New investor with some questions regarding financing

Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes

5mo

@Alex B. a few thoughts:

1. Don't pay the tax man! If you sell your primary residence while it still is your primary residence (lived there 2 of previous 5 years), then you don't pay tax on $250k of profit for single person or $500k for a married couple filing jointly. How often can you make money and NOT pay the tax man?!?

2. Renting your paid off house sounds good in theory, but you have a lot of eggs in 1 basket. If you have problems with your renter that is a much bigger issues with damage, vacancy, etc.

3. If you keep a $400k paid off house and prices go up 10% you gain $40k in equity, which sounds great, but if you use that $400k to buy $2,000,000 with loans and the market goes up 10% you gain $200k!

4. So, to me selling the primary and buying a 2-4 unit house hack sounds pretty good. You can likely keep a nice chunk of money available to buy a 2nd house hack in another year or so.

2 Reply

Alex B.
OP
Cleveland, OH · Member since 2013 · 6 posts · 10 votes
5mo
Quote from @Kevin Sobilo:

@Alex B. a few thoughts:
1. Don't pay the tax man! If you sell your primary residence while it still is your primary residence (lived there 2 of previous 5 years), then you don't pay tax on $250k of profit for single person or $500k for a married couple filing jointly. How often can you make money and NOT pay the tax man?!?
2. Renting your paid off house sounds good in theory, but you have a lot of eggs in 1 basket. If you have problems with your renter that is a much bigger issues with damage, vacancy, etc.
3. If you keep a $400k paid off house and prices go up 10% you gain $40k in equity, which sounds great, but if you use that $400k to buy $2,000,000 with loans and the market goes up 10% you gain $200k!
4. So, to me selling the primary and buying a 2-4 unit house hack sounds pretty good. You can likely keep a nice chunk of money available to buy a 2nd house hack in another year or so.

Thanks for the reply Kevin.
I have thought about the capital gains that I can exclude, and between the price I paid and the renovations I've done (kept all the documentation), I should be able to exclude all the profit from the sale.
As far as having all my eggs in 1 basket, that's definitely a valid point.
At the price point for the rent and location, I think I'm less concerned about damage (with proper tenant screening too), but yes, vacancy would be a bigger issue.
Having said that, I think I've got a bit of an emotional attachment to the house, it's the longest I've lived anywhere, great location, great house for a family and I've done a lot of the major improvements already (roof, electrical, HVAC, basement waterproofing), so I might return to this house in the future when I have a family.
1 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
5mo
Quote from @Alex B.:

Quote from @Kevin Sobilo:

@Alex B. a few thoughts:
1. Don't pay the tax man! If you sell your primary residence while it still is your primary residence (lived there 2 of previous 5 years), then you don't pay tax on $250k of profit for single person or $500k for a married couple filing jointly. How often can you make money and NOT pay the tax man?!?
2. Renting your paid off house sounds good in theory, but you have a lot of eggs in 1 basket. If you have problems with your renter that is a much bigger issues with damage, vacancy, etc.
3. If you keep a $400k paid off house and prices go up 10% you gain $40k in equity, which sounds great, but if you use that $400k to buy $2,000,000 with loans and the market goes up 10% you gain $200k!
4. So, to me selling the primary and buying a 2-4 unit house hack sounds pretty good. You can likely keep a nice chunk of money available to buy a 2nd house hack in another year or so.

Thanks for the reply Kevin.
I have thought about the capital gains that I can exclude, and between the price I paid and the renovations I've done (kept all the documentation), I should be able to exclude all the profit from the sale.
As far as having all my eggs in 1 basket, that's definitely a valid point.
At the price point for the rent and location, I think I'm less concerned about damage (with proper tenant screening too), but yes, vacancy would be a bigger issue.
Having said that, I think I've got a bit of an emotional attachment to the house, it's the longest I've lived anywhere, great location, great house for a family and I've done a lot of the major improvements already (roof, electrical, HVAC, basement waterproofing), so I might return to this house in the future when I have a family.

You just stated BIG future problem - your emotional attachment to the property.
This may cloud your future decisions, so another potential reason to sell.
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Kevin Sobilo
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
5mo
Quote from @Alex B.:

Quote from @Kevin Sobilo:

@Alex B. a few thoughts:
1. Don't pay the tax man! If you sell your primary residence while it still is your primary residence (lived there 2 of previous 5 years), then you don't pay tax on $250k of profit for single person or $500k for a married couple filing jointly. How often can you make money and NOT pay the tax man?!?
2. Renting your paid off house sounds good in theory, but you have a lot of eggs in 1 basket. If you have problems with your renter that is a much bigger issues with damage, vacancy, etc.
3. If you keep a $400k paid off house and prices go up 10% you gain $40k in equity, which sounds great, but if you use that $400k to buy $2,000,000 with loans and the market goes up 10% you gain $200k!
4. So, to me selling the primary and buying a 2-4 unit house hack sounds pretty good. You can likely keep a nice chunk of money available to buy a 2nd house hack in another year or so.

Thanks for the reply Kevin.
I have thought about the capital gains that I can exclude, and between the price I paid and the renovations I've done (kept all the documentation), I should be able to exclude all the profit from the sale.
As far as having all my eggs in 1 basket, that's definitely a valid point.
At the price point for the rent and location, I think I'm less concerned about damage (with proper tenant screening too), but yes, vacancy would be a bigger issue.
Having said that, I think I've got a bit of an emotional attachment to the house, it's the longest I've lived anywhere, great location, great house for a family and I've done a lot of the major improvements already (roof, electrical, HVAC, basement waterproofing), so I might return to this house in the future when I have a family.

I think you have a bias you don't realize:
"At the price point for the rent and location, I think I'm less concerned about damage (with proper tenant screening too)"
It seems like you believe if people have money to spend then you need to be less concerned? I don't think that is true AT ALL!
With a $1,000 rental, you have a $1,000 deposit and on a C class rental that covers quite a bit because the quality of finishes is lower and there are more acceptable defects in a rent-ready property.
With your rental, your $3,500 deposit money really doesn't cover as much when you think about how much even modest damage may cost to repair. One bad tenant experience in an expensive rental like that could be VERY VERY costly!
I think its a much safer bet to have three $1150 rentals than one $3500 rental.
If you had a portfolio of B/C rentals and wanted to keep this one in addition, it wouldn't be a concern, but when its a big key part of your portfolio, to me its too much risk of a bad experience.
1 Reply

Samuel DioufBusiness Member

Real Estate Agent · Columbus & Cleveland, OH · Member since 2023 · 1k+ posts · 1k+ votes

5mo

Hey Alex, I've helped a handful of people with similar situations..

I'd sell the property to avoid paying taxes & pick up a few cash-flowing properties in nicer areas of Cleveland. Don't fall for the high cash-flow numbers in the rougher areas!

[email protected]614-662-1652

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Keyano BurgessBusiness Member

Cleveland, OH · Member since 2024 · 32 posts · 23 votes

5mo

Hey Alex,

There are plenty of people more qualified than I am that can address the financial side of your question, but as for the real estate yourself make sure you:

A) make sure the house is in decent condition, don't skip out on the home inspection. Make sure your roof, furnace, hot water tank etc. are in good condition

B) if inheriting tenants, make sure you review the rent roll and make sure they're been paying on time

C) you mentioned wanting to acquire multiple properties down the road to prepare yourself for semi-retirement. Decide now whether you are going to self-manage or hire a property management company. If doing the latter MAKE SURE they are reputable because this will make or break you.

Hope this helps! I am an investor focused agent in the Cleveland market and would happy to answer any questions you may have.

[email protected]216-387-7220

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Arman AhmedPro Member

Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 911 votes

5mo

Quote from @Alex B.:

Hello, I've been a long time listener but due to life circumstances wasn't able to start my REI journey.
I'm now at a point where I am ready to buy my first rental property, looking at at least a duplex but leaning more towards a 4 unit in my area of Cleveland Ohio (looking to buy on the west side of town).
I've been fortunate enough to buy and pay off my primary residence (single family home in suburbs of Cleveland), which appraised for over $400k as of a few months ago.
Some of the questions/ideas I've had were:
For the primary residence, either sell it to capture the equity and have some dry powder in the bank account, or rent it out. Looking at comparable rentals in the area, they are $3200-$3500 per month, with taxes/insurance being around $700 per month currently on my property.
As for the financing question, I have strong (800+) credit and decent income (1099 not W2, which could be an issue), so I was thinking of doing FHA and house hacking. Or I could pull out a HELOC on my primary residence to finance down payment for the new property through a conventional loan.
For people in Ohio familiar with OHFA Next Home program, I was thinking about going through that as well.
My goals are long term, 10-15 year horizon, buy a few properties for renting out, paying them off slowly, and fund a semi-passive retirement.
I'm also open to connecting with local people, especially existing investors as mentors or just to bounce ideas/deals off of.

You’re in a really strong position, paid-off primary, great credit, and solid rent potential put you ahead of most first-time investors. Renting your current home looks attractive on paper with that spread, but just make sure you factor in maintenance, vacancy, and management to see the true cash flow. For your next deal, FHA house hacking, a 2–4 unit is a great low-risk entry, especially in Cleveland, where you can still find solid numbers on the west side if you buy right. A HELOC can work too, but just be mindful of stacking leverage early. Your long-term plan is solid, and once you get that first multi under your belt, you’ll see how repeatable it is. Some investors even expand into nearby Midwest markets to scale faster once they get comfortable.

[email protected]614-418-6081

1 Reply

Alfath AhmedBusiness Member

Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes

5mo

Quote from @Alex B.:

Hello, I've been a long time listener but due to life circumstances wasn't able to start my REI journey.
I'm now at a point where I am ready to buy my first rental property, looking at at least a duplex but leaning more towards a 4 unit in my area of Cleveland Ohio (looking to buy on the west side of town).
I've been fortunate enough to buy and pay off my primary residence (single family home in suburbs of Cleveland), which appraised for over $400k as of a few months ago.
Some of the questions/ideas I've had were:
For the primary residence, either sell it to capture the equity and have some dry powder in the bank account, or rent it out. Looking at comparable rentals in the area, they are $3200-$3500 per month, with taxes/insurance being around $700 per month currently on my property.
As for the financing question, I have strong (800+) credit and decent income (1099 not W2, which could be an issue), so I was thinking of doing FHA and house hacking. Or I could pull out a HELOC on my primary residence to finance down payment for the new property through a conventional loan.
For people in Ohio familiar with OHFA Next Home program, I was thinking about going through that as well.
My goals are long term, 10-15 year horizon, buy a few properties for renting out, paying them off slowly, and fund a semi-passive retirement.
I'm also open to connecting with local people, especially existing investors as mentors or just to bounce ideas/deals off of.

That's awesome that you are getting started @Alex B. Biggerpockets has taught me everything after leaving engineering school and my consulting job. I own 28 rental units now in my market and sell over 100+ properties every year.

Cleveland is great for cashflow. Dayton is more about affordability and stability. Columbus is great for equity plays and appreciation. Since you are starting out, Cleveland is great for finding cash flowing properties. Make sure to buy in decent areas where rental rates are strong.

[email protected]614-802-5698

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Jimmy LieuBusiness Member

Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes

5mo

Quote from @Alex B.:

Hello, I've been a long time listener but due to life circumstances wasn't able to start my REI journey.
I'm now at a point where I am ready to buy my first rental property, looking at at least a duplex but leaning more towards a 4 unit in my area of Cleveland Ohio (looking to buy on the west side of town).
I've been fortunate enough to buy and pay off my primary residence (single family home in suburbs of Cleveland), which appraised for over $400k as of a few months ago.
Some of the questions/ideas I've had were:
For the primary residence, either sell it to capture the equity and have some dry powder in the bank account, or rent it out. Looking at comparable rentals in the area, they are $3200-$3500 per month, with taxes/insurance being around $700 per month currently on my property.
As for the financing question, I have strong (800+) credit and decent income (1099 not W2, which could be an issue), so I was thinking of doing FHA and house hacking. Or I could pull out a HELOC on my primary residence to finance down payment for the new property through a conventional loan.
For people in Ohio familiar with OHFA Next Home program, I was thinking about going through that as well.
My goals are long term, 10-15 year horizon, buy a few properties for renting out, paying them off slowly, and fund a semi-passive retirement.
I'm also open to connecting with local people, especially existing investors as mentors or just to bounce ideas/deals off of.

Hey Alex, welcome to BP and you're in a strong starting spot with a paid-off primary, solid credit, and clear long-term goals. In your case, keeping the house as a rental could work well based on the cash flow you mentioned, but it depends on whether you want the simplicity of turning it into an income stream or the liquidity from selling it to fund your first deal. For financing, FHA house hacking is often the best way to start if you're open to living in the next property because it lowers your entry cost and helps you learn the business early, while using a HELOC into a conventional purchase gives you more flexibility but can be a bit tighter on cash flow depending on rates and your 1099 income setup. Programs like OHFA can help, but I'd focus more on getting a solid duplex or fourplex where the numbers make sense without relying too much on any one loan program. The main thing is getting that first deal right and learning the management side, since that experience will shape everything you do next.

[email protected]614-300-7535

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Dave FosterBusiness Member

Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes

5mo

@Alex B., if you just decide to sell the property, you could take the first 250k (500k if married) tax-free if you've lived in the property for two out of the previous five years as your primary residence, as @Kevin Sobilo mentioned.

Primary residences dont usually become great rentals, but if you did decide to try renting it out, you would still have three years to take advantage of the primary residence exclusion if the property doesn't perform and you decided to sell.

If the property ends up being a great rental and you pass on the primary exclusion, you can always do a 1031 exchange in the future. If you ever decide to do so later down the line, and want to scale into something larger. A 1031 exchange would allow you to defer all of the tax and appreciation and reinvest it into another investment property of any type anywhere in the country.

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Stephen Geluz

New to Real Estate · Los Angeles, CA · Member since 2023 · 83 posts · 29 votes

5mo

The biggest thing I’d watch is not letting emotional attachment to the current house drive the decision.

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Leo CarterPro Member

Member since 2025 · 27 posts · 22 votes

5mo

Hey man, this is a great spot to be in—having a paid-off primary gives you a lot of flexibility.

I’m an investor-focused agent here in the Cleveland market with Keller Williams Living (Journey Home Group), and I'm always open to new connections.

On your main question—whether to sell or rent your primary—it really comes down to your overall strategy and risk tolerance. There’s no one “right” answer, and it’s probably worth talking with a lender/financial advisor to map that out based on your income and goals.

That said, from a purely investing standpoint:

Those rent numbers you mentioned are strong, especially with such low monthly overhead
Keeping it as a rental could give you a solid cash-flowing asset + long-term appreciation, but as others have mentioned there may be higher upside potential using the equity to get loans on more properties...

On the acquisition side:

FHA house hacking can work well, especially for a 2–4 unit
HELOC + conventional is another solid route if you want to stay more flexible
The west side definitely has some good opportunities if you’re targeting small multis

I come from a 7-year remodeling background, so I focus a lot on value-add deals (especially 2–4 units that need some work but have strong upside). I also have a great boots-on-the-ground team here—property managers, contractors, and I regularly analyze deals, walk properties + send video walkthroughs for clients.

If you ever want to bounce ideas, look at deals, or just sanity-check numbers, I’m happy to help.

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Brandon Hightower

Member since 2026 · 43 posts · 21 votes

5mo

With a paid-off primary, excellent credit, and a long-term perspective, you're in a very good position. That's a strong base.

I would consider the following two points

Don't sell your main house right away unless you have a very good reason to. If it really rents for $3.2k to $3.5k and costs about $700 a month, that's a great asset. Just remember to include maintenance, vacancy, and management costs to see if it still makes the money you expect.

Both FHA house hacking and HELOC + conventional can work. FHA is great if you don't have a lot of money to put down, but it means you have to live there. HELOC gives you freedom, but it also adds risk because your primary is on the line. It all depends on how much risk you're willing to take and how quickly you want to grow.

If you have 1099 income, talk to a few lenders who are willing to work with investors early on. Don't guess—find out exactly what you can get.

When you make your first deal, don't worry so much about having the perfect strategy and more about buying.

You're approaching this correctly; just avoid becoming bogged down in analysis.

1 Reply

Kamil Lysik

Property Manager · Warsaw · Member since 2026 · 107 posts · 37 votes

4mo

Great position to sell, the rent numbers look good on paper, but after vacancy, maintenance, and property management, your actual net is probably closer to $2,000–$2,200/month. Meanwhile you're sitting on a tax-free liquidity event that gives you serious dry powder for the multifamily you actually want. Sell, capture the equity clean, and go buy the 4-unit with a strong down payment.

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Pete Langford

Member since 2026 · 5 posts · 7 votes

4mo

Started with a duplex myself and went to fourplexes from there. 11 doors now and I'll never buy a single family as a rental. With a fourplex one vacancy still means three units paying the mortgage. One vacancy on a single family means you're covering the whole thing out of pocket.

On the 1099 income, that's going to make conventional lending harder than you think. I ran into the same wall when my income shifted away from W-2. Ended up going DSCR for most of my portfolio and it worked out fine because lenders just care that the rent covers the debt. With your credit score you'll get decent terms on that. Cleveland price points are similar to where I buy in Milwaukee so the DSCR math should work in your favor.

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Account Closed

Member since 2026 · 35 posts · 3 votes

3mo

Hey Alex, great post — and you're asking all the right questions at the right time.

A few thoughts based on what you've laid out:

On your primary residence: Renting it out at $3,200–$3,500/month with only $700/month in taxes and insurance is a strong cash flow position. That's likely $2,500+ monthly before any mortgage payment — and since it's paid off, that's real income. Unless you need the liquidity now, renting it out and using a HELOC to access equity for your next purchase gives you the best of both worlds: you keep the appreciation upside and you get your down payment capital.

On the 1099 income concern: This is actually less of a problem than most investors think, especially for rental properties. A DSCR loan (Debt Service Coverage Ratio) qualifies entirely on the property's rental income — no W-2s, no tax returns, no personal income verification required. With your 800+ credit score, you'd be looking at some of the best available pricing on these programs. FHA and house hacking is still a solid play if you want to minimize your down payment on that first duplex or 4-unit, but know you have options that don't require your 1099 income to pencil out.lendmire+1

On Cleveland specifically: The market data is actually encouraging right now. Median home values in Cleveland are projected to reach around $242,875 in 2026, up roughly 4.6% year over year, and multifamily vacancy is expected to stay tight due to a low construction pipeline. The west side in particular has strong rental demand fundamentals. Cleveland also consistently shows up in national ranking as one of the strongest Midwest markets for cash-flow investors — Realtor.com and Zillow's 2026 reports both highlight Midwest and Northeast markets as leading opportunities this year due to affordability and value relative to coastal markets.realtor+3

On OHFA Next Home: Worth exploring, but be aware that income and purchase price limits may restrict your options on a 4-unit. It's designed more for owner-occupants stepping into homeownership. Run the numbers against a conventional or DSCR structure to see which actually pencils better at your purchase price target.

One thing to keep in mind: Your long-term 10–15 year horizon is actually your biggest advantage. You don't need to optimize for perfect market timing — you need to optimize for a deal that cash flows on day one and that you can hold through cycles. At your credit score and with equity already in hand, you're starting from a stronger position than most first-time investors.

If you want to connect with someone working through similar strategies, feel free to send me a message — happy to talk through financing structures and what the numbers might look like for a duplex or quad on the west side.

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Jeffrey Abraham

Lender · United States · Member since 2020 · 177 posts · 26 votes

3mo

You're actually in a very strong position compared to most first-time investors. Having a paid-off primary residence worth over $400,000, excellent credit, and a long-term investment horizon gives you several paths forward.

Personally, I would be hesitant to sell the primary residence unless you need the capital. If the property can realistically rent for $3,200–$3,500 per month with only about $700 in taxes and insurance, that could become a valuable cash-flowing asset while still allowing you to access equity through a HELOC or home equity loan.

For your first investment property, a duplex, triplex, or fourplex where you can house hack is often one of the best ways to get started. FHA financing on a 2–4 unit property can allow a low down payment while helping you learn landlording on a manageable scale. Since you're self-employed (1099), the biggest factor will be documenting your income properly for underwriting.

Another option is using a HELOC on your primary residence for the down payment and reserves while obtaining conventional financing on the investment property. This can preserve ownership of your current home while leveraging some of the equity you've built.

Before making a decision, I'd encourage you to compare three scenarios:

Keep your home and obtain a HELOC.
Keep your home as a rental and house hack a 2–4 unit.
Sell your home and deploy the equity into multiple investment properties.

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New investor with some questions regarding financing

New investor with some questions regarding financing

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