Hold, sell, or 1031: the 12 questions to answer first

The 12 questions

1. What is the property worth today, and what would you actually net?

   This is the money a sale would free up. Every other number is compared against it.

2. What does it earn on that equity each year?

   Long-held rentals often earn 2% to 4% on equity, even when the cash flow feels fine.

3. What is the true cash flow after every cost?

   If you self-manage, count your time. If you skip the reserve, the roof will remind you.

4. What big expenses are coming in the next five years?

   A $15,000 replacement right after you decide to keep can change the answer.

5. What would you owe in tax if you sold?

   Depreciation recapture is taxed at up to 25% federally, even if you never claimed it.

6. Is a 1031 exchange realistic, and would you want the replacement?

   Never buy a weak property just to save tax. Paying the tax can be the better deal.

7. Could a different strategy earn more from the same property?

   More gross revenue often means more cost, time, and rule risk. Compare what you keep.

8. Would refinancing or a HELOC help, or just add risk?

   A cash-out refinance reprices your whole balance, not only the new cash.

9. How much of your time does it take, and how much do you want it to take?

   Price your time. A manager at 8% to 10% of rent may be the cheapest fix.

10. How does it fit your timeline and goals?

    Heirs generally receive a stepped-up basis, which changes the math on selling now.

11. What could go wrong if you keep it?

    In Texas, the 20% cap on rental appraisal increases is set to end after 2026.

12. Who else needs to weigh in before you decide?

    Bring them this page. It is far easier to agree on facts than on opinions.

The worksheet adds where to find each number and space to write your answers. When you are done, you will know which path deserves a closer look, and what to ask your CPA.

This page is general education, not legal, tax, investment, insurance, or lending advice. See our disclosures. By signing up you agree to our privacy policy. Unsubscribe anytime.