I bought my first home about 3 years ago and secured a 30-year mortgage with a mid-3% interest rate. I put down around $75k, and now the equity has grown to about $100k-$130k. I also have $50k in cash sitting in a high-yield savings account, along with funds in brokerage accounts.
I am considering moving to a single-family home in the next few years to avoid dealing with increasing HOA fees and strict rules. My big question is whether I should keep my current property and rent it out or sell it and use the $100k+ equity as a down payment.
This decision will impact my financial strategy over the next 1-3 years. Should I continue to keep more than $50k in my high-yield savings account, or should I invest extra funds in my brokerage account? If I sell the condo, it would free up a lot of cash, allowing me to invest more in the coming years.
The margins on rentals are typically very small, and many reasonable rentals become unprofitable when you factor in an additional 5–10% for prop management.
People often overlook the issue of scale in rental income. While there are exceptions with highly profitable rentals, most of the time, the income from a single rental property—after accounting for a property manager and maintenance—ends up being very slim. If you own multiple units, the profit margin improves somewhat, and you can spread out unexpected maintenance costs and negotiate better rates for property management. However, social media has given people an overly optimistic view of rental income profitability. With rising ownership costs, the profit margins have significantly diminished. Contrary to what Instagram and TikTok might suggest, being a landlord won’t lead to financial freedom through cash flow alone. You’re likely to see a 3-5% return on a dozen or more properties over a decade, which is far worse than market returns and comes with much more risk.
You are saying people only make 3-5%? That’s way off. I have three units and make around 40-45% on each, with minimal maintenance. I could hire a property manager, but it is hardly necessary—I prefer spending that money on a realtor to secure tenants.
The real issue is that people try to create opportunities where none exist. I will admit it is challenging in today’s market, but I managed to do all of this within the last five years, so it’s definitely possible.
If you think landlords are only making 3-5%, you are mistaken. Sure, that might be true for those who randomly buy a property expecting to get rich. But with proper planning and a willingness to handle the responsibilities, it can be very lucrative.