones.

This is Dave’s exact predicament. He’s got a property he bought back in 2016 that has over $300,000 in home equity. It’s cash flowing a solid $500 per month with a mortgage rate of just under four percent, but only producing a measly two percent cash-on-cash return. He’s getting four times the return on his recent investment property purchases, so should he sell? Not so fast; we’re doing the math to figure out whether he should keep, refinance, sell, or change strategies on this property.

Got the same good problem? Stick around as we even drop a fifth option most investors overlook entirely, which gives you the best of both worlds.

00:00 Intro
01:20 Property Details
04:51 1. Keep the Property
07:12 2. Refinance the Property
10:29 3. Sell the Property
17:12 4. Convert Into a Mid-Term Rental?
21:10 The Best Option?
22:24 5. Use Home Equity Instead

[ClemenceLisee]

Your video is outstanding! The way you break down complex financial concepts into actionable insights is impressive. I appreciate your unique presentation style, which combines humor, empathy, and expertise to create an engaging and enlightening experience.

[JeremyBlackston]

This is an EXTREMELY good video. Discussing the different options, etc. Great stuff.

[Omoloya]

Househacking among renting neighbors can be exceedingly tricky.

[Celticsfan]

The old man was right. Never sell in 5 plus percent rates. Putting money in the bank right now is riskier than holding.

[riveroflife]

Please do more of these videos guys! So educational and helpful for me as a new investor

[keithvelaski]

This is an extrememly helpful episode!

[Buddyelvis-]

I got one for ya...
On bigger pockets find a person who'd trade (swap) property where you want to be at.

[davelavigne]

As a person with rentals in Colorado, I think we have seen the runup and the market will be stable for the next several years. Rents have not adjusted up to the traditional .6% of market rate. IE if you have an 800K property would rent for $4800/mo with future appreciation. Now the rents are about $3600-$3800/mo with no sign of raising.

[navidkh]

That was the best video in long time. It was like school to learn portfolio management. One question, Why not hold it for more appreciation?

[Tucknroll]

Great video. Feels like you made it for me!

[paulnovak]

I really like how you broke down all the options. Another great video guys! I might also be your one in a million that plans to purchase my properties and never sell them lol. I am working to follow Chad Carson's strategy of small and mighty. I currently have 5 properties and think if I buy 1 or 2 more I will make enough to retire off my portfolio provided I pay them all off. Given I live in the Midwest in Wisconsin where cost of living and the price of properties is much lower. Also all my properties are long term rentals. My best property is still the first rental I purchased back in 2021. It's a duplex that currently cashflows $1, 525 per month that I purchased for $199, 900. I am not saying I would never sell but my short term goal is to purchase them, pay them off, and then owner finance sell them off to my kids in retirement. We will see what the future actually holds.

[michaelhernandezii]

I had to sell my 2.75% mortgage rate condo due to divorce 😢

[Pseudify]

I’ve never quite got my mind around the 1031 rules. But I think you can get *partial* tax deferral by buying a replacement property that is less in value than the relinquished property. Also, as to the rule about obtaining the same or higher level of debt, there’s some rule about replacing debt with cash. I THINK what this means is if you have 100k in, say, an index fund that you wanted to use, you could substitute that debt requirement with that 100k. Does anyone know more about this?

[Whatever]

If you have some cash available. Do a reverse 1031 to avoid the 45+135 days time limit.
I have never heard about that You have to take on a minimum amount of debt in a 1031. That’s not a thing.

[jerrystpierreofficial]

Sell the rental at 2% CAP and buy index funds?

[onedropontv]

Dave who manages your rentals in Midwest?

[dylanwickersham]

Any recommendations on banks that do helocs on investment properties?

[jnachtig]

How do any of these options beat a 60/40 stock/bond portfolio of low cost EFT? It would generate a min 5-6% every year with zero energy and no taxes until you sell. Real Estate is not the only way to make money, and with loans at 7-8% i dont see how any of these are the superior option.

[TruthExposed-hq]

Would you sell a property with $500k in equity to start a coworker business?

[bradm]

Oh no, you lost out on the $500k capital gain exclusion by making it a rental for more than 3 years!