Apollo AdvisingHold, sell, or 1031 exchange?
Deciding whether to keep, sell, or exchange a rental comes down to equity, cash flow, taxes, time, and what you would do next. We put those side by side.
Short answer. Compare three paths for the same property: keep it, sell it, or exchange it. Start with what your equity is earning each year, then weigh the taxes a sale would trigger, the time the property takes, and what you would do with the money. Once all three sit side by side, the answer is usually clear.
Start with what the equity is earning
Many long-held rentals look fine on monthly cash flow but earn very little on the equity tied up in them. A property worth $450,000 with $300,000 of equity that nets $9,000 a year is earning about 3% on that equity before appreciation. That number does not decide anything by itself, but it frames the question honestly. The chart below shows how it happens on an illustrative rental, and the calculator under it runs your own figures.
Cash flow grows from $5,780 to $13,188 a year, but equity grows from $50,000 to $356,464, so each dollar of equity earns less. Assumes a $250,000 purchase with 20% down, a 30-year loan at 4.5%, rent of $2,300 a month rising 2.5% a year, expenses and reserves at 35% of rent, and 5% annual appreciation. Illustrative, not a forecast.
Show the numbers
| Year | Value | Equity | Cash flow | Return on equity |
|---|---|---|---|---|
| 1 | $250,000 | $50,000 | $5,780 | 11.6% |
| 2 | $262,500 | $65,726 | $6,228 | 9.5% |
| 3 | $275,625 | $82,226 | $6,688 | 8.1% |
| 4 | $289,406 | $99,537 | $7,159 | 7.2% |
| 5 | $303,877 | $117,699 | $7,642 | 6.5% |
| 6 | $319,070 | $136,755 | $8,137 | 6.0% |
| 7 | $335,024 | $156,747 | $8,644 | 5.5% |
| 8 | $351,775 | $177,723 | $9,165 | 5.2% |
| 9 | $369,364 | $199,730 | $9,698 | 4.9% |
| 10 | $387,832 | $222,819 | $10,244 | 4.6% |
| 11 | $407,224 | $247,045 | $10,804 | 4.4% |
| 12 | $427,585 | $272,462 | $11,378 | 4.2% |
| 13 | $448,964 | $299,129 | $11,967 | 4.0% |
| 14 | $471,412 | $327,108 | $12,570 | 3.8% |
| 15 | $494,983 | $356,464 | $13,188 | 3.7% |
Check what your equity is earning
Type over the figures with your own property.
3.0%
is what your $300,000 of equity earns each year in cash flow, before appreciation and loan paydown. That is $3,000 a year for every $100,000 tied up in the property.
Compare the paths side by side
We model three scenarios for the same property. Hold: cash flow after realistic reserves and upcoming capital expenses, plus the time the property takes. Sell: proceeds after commissions, closing costs, and estimated taxes for you to confirm with your CPA. Exchange: what a 1031 would defer, what it would require, and what you would own afterward.
Seeing the three together usually makes the decision obvious, or shows exactly which question is still open.
Is a 1031 exchange worth it?
A 1031 exchange can defer capital gains tax when you sell investment real estate and buy like-kind property. It also comes with strict rules: you generally have 45 days from the sale to identify replacement property and 180 days to close, and the proceeds must be held by a qualified intermediary rather than by you.
The real tradeoff is that you take on a new property, often new debt, and a new set of responsibilities. For some owners that is exactly right. For others, paying the tax and simplifying is the better outcome. We help you weigh it and prepare the questions for your qualified intermediary, CPA, and attorney. Apollo Advising does not act as an intermediary.
Some owners consider a Delaware Statutory Trust (DST) as replacement property. DSTs are securities, and Apollo Advising does not advise on them. See the FAQ for where that advice is available.
Questions we work through
- How much equity is tied up, and what is it earning?
- What is the cash flow after realistic reserves and upcoming capital expenses?
- What would a sale cost after commissions, closing costs, and taxes (to confirm with your CPA)?
- Is a 1031 exchange worth the deadlines and the new property?
- What questions should I bring to my qualified intermediary, CPA, and attorney?
What you leave with
- Hold, sell, and exchange scenarios on one page
- The open questions for your CPA, attorney, and intermediary
- A recommended next step and a timeline for it
Bring this decision to a session
$199 per hour, billed in 15-minute increments, or $499 for a three-hour block. The first 30 minutes are free.
Related questions
Should I sell my rental property or keep it?
It depends on how much equity is tied up, the cash flow after realistic reserves, the taxes a sale would trigger, how much time the property takes, and what you would do with the money instead. We model the keep, sell, and exchange scenarios side by side so you can compare them, and give you the tax questions to confirm with your CPA.
Is a 1031 exchange worth it?
Sometimes. A 1031 exchange can defer capital gains tax when you sell investment real estate and buy like-kind property, but it comes with strict deadlines (45 days to identify replacement property and 180 days to close) and you take on a new property and often new debt. We help you weigh the tradeoffs and timing and prepare questions for your qualified intermediary, CPA, and attorney. We do not act as an intermediary.
Do you give advice on Delaware Statutory Trusts (DSTs)?
No. DSTs are securities, and Apollo Advising does not evaluate or recommend DSTs, REITs, tenant-in-common interests, private placements, or syndications. If you are considering a DST as replacement property in a 1031 exchange, investment advice is available only through Nashional Independent Investment Management LLC, a registered investment adviser, under a separate agreement. Contact Denver to confirm whether that is the right fit.
Go deeper
Return on equity: the rental number most owners never checkHow to calculate it, why it drifts down as a property appreciates, and what it does and does not tell you about selling.The 1031 exchange timeline, step by stepThe 45-day and 180-day deadlines, the identification rules, and what to line up before you list.1031 exchange deadline calculatorEnter your closing date to get your 45-day and 180-day dates, a tax-return warning, and a calendar file.This page is general education, not legal, tax, investment, insurance, or lending advice. See our disclosures.