# Hold versus sell

Canonical: https://chicagocommercialfunding.com/tools/hold-versus-sell/

Compare today’s net sale proceeds with discounted holding cash flows.

## Model inputs and hypothetical defaults

- Current sale price ($): 3000000
- Current loan payoff ($): 1800000
- Sale costs (% of gross price): 5
- Additional holding years: 5
- Annual cash after debt and capex ($): 90000
- Gross price at future exit ($): 3500000
- Loan payoff at future exit ($): 1600000
- Annual required return (%): 10

## How the model works

Holding value = present value of annual net cash flows plus net future sale proceeds. Compare with net sale proceeds available today.

## Worked illustration

Selling a $3 million property at 5% costs with $1.8 million debt yields $1.05 million before tax. Holding must compensate the owner for postponing access to that equity.

## Treat existing equity as committed capital

The comparison starts with net cash an owner could release by selling today after the entered costs and debt. Holding gives up immediate access to that cash. It is therefore useful to evaluate the forward decision even when the original acquisition occurred years ago. Historical cost and unrealized gain do not alone establish which option is better today.

The holding value discounts flat annual cash and net terminal proceeds at the entered required return. Annual cash should already deduct debt service and the capital expenditure assumed for those years. The exit-debt field is the remaining payoff at sale, not the sum of all payments during the hold. Deducting both scheduled principal payments and the original loan again at exit would overstate the burden.

## Compare alternatives using compatible assumptions

Use supportable future income, capital and buyer pricing to build the future gross sale price. A larger nominal sale does not necessarily compensate for additional equity, downtime and years of risk. This simple model does not contain a field for a new capital call: evaluate a major renovation or refinance contribution in a full cash-flow model rather than concealing it inside an annual average.

The displayed advantage is pretax and depends on the chosen required return. Test lower annual cash, a weaker exit and a longer execution period. Consult qualified advisers for tax and transaction-specific exchange matters; a potential 1031 exchange is not assumed to remove tax or eliminate reinvestment obligations. The final choice should also reflect liquidity, concentration, personal objectives and the ability to execute the next business plan.

## Limitations

Pretax model, flat annual operating cash, and identical sale-cost percentages. No assumed 1031 treatment or automatic future appreciation.

The canonical HTML page provides the interactive calculator. Inputs stay in the browser; hypothetical defaults are not current financing terms. Distinguish operating income, debt service, capital expenditures and investor distributions.

## Research and related reading

- [Source material](https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/pub-ch-commercial-real-estate.pdf)
- [Compare refinancing and sale](https://chicagocommercialfunding.com/guides/refinance-versus-sale-decisions-for-commercial-owners/)
- [Work through a forward-equity decision](https://chicagocommercialfunding.com/deal-lab/multifamily-hold-versus-sell-investment-decision/)
- [IRS: like-kind exchange conditions](https://www.irs.gov/businesses/small-businesses-self-employed/like-kind-exchanges-real-estate-tax-tips)