38. How to Know When It's Time to Sell a Rental Property

What if holding onto a rental property is actually keeping you from reaching your financial goals?

In this episode, Violeta and Lindsay tackle one of the toughest questions real estate investors face: Should you keep an underperforming rental property, or is it time to let it go?

Using a real question from a community member, they break down how to evaluate whether a property is still serving your long-term goals—or quietly draining your finances. Violeta shares the personal story of walking away from three investment properties despite others telling her to hold on, while Lindsay offers practical strategies for weighing your options before making a big financial decision.

Together, they explore the emotional side of letting go, the importance of staying focused on your investing goals, and why sometimes selling isn't a sign of failure—it's a strategic move that creates new opportunities.

The conversation also covers how rising property taxes, negative cash flow, debt payoff goals, and changing life circumstances can all impact whether a rental property still deserves a place in your portfolio. Rather than relying on emotions or the fear of missing out, they explain how to make decisions based on numbers, strategy, and the future you want to build.

Whether you're struggling with an investment that's no longer performing, trying to become debt-free, or wondering if it's time to pivot your real estate strategy, this episode provides a practical framework for making confident decisions.

Ready to decide whether your rental property deserves another chance—or it's time to kick el tóxico to the curb? Tune in for actionable advice, real-life investing lessons, and the questions every landlord should ask before making their next move.

Transcript

SPEAKER_01 0:00

If it was me, I would just let it go because it is a stressor on your life. It's hindering you, it's not letting you move forward.

SPEAKER_00 0:09

Okay, I my initial damage was like, don't sell. Never sell, yeah. But obviously everybody's situation is different.

SPEAKER_01 0:17

Should I keep my rental property or should I kick it to the curb? Today we are talking about dropping il toxico. And no, I'm not talking about el toxico in your relationship, but I mean if you are in one, let him go, kick him to the curb. You know, I am team kicking men to the curb with some toxicos, right? But no, we are talking about a rental property that is not performing, that is not giving what it needs to give. It is either not giving the cash flow that you expected, maybe expenses went up, maybe in this case property taxes went up, or it's even negative cash flow. We are going to talk about when to walk away. So we're gonna be covering that today. I'm gonna be sharing a story of when I had to walk away from properties and a little bit of that. And this actually came from a follower of mine who is going through this and is wondering, hey, should I keep this rental property or should I sell it? What should I do? So we're gonna be talking about her story and also a quick little note that if you notice when you're watching this on YouTube, if you're watching it on YouTube on the podcast, you shouldn't tell a difference. But for some reason, when we recorded this episode, like my video went out. I don't know, so I am having to re-record my portion, so it might be kind of wonky with the editing with Lynn. So I'm over here recording by myself now when we did this episode together. But she's going to be covering about you know what to do, like other options as well, if you are dealing with something like this, because with this particular situation, it also includes like debt and things like that. So we're gonna get into that, but before we do, I do want to also remind you that hey, don't forget to like, subscribe if you are watching this on YouTube, if you're on the podcast. You know, it would really help me out if you liked, rated the podcast. It helps us grow and share this episode uh with a friend, it helps us grow as well. And also don't forget, I do have my free starter kit if you are looking to get started in investing in real estate. It's there, it gives you uh a how-to and a plan to get started, and also you can join my free Latinas in real estate community where you can network, you could talk with me and Lynn, ask tips, and just you know, ask me questions, and also I have resources there, so all of that will be linked down below. Okay, so I want to get into a little bit of the background first of the question. A follower of mine she reached out because she is at a crossroads right now, so she has a property that was her first house. She bought it in 2019, and you know, they they lived in it and they then moved to another house, and so she is kind of like, I don't know what to do because my goal is to become debt-free, but I also want to continue investing in real estate, right? Like, that's my goal. I want to create income, build wealth, and so on. And so she is at a loss, like, okay, so what do I do with this property? Because I am on the verge of giving up. So, first, I definitely understand this. I have gone through a similar situation, right? I've had three, not just one, but three properties that I gave up, and everybody thought that I was crazy. I had like people saying, like, no, it's gonna appreciate this property's gonna go up, and blah blah blah. But I had to analyze what I wanted, what were my financial goals, and what is it that I was trying to accomplish? Because that's one of the things here is number one, reflect on what it is that you are trying to achieve. Because remember, this is your journey. Even with the little information that she gave, I could only give her tips, right? Because I don't want to give financial advice, because one, I don't know her exact situation, and I'm not a financial advisor, but I'm going to share my thoughts and how I navigated a similar situation. And so the first thing I did was really reflect on what it is that I'm trying to achieve. So, in my case, I was wanting to, of course, the whole point that I bought houses was to build monthly cash flow because at this time I was in the military and I knew that I wanted to get out, and I wanted to have that income to give me a cushion because the military gives you a stable paycheck. And of course, I wanted to build wealth, and another thing, I am the eldest daughter, so I'm already thinking of how I am going to provide and help my parents during retirement, right? So these are all things that are in my head, and so you need to understand what you are trying to achieve with your finances, and so that's what I told her is like, well, from the email, you said you want to be debt-free, this property is weighing heavily on you, it's stressing you out, and it's from 2019, you bought it, so at this point, you have some equity in there, and I'm sure it has appreciated. And your goal is that you still want to invest, but this is going to be weighing you down because another thing that she mentioned was that she did try to do a cash-out refinance on this property, but they unfortunately didn't qualify, so that's already kind of out the window of refinancing, and also not sure she didn't tell me the interest rate, so like that as well is like, well, is it going to be worth it to refinance? Like, again, I'm not sure what their interest rate was, but let's say it was lower, and right now we're higher, so it's kind of like not a good deal as well, because now you're taking more debt on top of a property that is not doing well already. So to me, this is a property that is just weighing you down and preventing you from progressing. And I was like, if it was me, I would just let it go because number one, it is a stressor on your life, it's hindering you, it's not letting you move forward. So again, etoxico, just not letting you progress with your life. So just let it go. Number two, you have equity in that house. So get with the realtor, have them do weight comps, you know, see how much it's worth, right? Based on the recent sales and things like that, and then have them do a breakdown of all the fees and everything so that way you get a really good, as close as possible, good idea of what you are going to end up with after you sell the house. And so from there, look at that number and see, okay, this is going to help me pay off the debt that I have and whatever expenses she mentioned that she was going to have later on, and see, like, okay, if that's going to be worth it. And maybe again, I'm not sure how much it appreciated, whatever, but it might even be enough to start the down payment for an investment property, and you're gonna get that debt off your credit, right? You're gonna be done with that loan, and it's not gonna be weighing you down because that does increase your debt to income ratio. And so all of that might be worth it. And I had similar advice, as I mentioned earlier, was that when I had these rental properties that I purchased, because I did the same thing, which by the way, she's a fellow veteran, so yay! She used her resources to start her investment journey. But like me, she didn't really understand yet everything that goes with real estate investing, you know, like figuring out the cash flow, which by the way, I do have an episode where me and Lynn talk about how to calculate that so that way you could avoid this issue. Because with cash flow, just a quick little uh reminder is that you want to calculate the rental income minus all the expenses and to include saving up for things like vacancies, if you need to fix the HVAC system, things like that, plus property management fees and all that, and you also want to account for property tax increases. So we talk about all that in that episode, and that'll be linked down below. And also, I have a five-minute breakdown on that in the school community that is also linked down below, plugging that in again. So she didn't understand that at the beginning, and I had the same issue when I first bought my house. My house was for me, right? So I wasn't thinking about investing in it, like turning it into a rental. Luckily, that one did cash flow, and that one I sold for different reasons. I just that one was more an emotional sell that I'll talk about that in another time. But then when I moved to a different duty station, I got sent to Texas, I bought a second home. And once again, now I did have the mindset of like, okay, now I'm gonna start buying houses to turn into rentals. And I did that, but I once again I bought a property that was for me, right? That looked nice, it was pretty, it was cute, whatever. Not necessarily did a market analysis, I didn't understand cash flow or anything like that. So then when I left and went to California, which I did the same thing. So three that's three, three houses that I ended up doing the same thing, all because I didn't understand, or I thought it was just simple, right? I got lucky with the first one, it was positive cash flow. The second one, I did house hack again, but when I turned it into a rental, like I was paying out of pocket, it was negative cash flow, $200, $200 out of my pocket to have that as a rental. And then the same thing, well, not the same thing with the third house. I was living in it, I house hacked it, had a friend that lived with us, and when I was going to turn that into a rental when I left, it was just too too high risk. So that one was more of a risk, and also I had some debt on that as well. I took out a loan on it, so I just wanted to wipe the slate clean. And again, going back to your why, your financial goals, I went back and was like, Well, I have a rental property that is costing me money, and yes, over time it's going to appreciate. Like, and it had in those three years that I had it, it did appreciate. And also the same thing with the California house, which everybody thought I was crazy to sell because I mean you could see, right? Like real estate in California, like that's prime real estate, right? But with my goals, what I was trying to do is that like I'm trying to make money, I'm trying to have monthly cash flow. So I definitely don't want a house that I'm paying to have as a rental. Like, I don't have that luxury to be able to wait for the rental market to catch up or waiting on the appreciation. So bam, let it go. I sold it, and after all the expenses and everything like that, I had about just enough for another down payment for a rental property, and so I ended up using those funds to buy a multifamily. So my duplex, so that's one duplex, right? That's actually it's making me money with the California house. The mortgage was super high, so super high risk. And I'm like, no, because when if a vacancy happens or something happens, it's going to be super pricey, right? It was a four thousand dollar mortgage because it's just pricey over there. And then I was like, you know what? Additionally, I had taken out a second mortgage on it for the equity, so that way, you know, I could fund my surrogacy journey and my infertility treatments. So I was like, I want to wipe the slate clean. So sold that one and bam, no more debt. I that paid off over 100k in debt, and then I still had some left over to buy duplex number three, I think the third one. And so we also had some money to pay off the rest of the car payment for my husband's truck. So that wiped the slate clean. And now I had the funds to buy more rental properties that are actually lower risk, making me cash flow and actually progressing me in my financial journey, what I'm trying to do. And so that's where I told her is like, you know, people are gonna be telling you, right? Like, why sell it and this and that? That's a step backwards. And it felt like that at that moment. Like, here I had a portfolio at this time of three properties, and basically a million dollar worth portfolio. Yeah, I had loans on it, but you know, I had a million dollar worth of properties, and I sold them all and basically just went back to zero and then restarted my journey. But it has accelerated that now I'm just here chilling in my house in my 10 acres and not really working, right? I do the podcast and I still do real estate and things like that, but I lowered all my expenses and my debt and all that to where we can live comfortably in one income right now. So now the focus is to get him to be financially free and of course still grow enough cash flow to provide for my parents' retirement. But now that's one person that is already financially free. So, yes, I took a step backwards, but it helped me gain the momentum to take a huge leap forward. And so that's what I told her is like, yeah, you know, this property, you know, if you get rid of it, no more stress, that's not weighing heavily on you. And two, it's going to create that clean slate for you to where now you're going to be better off financially, right? No more debt, which means that your credit score is going to come up, your debt-to-income ratio is going to go down, and now you have a good financial foundation to now go back to real estate investing. And then we could actually do that with more strategy, with more intention now that you know how it kind of works, and then we can work on that and actually start getting you on the right path to actually buying rental properties that are actually going to make you money and help you gain financial freedom. So that's really my side. But if you do find yourself that you have a similar situation, there are some other options available, and that's what Lynn, you know, talks about. And I'll let her share her side. I know mine's was kind of long-witted, so I'm gonna pass it on to her. Okay.

SPEAKER_00 15:31

I my initial gap reaction was like, don't sell. Never sell, yeah. But obviously, everybody's situation is different, and I think the only thing I can do right now is just provide more information. It says this person cash flow is not basically existent, right? It's almost just enough to cover the mortgage, the taxes, the insurance, and maybe not even that. Like I'm not 100% sure how much of a government there is in that. They try to do a cash out refinance, but they're unable to do it because of the credit scores, because they have credit card debt. But it doesn't say they're not able to do it because of your debt to income ratio. So there are a couple of things that you could do when you do a cash out refinance or a HELOC or whatever, that they look at basically three things, like your tax returns, your credit score, and your debt-to-income ratio. So this person only mentioned their credit score, and it probably because of the credit card debt that they have on their name, right? And that's why they don't qualify, which makes me think, and I might be wrong, that their taxes and their income is enough for them to qualify, but it's this credit score that's holding them back. So for that, I would definitely think from the get-go, it makes me think like you maybe do have the income, but you are expending more than you're making, and it's maybe making you go into debt, which is totally understandable. Like as a family, you know, there might be emergencies that you might not be able to prepare for and things like that. So that is one thing that's kind of handing me back. And it also says that it was a rental that they set up and it was the first time and they didn't know much about the rental space because this podcast is about rental income. I just want to mention a few things so that that you could do to like make sure your rents are, for example, a market rate. Like a lot of like the rentals that I do, for example, check is I don't know what market you are in, but in the state of Indiana and also California, I check what is for rental market price. I go to the fair micro rents set by the government for Section A, which usually is the lowest you know, rent you can get per unit. I quickly look into that website and I look at my zip code and the units of the number of bedrooms and bathrooms that you have to set, like basically what it will be the bottom of my market to see if you're renting that would be a quick check to see if you're under renting your space or maybe you are pretty pretty much competitive, right? One would be a thing like that. Another would be that just to definitely look at your income and expenses, right? Like what is actually putting you into debt? Is it overspending or is it are you living with the bare minimum? Those are two very different scenarios. Just regular financial education. For example, you're not able to totally cash out ReFi. There are so many ways to compile your credit card debt. So there's ways of transferring the debt to different credit cards that have 0% interest rate for the first 12 months, right? Which you don't have to pay that high interest rate because most credit cards have an interest of 14 to 26%. That is the thing that does not let you get ahead. And this might be like back to Villet as like normal podcasts, like Care Money Chasener podcast, which you know, all of those tools we talked about, a snubble payment method of like paying down your credit cards, or maybe it is moving your equity. And then in this case, it sounds like the easier and more uh, I guess, like fixed now would be to sell your property. But I would definitely encourage you to explore the other methods, for example, get a personal loan, unsecured loan that could be 10, 12% versus that 26% that you have of your credit card debt, and then make a plan to pay it after your credit scores are so so unquote in a better place than the refinance, then you have the additional plan of like cashing out the refined because it sounds like you have some equity in your house since 2019. That's seven years now, right? Seven years to pay down. So I know that you do have some equity in your property. That would be an additional blanket space for you, like additional safety layer for the future. But I understand it also mentions that you have some upcoming expenses coming up. So all of those things are balanced, right? Like you have to see what you can do. But I'm just here to provide a little more information on what you, you know, could do. The quality of your decisions are affected by how much information you have. And it sounds like when you went and made your primary rental property, like you didn't really know what you were doing. So that's what it's reflecting right now. In deploying capital, maybe right now it just occurred to me that because you lived and sounds like you moved into your primary residence in 2023, making that your rental, if you lived in that property in the last two years out of the five years, then you can still sell this property as your primary residence. So you will not incur capital tax gains on this property. So it would be like you're selling your primary because you lived there in that two out of the last five years. So that is another incentive for you to sell in the case that you decide to do that, because you won't pay any taxes on the money that you any capital tax gaze on the money that you acquired from the property. And you may be able to get back down your down payment plus a profit, right? Since you did purchase it in 2019, and that's something that is also incentivizing you to that decision as well. But yeah, that's right. Like there are very different state of minds and they're very different places in our lives in which that if this is gonna propel you further, then it's a good way to like go ahead and like just at a store fresh. But I also would recommend to audit your financial situation just because wanna make sure that you are also looking at like what are you missing in terms of like financial education? Because we stress that a lot. Like, real state would only drive off how much financial discipline you have already. Because even though people say it's a passive way of doing income, it is starting a business. And if you don't take care of your financials personally as well, you won't be able to start a business that's going to succeed because you need to understand like what are your numbers and exactly how to treat that business as it's moving forward. Whatever you do, make sure you have a plan in action that is gonna set you up for you know your future. And then whatever that is, if your goal is to become debt-free, then this is a way that it's gonna get you there faster. And you know, once you become goal debt free, you will have another goal, like I assure you. And if your next goal is to purchase more rental properties, keep listening to this podcast. And we're always talking about how to go ahead and make that investment more soundly, and just trust the position that you're in right now, you are able to deploy this lever that you have, which is a property that you acquire empty in, that it's going to make you now debt free. And then, you know, you're gonna make yourself be in a position in the future to continue to invest.

SPEAKER_01 23:12

Yeah, so those are the options that you have available. Like if you do decide that you don't want to get rid of a toxical uh property, then you, you know, those are other options that are out there, and again, it does come like with how Lynn was saying, a little bit of adjusting how you handle your finances, some money management, things like that, which you know comes into play with rental property investing. But yeah, other than that, always feel free to ask questions. I have my email, you could DM me if you sign up for my newsletter. You could always just respond to that or again plug again for the free community. You could always ask questions there, and we are more than happy to answer them. Other than that, don't forget to like, subscribe, follow, rate, whatever. It really helps us out, and we will see you in the next one. Bye.