Sell or hold an investment property (4.75% rate)

Scottsdale, AZ · Member since 2020 · 11 posts · 3 votes

I wanted to get your thoughts on a real estate decision I’m considering.

I bought a 3/2.00 home in Tampa, FL in April 2022 for $245k at a 4.75% interest rate, I still owe $210K on the loan, my RE agent thinks it could sell for $280k ($70k in equity). It's cash flowing about $50/month after everything (PITI, flood insurance, home warranty, excess liability & termite protection) - if I got ride of termite it would cash flow $125.

I’m thinking about selling it but wanted to hear your perspective, especially since the interest rate is so low at 4.75% & I don’t necessarily like the idea of selling an investment property but know my money could potentially be better elsewhere. I have not explored 1031 exchange but given current interest rates may be tough to find a cash flowing deal elsewhere.

Thanks!

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Leo Gregoire

Real Estate Agent · Worcester county · Member since 2024 · 33 posts · 24 votes

i would sell the property. $50/mon cashflow is essentially breaking even and even with the $125/mon you're not cashflowing enough to justify the risk, i don't think. As Elias mentioned above i think you're insurance costs will continue to rise and while the property may appreciate as well i don't think juice is worth the squeeze. Virtually any cap ex expense will wipe out more than a years returns.

The interest rate is nice, if there was a way to increase the cash flow to ~15% or greater COC you could pull a HELOC on the property for 9% and collect the delta.

again though, i would suggest selling it and trying to lock up a property or two with the proceeds that required some sweat equity, force appreciation through a reno, rent it out, refinance and repeat (BRRRR)

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Henry ClarkPro Member
Developer · Member since 2020 · 4k+ posts · 4k+ votes
1y
1. What are your loan terms?
2. How much principal per year are you pay ing
3. What do your future capex look like?
4. How stable is your tenant market?
5. What financial targets do you have? Coc, ROI, etc. How do your actual returns compare?
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
1y
How much cash have you put into the deal so far?
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Elias HalvorsonBusiness Member
HI · Member since 2024 · 225 posts · 130 votes
1y
I would sell. I do not believe FL is a good long-term investment. Whether it is the increase in hurricanes, intensity of hurricanes, rising sea levels etc. Know that almost every year your homeowners/hurricane insurance will be increasing significantly. We are seeing big increases in HI because of the natural disasters in FL, CA, etc. More and more insurers are refusing to cover disaster-prone locations. I believe the appreciation will slow/stop in much of the gulf towns on the water because of this. Just my two cents.
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Leo Gregoire
Real Estate Agent · Worcester county · Member since 2024 · 33 posts · 24 votes
1y
i would sell the property. $50/mon cashflow is essentially breaking even and even with the $125/mon you're not cashflowing enough to justify the risk, i don't think. As Elias mentioned above i think you're insurance costs will continue to rise and while the property may appreciate as well i don't think juice is worth the squeeze. Virtually any cap ex expense will wipe out more than a years returns.
The interest rate is nice, if there was a way to increase the cash flow to ~15% or greater COC you could pull a HELOC on the property for 9% and collect the delta.
again though, i would suggest selling it and trying to lock up a property or two with the proceeds that required some sweat equity, force appreciation through a reno, rent it out, refinance and repeat (BRRRR)
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Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
1y
@Griffin Brenseke The decision to sell vs hold a property is full of those little decisions you describe that make such a difference in cash flow. If you decide to sell and find an investment property with a greater cash flow potential.

A 1031 exchange would allow you to indefinitely all of the tax and use it to your advantage to reinvest into larger nicer property/properties.

If you choose to go with this strategy you could complete your exchange and immediately do a cash out refi.

This would allow you to access some cash for other purposes ( Tax Free) because a refinance is not a taxable event.
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Sean Barnebey
Real Estate Broker · Bellevue, WA · Member since 2020 · 48 posts · 30 votes
1y
You’re in a solid position with this property, and it’s smart to weigh your options carefully. Selling an investment property, especially one with a low interest rate, shouldn’t be taken lightly. Let’s break this down:
1. The case for holding
  The 4.75% interest rate is a valuable asset in today’s high-rate environment. If you sell, you’ll likely face a significantly higher rate on any future purchase, which could make finding a cash-flowing property challenging. While $50/month in cash flow isn’t great, it’s still positive, and cutting the termite protection could boost it to $125. That’s a better cushion, even if it’s modest. Tampa is a strong market with steady population growth and high demand. If the market continues to appreciate, holding the property could yield more long-term equity gains. Selling would likely trigger capital gains taxes (unless you lived in the property for two out of the last five years or use a 1031 exchange). These costs would eat into your profits.
2. The case for selling
  Even at $125/month, your cash flow is slim, and any unexpected expenses could turn this property into a liability rather than an asset. If your goal is higher cash flow, your equity might work harder elsewhere. You have $70k in equity tied up, earning a low return relative to its potential. Selling and reinvesting in higher cash-flow properties or other opportunities might provide better returns. If your agent’s estimate of $280k is accurate, this could be a good time to sell. Tampa’s market has been hot, but if appreciation slows or reverses, you could miss the window to maximize your gains.
3. Exploring a 1031 exchange
  A 1031 exchange could allow you to sell the property, defer capital gains taxes, and reinvest into a property with stronger cash flow. However, given today’s high interest rates, finding a deal that matches or exceeds your current return might be tricky. If you go this route, consider properties in higher cash-flow markets like the Midwest or Southeast. Look into asset classes with stronger cash flow, such as small multifamily properties, short-term rentals, or mobile home parks. Work with a 1031 intermediary to ensure compliance and a smooth process.
4. Key questions to ask yourself
  What’s your long-term goal? If it’s cash flow, selling might make sense to reinvest in a better-performing asset. If it’s long-term equity growth, holding in a strong market like Tampa could still be worthwhile. How strong is your financial position? If this is your only property or your reserves are limited, holding onto a low-cash-flow property might not be the best move. On the other hand, if you’re financially secure, the low-rate loan and potential appreciation make holding more attractive. What are your reinvestment options? Research what properties or opportunities you’d realistically pursue if you sell. If you can’t find something with significantly better returns, holding might be your best option.
5. Alternative to selling
  If you’re hesitant to sell but want to improve returns, check if the current rent is at market rate. Even a small increase could make a difference in cash flow. While refinancing might mean a higher rate, it could allow you to tap into some equity for reinvestment while keeping the property. Reassess whether you need the home warranty, flood insurance, or other items. Cutting unnecessary costs could improve profitability.
Holding onto a property with a low interest rate in a growing market like Tampa is a strong position, even with limited cash flow. However, if you can identify a reinvestment opportunity that offers significantly better returns or aligns with your goals, selling through a 1031 exchange could make sense. Before making a decision, run the numbers on both scenarios—holding and reinvesting—and consider your long-term strategy. Let me know if you’d like help analyzing potential reinvestment options!
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Jorge VazquezBusiness Member
Real Estate Broker · Tampa, FL · Member since 2017 · 1k+ posts · 684 votes
1y
Hi Griffin,

After investing in 30 rentals, I’ve found that decisions like this come down to whether your current return justifies keeping the property. With a low 4.75% rate but minimal cash flow ($50–$125/month), your equity could likely work harder elsewhere. Selling and exploring a 1031 exchange could make sense if you can find a deal with stronger cash flow or faster equity growth, but the key is comparing your current return to what your skill and experience could generate in another investment.

Here to help,
Jorge
Graystone Investment Group4.6271 Reviews
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