Rent a personal residence for extra cashflow?

Question

I'm just starting in real estate as a single young man, I have one rental and own my primary residence, my primary residence is 1300 sq feet 3bed 2bath house and the mortgage is 1500/mo. I've been looking for a small studio size 1bed 1bath house to buy to keep my personal monthly expenses down but not many are around. I was wondering if it makes sense for me to rent an apartment at 500/mo so I can turn my current primary residence into a mid-term rental where I think it can make about 3000/mo, so theoretically I'm missing out on 1500mo in cashflow but by not doing this but I won't be building equity in a personal residence. There is also the possibility of using my current primary residences big side yard to build myself a small 1-2 bed 1bath house to live in instead. My main thing is I don't need a personal residence this big and to have that much of a personal mortgage while also leaving potentially 1500mo cashflow on the table. Let me know what you guys think!!

Drew Sygit · Answer

@Lane McDonald if your numbers are accurate, then pull the trigger.

Also like the suggestion by @Aaron Zimmerman of buying another property to house-hack.

Unless you don't like roommates?

FYI - buying a house with only 1-bed or a studio is a BAD decision in most markets outside of heavily populated areas like New York City. Resale will be very difficult:(

Dan H. · Answer

Rent minus piti does not equal cash flow especially on an MTR.

How did you derive a rent of $3k/month?   Does that rent include vacancy such as would be included if you used average daily rate (ADR)

You have utilities, maintenance/cap ex including on tne furnishings, PM (always include it even if self managing because your time has value), potential vacancy, increase in insurance cost (STR/ MTR insurance typically costs extra), and miscellaneous.

Your cash flow will be significantly less than the $1500 that was rent minus PITI.

However, if the house is bigger than you need then there is opportunity.  You can do as you proposed or you can house hack renting out the unused bedrooms.   Both will provide additional return from your existing home.

Good luck

Caleb Brown · Answer

If you can truly cashflow that much I would move out and maybe house hack another place. Rent out your current residence. Building a 1/1 ADU might be possible but won't be cheap

Nick Copland · Answer

You’re thinking about this the right way. If your current home can truly gross ~$3,000/mo as a mid-term rental, you’re looking at about $1,500/mo in potential cashflow after the mortgage. Even if you rent a smaller place for $500, you’d still net an extra ~$1,000/mo — that’s a solid return and a strategy a lot of early investors use to scale faster.

Mid-term rentals (travel nurses, corporate relocations, professionals on assignment) tend to pay well, stay longer, and take good care of the property compared to short-term guests. The main things to factor in are setup costs (furnishing), utilities, and budgeting for some vacancy.

Longer term, the ADU option could be the best of both worlds: a smaller home for yourself plus a consistent cashflowing asset next door. But if your goal right now is to maximize cashflow and accelerate into your next property, turning your current house into a mid-term rental while lowering your personal expenses makes a lot of sense.

Theresa Harris · Answer

If those are the real numbers, then yes it could work.

Arman Ahmed · Answer

@Lane McDonald

Hey Lane, what you’re describing is a smart way to optimize cash flow, and it’s something a lot of Midwest investors do with their primary residences. Converting your current home into a rental could definitely free up income and build equity over time. Another approach some take is exploring smaller, lower-cost properties nearby to live in, which keeps personal expenses down while letting the main property generate cash flow. It really comes down to your comfort with being a landlord and managing the rental versus the financial upside.

JD Martin · Answer

If the delta between what you can make on your current house and what you would replace it with is that high, then financially there's no question you should do it. You need to know if your mortgage permits it on your current house, and be sure you can both rent that cheap for yourself and rent your place out for that much money before you do anything.

Aaron Zimmerman · Answer

Why not house hack another property? The plan for the medium term rental seems good so long as there is rental demand there.

Myrna Barrett · Answer

Lane, love how you’re already thinking creatively about maximizing what you have. That’s the right mindset to grow in real estate. One thing I’d keep in mind is running the numbers side-by-side so you can see the true net benefit of each option (renting vs. staying). Sometimes people only look at the gross rent or mortgage, but when you factor in vacancy, maintenance, utilities, property management (if you ever outsource), and tax implications, the picture looks different.

Also, since you mentioned possibly building in the side yard, it might be worth mapping out your financing and timelines so you can see which option keeps your monthly obligations lean while still moving you toward your long-term portfolio goals.

Rent a personal residence for extra cashflow?

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