I'm bullish on real estate. Yet I recently sold another rental property. This type of incongruence between thought and action can feel unsettling and even counterproductive to wealth creation. But it doesn’t have to be.
Because while maximizing returns is a big goal on your road to financial independence, it’s not the only goal. Sometimes, selling a property, despite being optimistic about the market, is the right move for your life overall.
In my case, letting go of a rental simplified things. I’ve always felt managing three rental properties in one city was my limit. But when I bought a new home in 2023 and decided to rent out the old one, I crossed that threshold. It was like buying a large stock position on margin, something I don’t like to do.
When the tenants gave notice a year later, I saw it as a window to reset.
Why Selling Is OK Even If You Think Prices Will Still Go Up
Here are eight reasons why it’s OK to sell your property, even if you believe real estate prices will continue to rise.
1) It’s Better to Sell in a Bull Market Than a Bear Market
Selling real estate is stressful. Even if you get into contract, any number of issues can delay or derail the closing. But when you're selling into strength, the odds of a smooth transaction go up. A buyer in a hot market knows there are others waiting in line. Hence, they try to follow through.
In a bull market, bidding wars are common and tend to reset prices higher through a step-up function. In contrast, a bear market can feel like a liquidity trap—no buyers, falling comps, and painful price cuts. Prices don’t always fall gradually; oftentimes, they gap down. If they do, your home equity could get wiped out if you are forced to sell.
On the west side of San Francisco, it's a bull market now. Local economic catalysts are drawing in jobs and families, creating stronger demand. So I chose to sell into strength rather than risk being forced to sell later when the market might be weaker.
2) You May Already Have Too Much Real Estate Exposure
In general, I don’t recommend having more than 50% of your net worth in one asset class. Concentration risk is real. Please see my recommended net worth asset allocation for financial freedom. After purchasing another home in 2023, my real estate exposure temporarily ballooned to around 55%.
At one point, I had a primary residence and five rental properties—four of which were in San Francisco. When devastating fires swept through Los Angeles County and wiped out entire neighborhoods, I was reminded how quickly real estate wealth can be destroyed.
When my tenants gave notice, I saw a chance to reduce exposure and rebalance during the strongest selling season of the year: spring.
3) You’ve Tried Being a Landlord and Didn’t Like It
Holding real estate long-term is one of the best ways to build wealth. Renting out your property helps you ride the inflation wave, while hopefully generate positive cash flow.
But being a landlord isn’t for everyone, and that’s OK. If owning a rental property lowers your quality of life or consumes mental bandwidth you’d rather invest elsewhere, selling is a reasonable choice.
I gave it a year. The tenants were fine, aside from a yanked faucet nozzle that caused it to leak and a neglected front yard. But even small issues feel magnified when you’ve mentally moved on.
I felt like I was fortunate the home faced no major problems for the year, like a leak. So I chose not to press my luck further once they gave notice. Although, if they hadn't given their notice, I would have happily kept renting out the home to them.
4) You Can Potentially Earn a Greater Return Elsewhere
With the 10-year Treasury yield above 4%, I could earn almost as much risk-free as I did from the rental. The hassle and risk of being a landlord didn’t justify the modest yield premium.
For me to hold the property, I needed confidence in achieving at least an 8% return—roughly a 4% premium above the risk-free rate. Given a 43% loan-to-value ratio, it was certainly possible. But I wasn’t more than 80% confident it would happen.
If you can redeploy the equity into similar or better-performing assets—or simply diversify your risk—it’s worth considering. And even if you can’t match the return, freeing up time and energy for other priorities has real value too.
In addition to Treasury bonds, I find residential commercial real estate and private AI companies appealing, giving me at least three compelling options for reinvesting the proceeds. I hadn’t anticipated a 20% correction in the S&P 500 soon after the house sale, which created a fourth attractive investment opportunity.
Real estate can tie up a significant amount of equity, especially in high-cost markets. If you identify a better use of funds, it may make sense to unlock that capital and put it to more productive use.
5) You Qualify for the Tax-Free Home Sale Exclusion
If you’ve lived in your home for at least 2 of the past 5 years before selling, you can exclude up to $500,000 in capital gains if married, or $250,000 if single. This is the Section 121 capital gains exclusion rule. Renting the property for one year before selling still met the 2-out-of-5-year use test, so we qualified for the full exclusion—minus depreciation recapture.
Not having to pay capital gains tax on up to $500,000 is a huge benefit, especially if you're in a high-income bracket. If you're approaching the end of the 5-year window or tax-free appreciation limit, it may make sense to sell and lock in this tax advantage.
6) You’ve Found a Better Home and Moved On Emotionally
Some homes serve their purpose for a period of your life—and that’s enough. We bought the property we sold as our “forever home” during the pandemic. It was a sanctuary that dramatically improved our lives for three years.
But deep down it was always a rung on the property ladder. After moving out and renting it for a year, we were no longer emotionally attached. We were making new memories in our new home and no longer missed the old one. That emotional detachment made selling easier.
7) You Want to Reduce Liability and Headaches
Owning rental property exposes you to potential legal, financial, and safety risks. These can include tenant injuries, discrimination claims, habitability lawsuits, or city ordinance violations. Even with good insurance and property managers, the liability and stress can wear on you.
After years of being a landlord, you might decide the peace of mind that comes from reducing liability is worth more than the extra cash flow. A clean exit now could prevent a future legal or financial mess.
In my 22 years as a landlord, I’ve never had an issue with a tenant—a record I attribute to thorough screening and a solid lease agreement. That said, I recognize that each new tenant brings a new set of risks. In this case, the house we sold was rented to multiple roommates rather than a single household, which added another layer of complexity.
8) You're Preparing for a Lifestyle or Career Change
If you’re planning a major shift—such as retiring early, relocating to a new city, downsizing, traveling more, or changing careers—you may want to simplify your finances and reduce asset management responsibilities. Having our first baby in 2017 was the primary reason why we sold a property back then.
In considering this latest sale, I prioritized time freedom and location flexibility. Selling two or three rental properties before relocating to Honolulu in 2032 will be a challenge, especially if the market turns. By selling one now, I reduce the pressure to sell multiple properties later.
This step has already lightened my mental load and improved my overall happiness and lifestyle.
It's OK To Not Always Optimize For Maximum Returns
Selling a property even while bullish on real estate doesn’t make you irrational. It makes you a realist who understands that personal finance is personal. Sometimes the right decision is about simplifying life, rebalancing risk, or just reclaiming peace of mind.
We don’t always need to squeeze every last dollar out of every asset, especially if we've achieved enough wealth to be satisfied. Sometimes, locking in a win is the smartest move you can make.
Readers, have you ever sold a property even though you believed prices would continue rising? If so, what motivated your decision? And are there any other reasons for selling that I haven't covered in this post?
Invest In Real Estate Passively
If you're looking to invest in real estate passively, check out Fundrise—my preferred private real estate platform. Fundrise focuses on high-quality residential and industrial properties in the Sunbelt, where valuations are lower and yields are higher.
Some commercial real estate valuations have dropped to levels near the 2008 financial crisis lows, despite today’s stronger economy and healthier household balance sheets. Seeing this as an opportunity, I’m dollar-cost averaging into the sector with my home-sale proceeds while prices remain attractive.
Fundrise is a long-time sponsor of Financial Samurai and I've invested $300,000+ with them so far. About half of my invest in Fundrise is in their venture capital product as I want to build a decent amount of exposure to private AI companies.
“Why Sell When You're Bullish on Real Estate Prices” is a Financial Samurai original. All rights reserved.
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Thanks so much for writing this article! I love your articles and really appreciate your insight and advice!
I’m finding myself in a position where I’m getting ready to sell my home of 31 years and trying to decide how much money to put in to fix it up. I’m a 61 year old woman and have had a number of unfortunate life incidents – unemployment through covid, and then a car accident in 2021 which left me with post concussion issues. I’m much better, but can’t work the way I used to, and will probably need to find other work or be retrained. At this age, it will also be difficult to recapture some of that lost income. However the house has appreciated greatly in value – but as a single person I only get the $250,000 write off and with so many capital gains I’m looking at a huge tax bill – over $230,000. I know it’s a high class problem, but it’s still going to be a painful check to write! Since it’s going to be my future retirement fund, I’d like to try to figure out how to invest it safely so it can continue to grow.
It’s going to be hard to let go of the house, but lately I just feel that it owns me. I’m the live-in landlord with a room renter and I have to be responsible for everything. A little scary with all the downsizing and letting go of things, but I’m looking forward to less responsibility, more serenity and time to take on the new things I need to do to move my life forward in this next chapter! This article is so helpful because everyone thinks they need to cling to their real estate. I realized since I was in the top capital gains bracket,(hilarious considering I’m poor since almost all my money is in my home!) I’m now only going to continue earning 60 cents for each dollar the home increases in value. In addition after the fires here in LA, the rising costs, and the unfriendly policies towards landlords – even for owners of single family homes – it seems like diminishing returns, more risk, and the best decision for me is to sell at this point in time.
Thank you so much for your heartfelt comment and for sharing your journey. I can feel the weight of everything you’ve been through, and I admire your resilience and clarity.
Selling a home after 31 years is no small feat, especially when it’s not just a financial decision but an emotional one too. You’ve weathered so much, from the pandemic to a traumatic accident, and it sounds like you’re approaching this new chapter with courage and wisdom.
You’re absolutely right, at some point, the house can start to own us, and letting go isn’t a sign of giving up, it’s a strategic pivot toward freedom and flexibility. The realization that the next dollar of appreciation is taxed at 40%+ is a smart insight, and it’s clear you’ve thought deeply about the trade-offs. Many people cling to real estate out of fear or habit, not realizing the opportunity cost and emotional toll.
Yes, the $250,000 exemption limit for single homeowners is frustrating, especially when you’ve built most of your net worth in your home. But you’re turning that equity into optionality: less stress, more serenity, and funds you can invest in a way that supports your evolving lifestyle.
If you’re looking to reinvest the proceeds more safely, you might consider a diversified mix of municipal bonds (for tax efficiency), dividend-paying stocks, and maybe even a rental REIT or two if you want continued exposure to real estate without the management headaches. And depending on your income and needs, a financial planner could help model scenarios for longevity and steady withdrawal strategies.
You’ve done an amazing job getting to this point. And now, you get to write the next chapter with greater peace and intention. Social Security isn’t far away either. I’m rooting for you!
The tax consequences can be complicated and impact a variety of issues. I would like to sell a property that has about $200k of equity but I completely overlooked the fact that I will have 3 in private high school in 2026 for which we would other wise qualify for some financial aid. A $200k capital gain on top of W-2 income will wipe out any potential aid for the year. Depreciation recapture can be large depending upon how long you’ve owned the property. Healthcare subsidies can be impacted. Don’t forget about net investment income tax. There are alot of handy online calculators out there, but please consider your AFTER TAX equity! It may be better to hire a manager and/or consider cash out refi’s.
I agree on being careful about the after tax return.
Do you need financial aid if you’re sending three kids to private school though? I’ve only met people with a lot of money who actually don’t need aid and are donors who send three kids to private school.
Although, I have heard of a family of four with two kids who earned about $1 million to get financial aid.
What is the income and cut off UC where you are eligible to get free financial aid?
Related: https://www.financialsamurai.com/income-limit-to-qualify-for-college-scholarships-grants/
There are alot of people around here that get financial aid for high school. They actually call it “income based tuition”. Sticker price is about $21k, they gave my first daughter who is going in the fall $6k plus a $3500 academic scholarship based on test scores. My household income is around $200k. I think many don’t even apply for it and I’ve heard many have grandparents just write a check. On the application they ask recurring debt payments such as mortgages, car payments, cc debt, etc, etc. They also ask assets but I don’t know how it would be verified because the only thing submitted was tax documents. They don’t publish exact income cutoffs or asset guidelines. I’m not exactly sure, but I believe the amount of aid is based on how you fill out the application, the amount of money they have available that particular year and the overall need of the students as a whole. The interesting situation will be when the twins go in the fall of 2026 which will mean 3 in high school at the same time.
My wife and I are 37 & 38, just had our first baby (and only), now almost 5 months old. We have focused on our careers our entire adulthood. At one point, we had 6 rentals, + our primary residence. We just sold 2 more rentals, and will be down to our primary + 1 rental left. We have 1031’d most of the money into private equity deals/funds, but these two rentals we just sold (one just closed, and one in escrow), we are going to put the cash into the bank, and or pay down our house, and possibly have my wife open her own business.
We live in So Cal, and our only debt is our mortgage on our primary, our rental property (below a 45% LTB), and one auto lease (I work in the business, so I get employee deals).
My wife works for a fortune 500 company, and has great benefits (great medical, 401k with a great match, & bonus’), but with the recent addition of the little one, she is looking for a exit strategy to be able to become a stay at home mom/open her consulting business that she has long dreamt of.
Selling the rentals will give us the option to make that happen, possibly pay down our house and recast the mortgage to eliminate even more stress, and provide flexibility.
We owe 730 on our house that is worth 2.4 at a 2.875% rate, hard to pay down, but realistically we could pay 50% of it off comfortably, and have a mortgage that is probably less than our property taxes after recasting it.
We have a NW of low 3m’s, and have always chased early retirement. Now, our focus seems to be more on time, the baby, spending time with our parents while we have them around and family.
There will always be the next investment to chase, the next dollar to make, but there may not always be that next Sunday family dinner.
Time > Money
Money and financial freedom creates time. Its a balancing act, sometimes its ok to give up the extra 10% in potential gains, to create & enjoy more time, at least that’s what I’m realizing at this point of our lives.
Congrats on the little one! What a blessing. I understand how you feel completely. I was you in 2017 with the birth of our son, and I sold our main rental house because it was such a pain to manage with five dudes as tenants all the time.
“ There will always be the next investment to chase, the next dollar to make, but there may not always be that next Sunday family dinner.”
So great to hear you take fatherhood so seriously. You won’t regret it.
My wife and me FIREd early 2022 and sold both our primary residence and a rental property. Being a landlord wasn’t for me. We’ve been renting since then and enjoy not having the responsibilities or expenses that owning a property brings with it. One day we may change our mind and purchase another property but it will be a lifestyle choice
Great post, Sam.
Another couple reasons to sell:
No. 9. Big cap ex projects coming up in the next few years. This might be something like replacing the roof or some major appliances. You won’t know exactly when these things are coming, but you know it’s going to be expensive and a major headache.
No. 10. Your “recently renovated” rental is now dated. To go along with that, maybe your rental needs a significant refresh to remain a competitive option. If you bought a place 10 years ago that was brand new, it might be starting to show its age compared to more recently renovated homes.
I’ve experienced that this spring with one of my rentals. The apartment was rehabbed in 2017. It was the “freshly renovated” place for years and attracted great tenants. Now, I’m having a hard time renting it out and am starting to think it’s because the place could use a refresh.
Thanks,
Matt
Excellent point on number nine. It’s like selling a car before needing to do some major work. You’ll still have to disclose these maintenance issues and run the risk of the buyer willing to pay that expense. But selling before the big maintenance expenses is definitely something to consider as new buyers have new motivation.
The easiest refresh is Paint, fixtures, and new flooring. Not too difficult or expensive, but still will cost money.
I went back to one of my rentals last year, and I was kind of shocked at how old the carpets were and how dirty the walls were. But I guess to the tenants, who lived there for five years, they are used to it. I actually can’t wait to paint and change the carpet again.
Hello Sam,
This is great because I’ve been thinking this exact thing.
46 year old father of 4.
Cancer free for 12 months.
I went deeply into debt seeking all kinds of treatments and also carefree spending last year.
It would take me about 4 years to pay back all my personal debt not including home mortgage.
I have 2 income properties. I can sell 1 and pay back all the debt, sell both and live a little easier, or sell nothing and claw my way back out.
Any input would be great.
First off, congratulations on being cancer-free for 12 months—that’s a huge win! I’m THRILLED to hear that you’re on the other side of such a tough chapter. As a 46-year-old father of four, you’ve clearly got a lot of responsibility on your shoulders, and it’s understandable that you leaned into both treatment and some carefree spending during that time.
As for your financial crossroads, here are a few thoughts to consider:
1. Sell one income property to clear the debt:
If the debt is weighing heavily on your mental and financial well-being, selling one property to wipe the slate clean could be a smart move. It gives you breathing room without sacrificing all your passive income potential. You’d still have one property generating income, and you can rebuild from a cleaner financial position.
Personally, I like this route the best. Less stress and more free-time is good for your body. Let’s keep you healthy!
2. Keep both and claw your way back:
This route preserves your long-term wealth-building assets, but comes with more near-term stress. If your income is stable and you’re confident you can aggressively chip away at the debt over the next four years without burning out, this might make sense, especially if the properties are in appreciating markets or generating strong cash flow.
3. Sell both:
Depending on how much emotional and financial relief you’d get from eliminating debt and simplifying your life, this could be a very reasonable option. At the end of the day, your health, time with family, and peace of mind are worth more than any asset. You can always reinvest later when you’re in a stronger position.
I’d try to sell one property first and then revisit what to do next. It’s a good compromise.
All the best!
Sam
Sam, while you are comparing 8% to 4%, you forget about depreciation, interest deductibility, appreciation and loan pay down from the renter. These factors multiply the return, tax impact and risk. Lastly, the smaller percentage return is often leveraged 3x or 4x if you put 25% down and take a 75% mortgage which gives you a return on the total not just your equity.
However, I understand that selling in a strong market to optimize for a quick sale can make sense if you want to get out of a property. But the comparison is apples (stocks) to oranges (real estate) so it’s hard to state a return without all factors.
keep adding thought provoking content.
-Dan
Hi Dan,
Thanks for your comment. I didn’t forget. I wanted to simplify my message as a writer as my posts get long and reader attention spans are getting shorter.
Here’s a post for more analysis if you want: How to analyze a real estate investment. Perhaps I should link to it in the post.
Are you a buyer or seller of real estate at the moment? Have you ever sold a property even though you think its price will continue to go up?
I’d love to get more perspectives from readers.
Thanks!
Sam
You may enjoy this post as well: Stocks versus Real Estate: Which Is. A Better Investment
Nice work simplifying and thanks for the advice. Lately I feel like life is getting ever more complex and I really need to figure out more ways to simplify my own life. I dislike change and there’s a lot of change on my short and long term horizons so I need to work on lowering my anxieties and reframing my thoughts for positivity. Easier said than done but I’ll give it a go. Thanks!