Cash out refi or sell?

[Cindy Kao]

Hello! We have been going back and forth about selling or doing a cash out on our 4 rentals in Detroit MI. We see the benefits of each but are still not sure what our best option is. It would be nice to sell, but we don't really want to deal with the tax implications. This makes us lean more towards doing a cash out refi, but then again we still aren't sure. I listed a quick pro and con list for each. What would you do?

Sell

- Pros: Get all our cash back and then some.

- Cons: Taxes!

Cash out Refi

- Pro: Keep our properties, keep our future equity in the homes.

- Con: Still have to manage the properties out of state.

Thanks!

Cindy

[Jeff Stephens]

Hi @Cindy Kao, thanks for your post! Here are a couple questions that come to mind as I read your post:

1. If you got your cash back, do you have something productive planned to do with it?
2. To defer taxes, many people do 1031 exchanges--have you looked into that?
3. Another way to defer capital gains is to sell via an installment sale--have you looked into that?
4. Last but not least, rather than sell the properties to extract the equity, have you considered trying to place a second loan on the properties? It might be difficult via a financial institution, but potentially possible with a private lender.  

All that said, I'm not as big a fan of owning out-of-market properties, but that's just my own preference.  That would definitely impact my own decision-making process on this one.