Should I sell my rental property or keep it if it has mold growth problems?
I'm going to assume that you will spend the money to fix the mold problem correctly.  Using your numbers, after that is done, the home is worth perhaps $280k. To evaluate whether or not to sell, the amount you have spent on the house is irrelevant. The only thing you need to ask yourself is this: Would I spend $280k to buy this house today? You might, if you were happy with the rental income that you were getting. If the house is fully rented, it earns you $24k/year, which is an 8.6% return if you had purchased the house today at $280k. Of course, you will have vacancies, taxes, and other expenses bringing that return number down. Figure out what that is, and see if you are happy with the return based on those numbers.  If you decide it would be a bad investment for you at $280k, then sell the house.  By the way, this question works for any investment, not just real estate. When deciding whether or not to sell stock, the same thing applies. It is irrelevant what your cost basis is. You only need to ask yourself if the stock would be a good buy for you at the current price.
With an annual income of $120,000 you can be approved for a $2800 monthly payment on your mortgage. The trickier problem is that you will save quite a bit on that mortgage payment if you can avoid PMI, which means that you should be targeting a 20% down-payment on your next purchase. With a $500,000 budget for a new home, that means you should put $100,000 down. You only have $75,000 saved, so you can either wait until you save another $25,000, or you can refinance your current property for $95k+ $25k = $120k which would give you about a $575 monthly payment (at 30 years at 4%) on your current property. Your new property should be a little over $1,900 per month if you finance $400,000 of it. Those figures do not include property tax or home owners insurance escrow payments. Are you prepared to have about $2,500 in mortgage payments should your renters stop paying or you can't find renters?  Those numbers also do not include an emergency fund. You may want to wait even longer before making this move so that you can save enough to still have an emergency fund (worth 6 months of your new higher expenses including the higher mortgage payment on the new house.) I don't know enough about the rest of your expenses, but I think it's likely that if you're willing to borrow a little more refinancing your current place that you can probably make the numbers work to purchase a new home now. If I were you, I would not count on rental money when running the numbers to be sure it will work. I would probably also wait until I had saved $100,000 outright for the down-payment on the new place instead of refinancing the current place, but that's just a reflection of my more conservative approach to finances. You may have a larger appetite for risk, and that's fine, then rental income will probably help you pay down any money you borrow in the refinancing to make this all worth it. Exactly. And I'm diversified in other ways. I have a money collection that includes lots of silver and some gold, a rental property. In terms of actual cash accounts it's closer to 750K.   Protip: I always keep actual cash dollars in a safe in the house as well. I learned that trick from my neighbor who said she needed it twice in her life. Even a safe deposit box isn't good enough as the government can get in there, too. She and her husband owned a gas station and  unbeknownst to them the Sunoco gas trucks were leaking when filling their tanks so they had a big ecological problem. The government took every bit of liquid assets they had... that they could find. Then when he died a few years ago something similar thing happened and she needed to dip into it. Unfortunately, my taxes tend to be complicated This. In and of itself, is a greater reason to keep the documents. The other answer offered a good summary, but keep in mind, if the IRS decides you fraudulently withheld claiming income, they can go back 7 years.  I bought a rental property in 1987, and sold it in 2016. In that case, keeping the returns seemed the right thing to do to have the paper trail for basis, else I could claim anything, and hope for the best.  I have all my tax returns since my first tax return, 1980. It's one drawer of a file cabinet. Not too great a burden. "Another factor is, how far is your prospective rental property from where you live? vs. how comprehensive is your property management service?  If you need to visit much or would simply like to keep an eye on it, a couple of hours drive could be a deal breaker. One more thought; would you be able to upgrade the property at a profit when it comes time to sell?  If you have a realtor you trust he or she should be able to tell you if, say a $20k kitchen reno would reliably return more than $20k. It has a lot to do with the property's relative price position in the neighborhood.  A cheaper home has more ""upsell"" room." I know this is a little off the wall but I bought a rental property for my son's tuition. The tenants pay down the mortgage for the next 12 years and it (hopefully) also appreciates in value. Worst case scenario is I come out with a rental and a kid with no education.  He doesn't go then there's no skin off my back. "You are assuming 100% occupancy and 100% rent collection.  This is unrealistic.  You could get lucky and find that long term tenant with great credit that always pays their bills... but in reality that person usually buys a home they do not rent long term.  So you will need to be prepared for periods of no renters and periods of non payment.  The expenses here I would expect could wipe out more than you can make in ""profit"" based on your numbers. Have you checked to find out what the insurance on a rental property is?  I am guessing it will go up probably 200-500 a year possibly more depending on coverage.  You will need a different type of insurance for rental property. Have you checked with your mortgage provider to make sure that you can convert to a rental property?   Some mortgages (mine is one) restrict the use of the home from being a rental property.  You may be required to refinance your home which could cost you more, in addition if you are under water it will be hard to find a new financier willing to write that mortgage with anything like reasonable terms. You are correct you would be taking on a new expense in rental.  It is non deductible, and the IRS knows this well.   As Littleadv's answer stated you can deduct some expenses from your rental property. I am not sure that you will have a net wash or loss when you add those expenses.  If you do then you have a problem since you have a business losing money.  This does not even address the headaches that come with being a landlord. By my quick calculations if you want to break even your rental property should be about 2175/Month. This accounts for 80% occupancy and 80% rental payment.  If you get better than that you should make a bit of a profit... dont worry im sure the house will find a way to reclaim it." First, you can look up the property tax of the building you are in for an exact number. Go to you town's tax office or look at Zillow. You need to claim the rent as income, but will take all expenses as well as depreciation on half the building. The numbers may well work in your favor, especially as a resident landlord. I still own a rental in the next state, but it's 2 hour away, so I'm paying pros to do the simplest things. On site, you can handle all maintenance and save that way.  If the cash flow looks like it's better than what you have right now, it might be time to buy. Without seeing the numbers I can't point out what you might be missing. An important factor you failed to mention is the costs associated with owning a home.  For example, every 10 / 15 years, you have to replace your AC unit ($5k) and what about replacing a roof (depends on size, but could be $10k)?  Not to mention, paying a couple thousand annually for property taxes.  When renting, you never have to worry about any of these three.....