Should You Sell Your Rental Property or Keep It?

The Question Every Landlord Eventually Asks

At some point, every rental property owner stares at a repair bill, a late rent notice, or a code violation letter and thinks: “Is this worth it?” Sometimes the answer is no. Sometimes the answer is “not yet.” And sometimes the answer is “keep the asset, change the management.”

This decision comes down to math, not emotion. Here is how to evaluate it honestly.

When Selling Makes Sense

Negative Cash Flow for 12 or More Months

If your rental has been costing you money every month for a year or more, and there is no realistic path to positive cash flow, the property is a liability, not an asset. Raising rent, reducing expenses, and improving occupancy are the three levers. If you have pulled all three and the numbers still do not work, sell.

Common reasons for persistent negative cash flow: property taxes too high relative to rent (very common in Central New York), deferred maintenance creating ongoing emergency repairs, high vacancy in a declining area, or an underwater mortgage from buying at peak prices.

Major Capital Expenditure Coming

A new roof costs $8,000-$15,000 on a small multi-family. Foundation work can run $20,000-$50,000. A full sewer line replacement is $5,000-$15,000. If one or more of these are on the horizon and you do not have the reserves, selling before the expense hits may make more sense than financing a repair on a marginally profitable property.

Get the inspection done before deciding. An estimate from a contractor tells you the actual number. You might find the roof has 5 more years, not 1. Or you might find it needs replacement yesterday. Make the decision based on facts.

Hot Seller’s Market

If property values in your area have appreciated significantly, selling lets you capture that equity. In parts of Syracuse, property values have increased notably over the past few years. If you bought low and the market is high, the spread may be more valuable than years of future cash flow.

Check recent comparable sales, not Zillow estimates. Talk to a local real estate agent who specializes in investment properties. They can give you a realistic market value based on actual transactions.

You Hate Being a Landlord

This is a valid reason. If the stress, the phone calls, the maintenance, and the tenant issues are affecting your quality of life, and you do not want to hire a property manager, sell the property. No investment return is worth your health.

When Keeping Makes Sense

Positive Cash Flow

If the property generates consistent positive cash flow after all expenses (including a management fee, even if you self-manage, because your time has value), that is a performing asset. Do not sell a performing asset because you had a bad month. Bad months happen. Look at the 12-month trailing average.

Depreciation and Tax Benefits

Rental property generates significant tax benefits that do not show up in your cash flow calculation. Depreciation alone (building value divided by 27.5 years) can offset thousands in taxable income. Mortgage interest, property taxes, insurance, repairs, and management fees are all deductible.

A property that breaks even on cash flow but generates $5,000 in tax deductions is still saving you $1,000-$1,500 in actual tax payments (depending on your bracket). Your CPA can run the exact numbers.

Appreciation Potential

If you are in an area with strong appreciation trends, holding the property builds equity over time. This is particularly relevant in Syracuse neighborhoods seeing revitalization, near university expansions, or along planned infrastructure improvements.

Appreciation is speculative. Do not hold a cash-flow-negative property purely on the hope it will appreciate. But if the cash flow is reasonable and the area is improving, time is on your side.

Good Tenants in Place

If you have reliable, long-term tenants who pay on time and take care of the property, that is valuable. Turnover is expensive. A good tenant in place is worth a premium. Think carefully before selling a property with tenants who have been there 5+ years and never caused problems.

The 1031 Exchange: Sell Without Paying Capital Gains

If you decide to sell, a 1031 exchange lets you defer capital gains taxes by reinvesting the proceeds into another investment property. The rules are strict:

• You must identify a replacement property within 45 days of selling.
• You must close on the replacement property within 180 days.
• The replacement must be equal or greater in value.
• You must use a qualified intermediary to hold the funds. You cannot touch the money.
• Both properties must be held for investment purposes (not personal use).

A 1031 exchange makes sense when you want to upgrade to a better property, move into a different market, or consolidate multiple small properties into one larger one. It does not make sense if you want to cash out entirely. For that, you pay the taxes.

The Real Cost of Selling

Before you list the property, calculate what selling actually costs you.

Real Estate Agent Commissions

Typically 5-6% of the sale price. On a $200,000 property, that is $10,000-$12,000. You can sell without an agent (FSBO), but investment properties are harder to sell without one, especially multi-family.

Capital Gains Tax

If you have owned the property for more than a year, you pay long-term capital gains tax on the profit. The rate depends on your income bracket: 0%, 15%, or 20% at the federal level, plus New York State income tax (4-10.9% depending on income).

The gain is calculated as: sale price minus purchase price, minus capital improvements, minus selling costs. If you bought for $100,000, put $30,000 into improvements, and sell for $200,000, your gain is roughly $60,000 after selling costs.

Depreciation Recapture

Here is the one that surprises people. All the depreciation you claimed (or could have claimed, whether you did or not) is “recaptured” at sale and taxed at 25%. If you depreciated $5,454/year for 10 years, that is $54,540 taxed at 25%, which is $13,635 in additional tax on top of capital gains.

This is why many landlords use 1031 exchanges instead of selling outright. The depreciation recapture tax alone can be a massive hit.

The Third Option: Hire a Property Manager and Keep the Asset

Most landlords who want to sell are not actually unhappy with the property. They are unhappy with managing it. The midnight phone calls, the maintenance coordination, the rent chasing, the tenant disputes. These are management problems, not property problems.

A property manager handles all of it. Tenant placement, rent collection, maintenance coordination, legal compliance, accounting. You keep the asset, the cash flow, the tax benefits, and the appreciation. You give up 8-10% of gross rent in management fees. For most landlords, that trade is worth it.

Run the numbers both ways. Calculate your net return after management fees vs. your net proceeds after selling costs and taxes. In many cases, keeping the property with professional management generates a better long-term financial outcome than selling.

How to Evaluate Your Actual Return

Before making the sell/keep decision, calculate these metrics for your property.

Cash-on-Cash Return

Annual pre-tax cash flow divided by your total cash invested (down payment + closing costs + capital improvements). If you have $40,000 into a property and it nets $4,800/year, your cash-on-cash return is 12%. Compare this to what you could earn if you sold and invested the equity elsewhere.

Cap Rate

Net operating income (gross rent minus all operating expenses, not including mortgage) divided by current property value. A cap rate of 8-10% is strong in Central New York. Below 5% is thin. This tells you how the property performs as a pure investment regardless of how you financed it.

Total Return

Cash flow + equity paydown (mortgage principal paid by tenants) + appreciation + tax benefits. This is the complete picture. A property with modest cash flow can still generate strong total returns when you factor in the equity building and tax savings.

Make the Decision With Math, Not Frustration

A bad week with a problem tenant is not a reason to sell. Neither is one big repair bill. These are costs of doing business. Sell when the numbers no longer work over a sustained period. Keep when the long-term return justifies the short-term headaches.

If you own rental property in Syracuse, Oswego, Auburn, or Utica and are thinking about selling, call RenPro Property Management at 315-400-2654 before you list it. We can run your numbers, show you what professional management looks like, and help you decide whether selling or keeping is the smarter financial move.