Converting Primary residence to first rental

Huntsville, Alabama
General Real Estate Investing
3moFollow

Converting Primary residence to first rental

Thomas Bridges
New to Real Estate · Birmingham, AL · Member since 2023 · 4 posts · 11 votes


Hey everyone, I’m looking for some feedback on a move I’m considering.

I currently own my primary residence and my monthly mortgage payment is about $1,550. The problem is that market rent in my neighborhood looks to be around $1,450/month, so if I moved out and turned it into a rental, I’d likely be negative each month before even factoring in maintenance, vacancy, repairs, etc.

My original idea was to keep the house, rent it out, and then buy a duplex as my next primary residence so I could live in one side and rent the other. But now I’m starting to question whether it would make more sense to just sell my current house and start fresh by buying a duplex as my new primary residence.

My main questions are:

  1. -Would you keep a primary residence as a rental if it’s likely to be slightly negative cash flow from day one, or would you sell it and move on?
  2. -From an investing standpoint, would it be smarter to sell the house now and focus on house hacking a duplex, rather than forcing my first house to become a rental that doesn’t really work on paper?

I’m trying to think long term and build a rental portfolio the right way, but I also don’t want to hold onto a property just because I already own it if it’s going to drag down my cash flow and borrowing power. Curious how others here would look at this.

0Reply
518 views

Most Popular Reply

Vijay FriedmanBusiness Member
Miami, FL · Member since 2026 · 766 posts · 124 votes
3mo
Quote from @Thomas Bridges:


Hey everyone, I’m looking for some feedback on a move I’m considering.

I currently own my primary residence and my monthly mortgage payment is about $1,550. The problem is that market rent in my neighborhood looks to be around $1,450/month, so if I moved out and turned it into a rental, I’d likely be negative each month before even factoring in maintenance, vacancy, repairs, etc.

My original idea was to keep the house, rent it out, and then buy a duplex as my next primary residence so I could live in one side and rent the other. But now I’m starting to question whether it would make more sense to just sell my current house and start fresh by buying a duplex as my new primary residence.

My main questions are:

  1. -Would you keep a primary residence as a rental if it’s likely to be slightly negative cash flow from day one, or would you sell it and move on?
  2. -From an investing standpoint, would it be smarter to sell the house now and focus on house hacking a duplex, rather than forcing my first house to become a rental that doesn’t really work on paper?

I’m trying to think long term and build a rental portfolio the right way, but I also don’t want to hold onto a property just because I already own it if it’s going to drag down my cash flow and borrowing power. Curious how others here would look at this.

@Thomas Bridges
I'd look beyond the monthly cash flow and consider the bigger picture. If the current home is only slightly negative but has strong appreciation potential, it may still make sense to keep it. On the other hand, if it's going to limit your ability to buy the duplex and grow your portfolio, selling could be the better move. I'd run both scenarios side by side before deciding.

786-656-0387
DreamPoint Capital
WebsiteView Page
2Reply
See this reply in the discussion

22 Replies

Jump to latestLatest
  • Jules Aton
    MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
    3mo

    I wouldn't force a property into rental that doesn't at least cash flow to some extent and is also in an area that is appreciating. I think you are smart to consider sunk cost fallacy and look at selling but on the other hand if you like the house and neighborhood why not stay there and buy either another SFH or duplex as investment? I tend to like SFH because they are often in nicer neighborhoods than multi-families and most importantly perceived ease of resale.

    0Reply
  • Harris Felton
    Member since 2026 · 3 posts · 0 votes
    3mo

    @Thomas Bridges, I have some friends who have walked through a similar scenario as you, and here are some of their thoughts...

    1. Follow-up question, are you in a fast rental and housing market? If rents are rising quickly, that may be a short-term issue for you. Another thing you would need to consider are any tax implications or depreciation benefits, etc. 

    2. The main question would be how much cash could you pull out of your current primary? Would that give you an influx of cash to purchase a few more duplexes or the financial security to do so? 

    If it were me, I have always wanted to live in a side of a duplex, but that also comes with a lot of trade-offs. 

    Good luck on building your portfolio!

    0Reply
  • Jeff Roth
    Real Estate Consultant · Ann Arbor, MI · Member since 2022 · 474 posts · 261 votes
    3mo

    Hi Thomas from Birmingham, Al-

    Great question! You own a primary residence that you intended to rent out but monthly market rent is less than your mortgage payment. You asked if you should rent out the house with negative cashflow or sell and go buy a duplex and rent out one side and live in the other that will cashflow when you are ready to move.

    Definitely do not have a negative cashflow rental willingly. Insurance will go up as a rental. Property taxes will go up as a rental. Maintenance costs will also go up as a rental from additional wear and tear and potentially also paying for outside lawn and landscape care. All of which, will make the negative cashflow worse not to mention a prolonged vacancy.

    If you sell, you can take your gain tax free from the sale of a primary residence and then go buy a property like a duplex that will cashflow when you are ready to move after you live in one of the units.

    To Your Success!

    1Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    3mo

    @Thomas Bridges, if you decide you want to just sell the property, you might be able to take the first $250k ($500k if married) of the gain tax-free as long as you lived in the property for two out of the previous five years as your primary residence. That would tip the scales for me. Unless the property has incredible appreciation over the primary limit, you might be better off just selling, since there wouldn't be a tax bill. If it's not a good rental now. It probably won't be a good rental in the future. But you're in a position where you don't have to act fast.

    At the same time, if you do qualify for the primary exclusion but want to try the property out as a rental, you could rent it out for exactly three years, see how it performs, and take advantage of the exclusion if you still choose to sell. Otherwise, if it does well as a rental and you decide to pass up on the exclusion, you could always do a 1031 exchange later in the future. A 1031 exchange allows you to defer all of the capital gains tax and depreciation recapture and reinvest it into any type of investment property in any state.

    It's possible to take advantage of both tax advantages as long as you qualify for both and defer any additional tax left from a 121 exclusion with the 1031 exchange.

    The 1031 Investor5140 Reviews
    WebsiteView Page
    1Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    3mo
    Quote from @Thomas Bridges:


    Hey everyone, I’m looking for some feedback on a move I’m considering.

    I currently own my primary residence and my monthly mortgage payment is about $1,550. The problem is that market rent in my neighborhood looks to be around $1,450/month, so if I moved out and turned it into a rental, I’d likely be negative each month before even factoring in maintenance, vacancy, repairs, etc.

    My original idea was to keep the house, rent it out, and then buy a duplex as my next primary residence so I could live in one side and rent the other. But now I’m starting to question whether it would make more sense to just sell my current house and start fresh by buying a duplex as my new primary residence.

    My main questions are:

    1. -Would you keep a primary residence as a rental if it’s likely to be slightly negative cash flow from day one, or would you sell it and move on?
    2. -From an investing standpoint, would it be smarter to sell the house now and focus on house hacking a duplex, rather than forcing my first house to become a rental that doesn’t really work on paper?

    I’m trying to think long term and build a rental portfolio the right way, but I also don’t want to hold onto a property just because I already own it if it’s going to drag down my cash flow and borrowing power. Curious how others here would look at this.


    We need more data:

    1) Property Value?
    2) Mortgage Type: 30 or 15-year?
    3) Mortgage Rate? 
    4) Projected appreciation of value & rent over next 1-5 years?

    [email protected]248-209-6824
    Logical Property Management4.9469 Reviews
    WebsiteView Page
    1Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    3mo

    @Thomas Bridges

    It should be done considering the future trends in value, rather than just the reality that you currently own the asset. If the property is only marginally under water but has great appreciation prospects, then it would definitely be worth holding onto; however, if it continues to take away from your cash flow, then maybe selling it and house hacking a duplex is the way to go.

    Good luck!

    [email protected]832-776-9582Podcast Guest on Show #469
    NETWORTH BUILDERS5236 Reviews
    WebsiteView Page
    1Reply
  • Vijay FriedmanBusiness Member
    Miami, FL · Member since 2026 · 766 posts · 124 votes
    3mo
    Quote from @Thomas Bridges:


    Hey everyone, I’m looking for some feedback on a move I’m considering.

    I currently own my primary residence and my monthly mortgage payment is about $1,550. The problem is that market rent in my neighborhood looks to be around $1,450/month, so if I moved out and turned it into a rental, I’d likely be negative each month before even factoring in maintenance, vacancy, repairs, etc.

    My original idea was to keep the house, rent it out, and then buy a duplex as my next primary residence so I could live in one side and rent the other. But now I’m starting to question whether it would make more sense to just sell my current house and start fresh by buying a duplex as my new primary residence.

    My main questions are:

    1. -Would you keep a primary residence as a rental if it’s likely to be slightly negative cash flow from day one, or would you sell it and move on?
    2. -From an investing standpoint, would it be smarter to sell the house now and focus on house hacking a duplex, rather than forcing my first house to become a rental that doesn’t really work on paper?

    I’m trying to think long term and build a rental portfolio the right way, but I also don’t want to hold onto a property just because I already own it if it’s going to drag down my cash flow and borrowing power. Curious how others here would look at this.

    @Thomas Bridges
    I'd look beyond the monthly cash flow and consider the bigger picture. If the current home is only slightly negative but has strong appreciation potential, it may still make sense to keep it. On the other hand, if it's going to limit your ability to buy the duplex and grow your portfolio, selling could be the better move. I'd run both scenarios side by side before deciding.

    786-656-0387
    DreamPoint Capital
    WebsiteView Page
    2Reply
  • Denise SuppleeBusiness Member
    Realtor · Willow Grove, PA · Member since 2017 · 1k+ posts · 662 votes
    3mo

    Hi @Thomas Bridges, this is a situation I have seen many times over. It can be very tempting to hold onto a home you already know, but forcing a property to be a rental when the numbers show a negative cash flow from day one is usually a mistake. Your property taxes and insurance will likely increase when you convert it to a rental, which will only widen that gap. I’d listen to the advice here about the tax free gain on your primary residence. 

    Spark Rental Co-Investing Club584 Reviews
    WebsiteView Page
    0Reply
  • Michael S.
    Huntsville, AL · Member since 2018 · 579 posts · 864 votes
    3mo

    @Thomas Bridges - is the property in Huntsville or Birmingham, as you tagged your thread location to be Huntsville.  If the property is in Huntsville, let me know the general location and I can give you feedback on appreciation potential.  

    If the property is not in a high appreciation area, I'd recommend selling it.  But if this property is in Jones Valley or Blossomwood, for example, would definitely sit on it despite the cash flow.  We bought a property in Jones Valley in 2018 that had negative cash flow, banking on appreciation - very glad we kept the property!

    1Reply
    • Thomas Bridges
      OP
      New to Real Estate · Birmingham, AL · Member since 2023 · 4 posts · 11 votes
      3mo
      Quote from @Michael S.:

      @Thomas Bridges - is the property in Huntsville or Birmingham, as you tagged your thread location to be Huntsville.  If the property is in Huntsville, let me know the general location and I can give you feedback on appreciation potential.  

      If the property is not in a high appreciation area, I'd recommend selling it.  But if this property is in Jones Valley or Blossomwood, for example, would definitely sit on it despite the cash flow.  We bought a property in Jones Valley in 2018 that had negative cash flow, banking on appreciation - very glad we kept the property!


       The property is actually located in Cullman, Al. It just wouldn't let me tag Cullman as a location. 

      0Reply
  • James JonesPro Member
    Investor · Collierville, TN 38017 · Member since 2017 · 968 posts · 661 votes
    3mo

    Don't hold a property just cause you own it. That's sunk cost thinking.

    Rent's $1,450, payment's $1,550, so you're -$100 before anything. Add vacancy and repairs and you're really down $300-400 a month once something breaks. That's not a rental, it's a bill.

    Only thing that'd change my mind is your rate. Locked in at 3%? Maybe keep it. Bought recently around 6.5%? Nothing to protect, sell.

    Also you're right about borrowing power. Lenders only count ~75% of rent, so this thing drags your DTI and can block you from the duplex anyway.

    I'd sell, take the equity, and go house hack the duplex. Live one side, rent the other, learn the ropes with less risk. Way better first move.

    0Reply
  • Octavia Richardson
    Member since 2026 · 12 posts · 2 votes
    3mo

    Hi Thomas,

    The current rent in your area is typically a now thing. It changes throughout the year. Depending on the neighborhood and the value adds that you have in the home and the demand for prospective families to live in your neighborhood, you can charge what feels fair and right to you. My mortgage was $1,600. I put a partition wall in the basement to add a room, and I built a bathroom in the basement. I charge $2,400 because it’s a nice quiet neighborhood a few minutes from the main road and located in a decent school district. 

    All in all, there are many factors that go into the decision other than the rental cost. Homes tend to appreciate so understanding trends and trajectory in your case is helpful. Where are you at financially? Will a few months vacancy take you under? Are you able to live below your means, down size into a rental to save until your home is rented (if needed)? Or do you have the capacity to jump right into a duplex to start while you look for a tenant?

    I wouldn’t negatively cash flow the property, someone will pay a higher cost for the ability to live in a home they aren’t positioned to purchase right now. Larger families who are priced out of apartments because you can only sleep so many in a 3 bedroom that they are forced to rent a home.

    Your on the right track with asking the questions. Continue to do your research in and around your area and your situation. Comeback and let us know what you are leaning towards.

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3mo

    I would not keep it if it was not cash-flowing. The one question you do not tell us is if there's equity in the property. If there's equity in the property, then I would sell and use the money I make to invest elsewhere.

    The other thing to consider is that, as an owner-occupied, you get the $250,000 capital gains exemption, whereas over time, if it's rental, you will lose that exemption. Lots to consider, but personally I would not force a rental. 

    7e investments53 Reviews
    WebsiteView Page
    0Reply
  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    3mo

    I would see if you could do mtr or str with the house to get the property to cash. Flow. If it doesnt, I'd look to sell the house because losing money if you only factor in PITI is a losing proposition unless you truly see a path towards significant appreciation and have substantial reserves.

    [email protected]
    Brick House CPAs53 Reviews
    WebsiteView Page
    0Reply
  • Peter W.
    Member since 2020 · 351 posts · 329 votes
    3mo

    As others have said, not a good bet to keep (there are always exceptions).

    You are about -600$ a month after accounting for vacancy/turnovers, repairs, and saving for capital expenses. You aren't slightly negative cash flow, you are majorly negative cash flow.  Looking at your mortgage payment, you aren't in a high HCOL/appreciation area, so you are highly unlikely to make that back from appreciation.  You will lose money turning it into a rental.

    0Reply
  • Samuel CoronadoPro Member
    Investor · Huntsville, AL · Member since 2016 · 348 posts · 182 votes
    3mo

    I would keep it if the appreciation is going up. Even in a declining market, my house appreciated $100k, which more than offset the -800 a month I was doing for a year. Now the property is a break even property. The real wealth is in holding homes for decades to get the appreciation. If you want cashflow only, just buy some old beat up trailers and put them on land that pays itself off with a higher return than brick homes ever could. (I also do that.) 

    In a high inflation environment, holding hard assets will always beat not having assets. We are currently in a high inflation environment. The government is printing like crazy despite rates set to rise. Social Security is about to go insolvent in the early 2030s, which means we will be printed into oblivion as well. If you can hold without serious financial detriment (-600 is a different threshold for different people; to me it's half an eating out budget per month), then hold on for dear life. 

    0Reply
  • Kamil Lysik
    Property Manager · Warsaw · Member since 2026 · 107 posts · 38 votes
    3mo

    Hi,
    If it were me, I wouldn't keep a rental that's cash-flow negative from day one unless there was a very strong reason (e.g. exceptional appreciation potential or a plan to significantly increase rent). A duplex where you can house hack seems like a better use of your capital if your goal is to build a portfolio. I'd run the numbers on both options, including equity, selling costs, taxes, and opportunity cost, but based on what you've shared, selling and moving into a duplex sounds like the stronger investment strategy. Kind regards, Kamil



    0Reply
  • Mohammed Rahman
    Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes
    3mo

    Hi Thomas,

    Personally, I wouldn't keep a property just because I already own it. I'd evaluate it the same way I'd evaluate buying it today. If you wouldn't buy it as a rental at today's numbers, that's worth paying attention to.

    That said, I also wouldn't make the decision based on monthly cash flow alone. Consider your equity, potential appreciation, tax implications, future rent growth, and what selling would allow you to do. If selling puts you in a much stronger position to house hack a duplex and accelerate your investing goals, that could be the better long-term move.

    Good luck, and feel free to connect with me - my DMs are always open for questions!

    0Reply
  • Ryan SpathBusiness Member
    Real Estate Agent · Boise, ID · Member since 2017 · 592 posts · 381 votes
    3mo
    Quote from @Thomas Bridges:


    Hey everyone, I’m looking for some feedback on a move I’m considering.

    I currently own my primary residence and my monthly mortgage payment is about $1,550. The problem is that market rent in my neighborhood looks to be around $1,450/month, so if I moved out and turned it into a rental, I’d likely be negative each month before even factoring in maintenance, vacancy, repairs, etc.

    My original idea was to keep the house, rent it out, and then buy a duplex as my next primary residence so I could live in one side and rent the other. But now I’m starting to question whether it would make more sense to just sell my current house and start fresh by buying a duplex as my new primary residence.

    My main questions are:

    1. -Would you keep a primary residence as a rental if it’s likely to be slightly negative cash flow from day one, or would you sell it and move on?
    2. -From an investing standpoint, would it be smarter to sell the house now and focus on house hacking a duplex, rather than forcing my first house to become a rental that doesn’t really work on paper?

    I’m trying to think long term and build a rental portfolio the right way, but I also don’t want to hold onto a property just because I already own it if it’s going to drag down my cash flow and borrowing power. Curious how others here would look at this.

    Thomas! I was in this same situation back when I bought my first house. I lost ~100 a month the first year after paying a pm to manage the house. Year 2 I broke even, we eventually sold the house via 1031 exchange and that initial house has helped purchase 3 more properties. This is one of those it depends on situations. How much equity do you have in the property? How much money do you make at your day job? Will a $100 loss affect you? How is your market? A quick google search tells me you have a strong employment base with NASA, Redstone, some manufacturing, and a defense contractor. Looks like your median house price is $350k, if this appreciates at 3.7% for 5 years it may be worth ~415kish, add in the principle paydown, and you have more to consider. Also, if you increase the rent annually 2-3% you will lose less money and the tenant will likely stay. One thing to consider, how old is the home and the major components? If the HVAC, roof, and appliances are old, you may be buying yourself a bill…..hope all this helps, send me a dm if I be a sounding board

    [email protected]208-600-2814
    0Reply
  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    3mo

    Holding for the long term is always recommended unless you do a 1031. And, as you hold you should be refinancing out of the property to buy more.

    [email protected]239-339-3969
    Bartomeo Property Management4.7143 Reviews
    WebsiteView Page
    0Reply
  • Jason MalabuteBusiness Member
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 914 votes
    2mo

    One thing worth weighing before you decide is the tax side of selling. If you've lived in it two of the last five years, you can take up to $250k of gain tax-free, or $500k if you're married filing jointly, and that exclusion can honestly tip the scales toward selling now if the property doesn't really work as a rental. If you'd still like to test it as a rental first, you can generally rent it out for up to about three years and still keep that exclusion, since you only need two of the prior five years as your primary. And if it ends up performing well and you'd rather hold, you could always 1031 it down the road to defer the gain and the depreciation recapture. Just keep in mind converting to a rental usually bumps your insurance and property taxes too, so which path wins really comes down to your specific numbers, and it's worth running past your own CPA.

    Malabute & Company CPAs527 Reviews
    WebsiteView Page
    0Reply
  • Danny Gonzalez
    Real Estate Broker · Member since 2024 · 134 posts · 62 votes
    1mo

    @Thomas Bridges $1,550 PITI vs ~$1,450 rent is already negative before vacancy, turns, and capex. Renting it to "start the portfolio" usually just locks in a monthly loss unless you have a clear rate of appreciation or a forced-equity plan. Selling and redeploying into a duplex that actually pencils after 8–10% PM + reserves is often cleaner than forcing a bad first rental. If you keep it, what's the hold thesis beyond "I already own it"?

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free