We bought two houses for too much, now we don't know what to do.

Boise, Idaho
Starting Out
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We bought two houses for too much, now we don't know what to do.

Lauren Taylor
Member since 2025 · 5 posts · 1 vote

Hi all! Big question for folks who have been in this world for a while. We are a couple who has recently been educating ourselves on real estate investing through resources like BiggerPockets. We would love to start the journey of setting ourselves up for success in the future. However, we’ve realized we’re in a tough spot and are unsure of our next steps. We’d love to get some advice or suggestions from others.

Here’s the situation:

  • -We own one rental property, which we purchased in 2021 for $390,000 (at the height of the market). We have a low-interest mortgage of about $1,500, and rent it for $1,875. It’s a 900 sq ft, 3 bed, 1 bath house. It was our primary home for 2 years.
  • -In the fall of 2023, we bought a primary home for $550,000 in a highly desirable neighborhood where homes typically sell for $700K–$1M+. Our house is 1,600 sq ft, but is smaller and not as desirable compared to others in the area, so it’s worth less than that. We are paying $3,900 in mortgage on this home, which is a lot for us.
  • -We absolutely love this neighborhood and it would be very hard to leave.
  • -Combined our salaries approximately $170,000 per year. (Not tons of room for growth as we work for the state and city)
  • -Last summer we rented a room in our larger house on AirBnb, bringing in $500-$900 per month

We are considering several options:

  1. -Renting out our primary home and moving to a cheaper rental. We think we could get $2,700–$3,100 in rent.
  2. -Renting out the larger home on Airbnb during the summer while we live in a camper, to help offset the mortgage.
  3. -Moving back to our smaller rental and selling the larger home.
  4. -Selling both homes and starting the investing process over again.
  5. -Selling the smaller home and using the cash to invest elsewhere.

We’re hesitant to sell the larger home because we’re not sure if we’d be able to buy back into this neighborhood at the same price, but we understand sacrifices may be necessary. The market hasn’t appreciated enough to make a significant profit (maybe $60K–$80K on each home, at best).

We very much know we’re in a less-than-ideal situation and wish we’d done more research before buying the second house. Hindsight is 2/20 and all that. Any advice or suggestions would be greatly appreciated! Thanks!

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
1y
Quote from @Henry Clark:

OP

This isn’t a Real Estate question.  It’s about personal finance.

Both homes you bought as a homeowner and not as an investor.  Homeowners will always and can pay more than an investor.  I would recommend you step back and do the deal analysis and view them as investments.  

Just a hunch either one won’t work out as a Real Estate investment.  Ok as a home.

1.  How are your companies, jobs and your personal employment.  Risk analysis on your current home.

2.  Insurance, property taxes, maintenance.  You have to do a deal analysis.

3.  $170 k gross or net.  Let’s say gross and your take home is $120k.  

4.  Just your house.  You need to do the personal finance numbers. Say $48k PI, insurance $4k, property tax $5k, capex $2k.  $59k total.
 
5.  $120k take home, $59k housing without utilities. 

6.   Haven’t discussed your vehicles, and other personal finances.

Change the numbers above.  Recommend you sit down with an Accountant who won’t have the emotion tied to your house and life style.

Let the numbers guide your thought process.  But I think you need to sell both houses and downsize.  Or sell the first house.  Then one of you needs to get an extra job if you want to stay in the current house.  Only if both your company and you have job security.  If either of you are unemployed for 6 months your house or savings are at risk.  

If you decide to get into Real estate investing come back and pose a question. Let’s look at options before buying that will make you money.  


if the 2 and 5 rule works sell them both pay no tax and start over.
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  • Ryan SpathBusiness Member
    Real Estate Agent · Boise, ID · Member since 2017 · 576 posts · 379 votes
    1y

    Lauren- 

    First of all congratulations on jumping into the investing journey! A big part of entrepreneurship is problem solving so you are are the right path!  

    What are you trying to achieve? Based on your post it appears as if you are not as comfortable with the $3900 monthly mortgage on the primary.....is this correct? Are you simply wanting to lower your personal housing costs?

    Are you willing to sell the primary you are in now and put that money to work somewhere else that can help you achieve more cash flow or at least a lower monthly expense? Are you willing to house hack? How uncomfortable are you willing to get to accomplish what ever it is you are seeking to do?

    Id love to help and provide perspective however I can, Please feel free to reach out.

    [email protected]208-600-2814
    0Reply
  • Pete Harper
    Rental Property Investor · Streetman, TX · Member since 2018 · 528 posts · 495 votes
    1y

    What is your primary goal? Appreciation or cash flow?

    The first home appears to have a positive cash flow depending on other expenses; taxes, insurance, maintenance etc. I would make a detailed spreadsheet to look at the cash flow and make sure you have reserves. You need cash flow to hold the property long enough for appreciation to build. 

    Second home doesn't appear to work as a rental. Based on your numbers you are negative cash flow as long term rental. AB&B might work better. 

    Sounds like you are willing to make sacrifices for the long term. House hacking with roommates on your primary might be a good short term strategy. Another potential strategy is buying a small multi family, duplex or four plex. You can live in one unit while renting the others. As your equity grows you can buy a second MF and move into it. Throw in some renovation work to force appreciation and you have a scalable strategy. 

    0Reply
  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    1y

    OP

    This isn’t a Real Estate question.  It’s about personal finance.

    Both homes you bought as a homeowner and not as an investor.  Homeowners will always and can pay more than an investor.  I would recommend you step back and do the deal analysis and view them as investments.  

    Just a hunch either one won’t work out as a Real Estate investment.  Ok as a home.

    1.  How are your companies, jobs and your personal employment.  Risk analysis on your current home.

    2.  Insurance, property taxes, maintenance.  You have to do a deal analysis.

    3.  $170 k gross or net.  Let’s say gross and your take home is $120k.  

    4.  Just your house.  You need to do the personal finance numbers. Say $48k PI, insurance $4k, property tax $5k, capex $2k.  $59k total.
     
    5.  $120k take home, $59k housing without utilities. 

    6.   Haven’t discussed your vehicles, and other personal finances.

    Change the numbers above.  Recommend you sit down with an Accountant who won’t have the emotion tied to your house and life style.

    Let the numbers guide your thought process.  But I think you need to sell both houses and downsize.  Or sell the first house.  Then one of you needs to get an extra job if you want to stay in the current house.  Only if both your company and you have job security.  If either of you are unemployed for 6 months your house or savings are at risk.  

    If you decide to get into Real estate investing come back and pose a question. Let’s look at options before buying that will make you money.  

    3Reply
    • Jay HinrichsBusiness Member
      Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
      1y
      Quote from @Henry Clark:

      OP

      This isn’t a Real Estate question.  It’s about personal finance.

      Both homes you bought as a homeowner and not as an investor.  Homeowners will always and can pay more than an investor.  I would recommend you step back and do the deal analysis and view them as investments.  

      Just a hunch either one won’t work out as a Real Estate investment.  Ok as a home.

      1.  How are your companies, jobs and your personal employment.  Risk analysis on your current home.

      2.  Insurance, property taxes, maintenance.  You have to do a deal analysis.

      3.  $170 k gross or net.  Let’s say gross and your take home is $120k.  

      4.  Just your house.  You need to do the personal finance numbers. Say $48k PI, insurance $4k, property tax $5k, capex $2k.  $59k total.
       
      5.  $120k take home, $59k housing without utilities. 

      6.   Haven’t discussed your vehicles, and other personal finances.

      Change the numbers above.  Recommend you sit down with an Accountant who won’t have the emotion tied to your house and life style.

      Let the numbers guide your thought process.  But I think you need to sell both houses and downsize.  Or sell the first house.  Then one of you needs to get an extra job if you want to stay in the current house.  Only if both your company and you have job security.  If either of you are unemployed for 6 months your house or savings are at risk.  

      If you decide to get into Real estate investing come back and pose a question. Let’s look at options before buying that will make you money.  


      if the 2 and 5 rule works sell them both pay no tax and start over.
      Podcast Guest on Show #222
      JLH Capital Partners51 Review
      WebsiteView Page
      3Reply
    • Lauren Taylor
      OP
      Member since 2025 · 5 posts · 1 vote
      1y

      Thanks, appreciate all the feedback!

      We are still exploring all options. We have folks interested in renting our larger home, in the desirable neighborhood for $3,600. This is about $250 below our mortgage payment, so negative cash flow. However, by moving into our first home, we would be spending about 2k less per month, despite the negative cash flow. We are considering this option to allow time for our larger home to appreciate. 

      0Reply
  • Allan C.
    Rental Property Investor · Member since 2018 · 826 posts · 810 votes
    1y

    Note OP that you'll have to wait 2 years between Sec 121 exclusion, assuming you don't have qualifying event to shorten timeline on the second sale (ie job relo). 

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Lauren Taylor:

    Hi all! Big question for folks who have been in this world for a while. We are a couple who has recently been educating ourselves on real estate investing through resources like BiggerPockets. We would love to start the journey of setting ourselves up for success in the future. However, we’ve realized we’re in a tough spot and are unsure of our next steps. We’d love to get some advice or suggestions from others.

    Here’s the situation:

    • -We own one rental property, which we purchased in 2021 for $390,000 (at the height of the market). We have a low-interest mortgage of about $1,500, and rent it for $1,875. It’s a 900 sq ft, 3 bed, 1 bath house. It was our primary home for 2 years.
    • -In the fall of 2023, we bought a primary home for $550,000 in a highly desirable neighborhood where homes typically sell for $700K–$1M+. Our house is 1,600 sq ft, but is smaller and not as desirable compared to others in the area, so it’s worth less than that. We are paying $3,900 in mortgage on this home, which is a lot for us.
    • -We absolutely love this neighborhood and it would be very hard to leave.
    • -Combined our salaries approximately $170,000 per year. (Not tons of room for growth as we work for the state and city)
    • -Last summer we rented a room in our larger house on AirBnb, bringing in $500-$900 per month

    We are considering several options:

    1. -Renting out our primary home and moving to a cheaper rental. We think we could get $2,700–$3,100 in rent.
    2. -Renting out the larger home on Airbnb during the summer while we live in a camper, to help offset the mortgage.
    3. -Moving back to our smaller rental and selling the larger home.
    4. -Selling both homes and starting the investing process over again.
    5. -Selling the smaller home and using the cash to invest elsewhere.

    We’re hesitant to sell the larger home because we’re not sure if we’d be able to buy back into this neighborhood at the same price, but we understand sacrifices may be necessary. The market hasn’t appreciated enough to make a significant profit (maybe $60K–$80K on each home, at best).

    We very much know we’re in a less-than-ideal situation and wish we’d done more research before buying the second house. Hindsight is 2/20 and all that. Any advice or suggestions would be greatly appreciated! Thanks!


     I would sell the larger home. There will always be more neighborhoods "you love". If rental cash flows and is low interest rate I would keep that. Seems like the larger home is the one causing the problems. 

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    1y

    Since you have a favorable interest rate on the first house, you could keep it and dump the newer house (on which I assume you're paying about 7.5%). Take the small profit  and park it in a CD and add what you have been paying to that untill you have a nice little slush fund.

    This is while you're waiting for the rates to drop to 5% or so....

    When a) rates drop and b) you have a decent amount saved, then you have a nice choice to make. Do you keep the original house and buy something else, or sell that and take that profit also and buy something bigger and better? Maybe a 2 on 1? Or a STR or two?

    I must admit, I also am a sucker for @Jay Hinrichs idea. Just dump everything and start over, it has a certain purity to it. And having equity of $60-80 x2 is not bad at all. That's still considered decent money.

    And don't beat yourself up, we all F up once in a while. Just move forward into a new prosperity. Good luck!

    3Reply
  • Lauren Taylor
    OP
    Member since 2025 · 5 posts · 1 vote
    1y

    Thanks all. Appreciate the feedback. Very helpful to get a perspective outside your own. 

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    1y

    How much could you sell your new primary home for? Get a real honest look at the market.

    Something tells me you might be underwater or face a real liquidity issue getting it off, if you do indeed try to sell it. 

    In terms of falling "in love" with the neighborhood. I hear this over and over, and it's usually the wife that emotionally runs up the checkbook to get her "dream home". And "for" the family. When in reality, there's regret usually 3 months in, but no later than a year when tax basis is re-adjusted. 

    I understand primary homes are emotional, but be logical with this and maybe do a re-do with the new primary. But first, see if you can get off of it. The market is brutal right now, however, Boise still does look a bit constrained supply wise. 

    2Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    1y

    Exactly as @Jay Hinrichs says. Just sell both and you won’t even have to pay taxes due to living there. Markets expensive I just sold one of my own places. $60-80k appreciation is still great money. Single families don’t tend to cash flow well if you’re in good areas, look for 4 units that’s really all I’ve seen cash flowing lately. Or maybe find a 2 or 3 unit and house hack it. 

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    1y

    Thoughts, in no particular order:

    1. Before you do anything else it sounds like you need to seriously get a firm handle on your personal finances. House #1 breaks even and house #2 costs $3900. You bring in $14.3k per month gross. You should be cruising on affording house #2. Even in a high tax situation you should have $10k net, and if you are burning through $6k beyond your mortgage that would be the place to start. 

    2. Neither house is a good rental option. House #2 would be terrible so if you're not going to live in it you should sell it. 

    3. You have to live somewhere so only you can decide how important this neighborhood is. If you really love it there's no reason on paper you should be struggling. For most people downsizing to a van on the river is going to be pretty shocking so you should try that on a trial basis for a month or two before pulling the trigger.

    4. Always remember that RE investing and buying primary homes are usually not the same thing unless you're willing to live in dives and remodel while you live there to value add. 

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  • Lauren Taylor
    OP
    Member since 2025 · 5 posts · 1 vote
    1y

    Hi JD, 

    Thanks for the input. Great point on looking at our finances. We are quite frugal. However, we've been really upping our savings in the past few years. So about 46% of our gross earnings combined are going into different retirement accounts (Employee sponsored pension plans and various retirement accounts.) So, once taxes/SS/health insurance are taken out, our take-home is about 91K. 

    Perhaps that is excessive and we should reconsider reducing our retirement contributions in order to have more capital?

    Appreciate you taking the time to chime in!

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    1y

    So your net income is about $8k per month? Do you really need that much to live on? If not, yes, kick in some more for your RE goals...

    0Reply
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