what to do with an extra house high interest rate/mortgage?

Gilbert, Arizona

what to do with an extra house high interest rate/mortgage?

New to Real Estate · Member since 2026 · 1 post · 2 votes

Hello everyone! Interesting question as I am just starting out with real estate and would like to use an extra house i already own for rental property. 4 bd, 2 bath 2000sqft single story, 2 car garage, tract home in a nice neighborhood in Gilbert, AZ. i've compared comps and looks like similar homes renting for about $2-2400/month (not including utilities). we bought the house originally for family to live in and be close by. the mortgage is $3700/month. purchase price 550K in 2023 with 5% down. we painted and put new laminate tile/carpet costing $8K total.

Would you keep it and do cost segregation studies to get some tax benefits? or sell it? I estimate we would make at the most 10K if sold today (does not include transactional costs. Do I refinance? short term, long term rental potential? I would like to keep it as its in a good area and I feel price will appreciate over time.

thanks!

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Chris SeveneyBusiness Member

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

3w

You can sell it and walk away with nothing or you can keep it but realize you're going to have to have a commitment of $1,500 to $3,700 a month in expenses. For me I would personally sell it and take that $3,700 a month I'm currently spending to pay for the property and invest it elsewhere

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Joe Piccirello
Lender · Peoria, AZ · Member since 2026 · 20 posts · 7 votes
3w
Hey Amanda. Gilbert numbers are the whole story here. At about $3,700 PITI vs about $2,200–$2,400 market rent you're looking at roughly $1,300–$1,500/mo negative cash flow before vacancy, maintenance, and utilities if you cover them. Cost segregation is a CPA/tax move; it doesn't fix the payment gap by itself.
If you want to keep it, the real fork is the loan: a rate-and-term refinance (or buydown if you have cash) only helps if it meaningfully drops the payment into the rent band. Cash-out usually makes the payment worse. LTR at those comps is the cleaner underwriting story; STR can show higher gross but insurance, furnishing, and management eat a lot of that in the East Valley. Model both before you commit.
Selling for about $10k equity before commissions/closing costs is often a wash or a small loss, so “sell to stop the bleed” only wins if you don’t want the carrying cost while you wait for appreciation. Happy to walk the payment math / refinance vs hold tradeoffs if you share rate, remaining term, and roughly how much cash you’d put toward a refi.
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Mason WeissBusiness Member
Realtor · Phoenix, AZ · Member since 2021 · 523 posts · 239 votes
3w
I think with this large of a negative month over month it doesn't make sense to keep the property. If you were less than $500 negative I could see the value for tax purposes and long term appreciation but I think this delta is too wide.
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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3w
That is a large difference between your costs and the rent. Once you factor in vacancies, maintenance and repairs, the difference is even larger. I'd sell. If you want to buy a rental, use some of the money from the sale to buy a new rental. You'll need 20% down. Most of the time buying and selling 2-3 years later, unless major renos are needed, you are going to break even.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
3w
It's EXTREMELY difficult to cashflow when you only put 5% down.
Is the house furnished?
If so, maybe consider STR or MTR for more rental income.
Be careful of blindly selling.
If you sold today and got $10k, how would that help you buy another rental property?
You'd have to put 20% down, so the $10k wouldn't be enough.
You could save the $1500/month loss you'd be avoiding, but how long would it take to save up at least $50k to buy another rental?
$50k / $1500 = 34 months.
How much is this property projected to increase in value over those 3 years?
And with only $50k, what Class of property/tenant will you be able to afford?
- The lower the Class the MORE headaches & challenges!
Don't really care what you do, just trying to help you see all the angles🙃
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Noah CorwickPro Member
Realtor · Phoenix, AZ · Member since 2021 · 274 posts · 117 votes
3w
Hi @Amanda Bisla

Tough situation to be in for sure. That's a lot of negative cash flow.
You mentioned that it was bought with the intention of using it for family. Because of that, is it furnished? If so, you could see what it would look like on the STR or MTR market. It being a MTR with 3-6 month minimum leases could be a nice sweet spot for you if being in the STR game is unappealing. You can rent it at a premium, not have to get into the management minutia of a short term tenant and have flexibility to pivot with shorter leases. Obviously the comps need to show if this is even possible though.
For either scenario, I'd also explore not hiring a property manager and just managing it yourself so you can keep as much money in your pocket as possible.

If the comps don't check out or the STR/MTR routes don't make sense, it might make sense to stop the bleeding and sell it.
[email protected]602-834-4617
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Joseph Zimmerman
Investor · Chicago · Member since 2026 · 17 posts · 12 votes
3w
I run my custom P&L on each of my two Chicago rentals every month, and the mortgage payment sits on it split into principal and interest. Principal moves money onto my own balance sheet, so I read that piece as savings. Insurance and my condo's assessment get their own lines, and both only hit once or twice a year.
On your house, a $1,300 to $1,500 monthly gap is roughly $16,000 to $18,000 a year out of pocket, against about $10,000 of equity before closing costs. Your $8,000 of paint and flooring belongs on a capital line. Cost seg is a question for your CPA.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3w
You can sell it and walk away with nothing or you can keep it but realize you're going to have to have a commitment of $1,500 to $3,700 a month in expenses. For me I would personally sell it and take that $3,700 a month I'm currently spending to pay for the property and invest it elsewhere
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LaTarence Dunbar
Lender · Washington DC · Member since 2026 · 67 posts · 17 votes
3w
I’d be interested in taking a closer look at this before you decide to sell. The negative cash flow at the current mortgage payment is definitely something to work through, but if you like the location and believe in the long term appreciation, there may be a way to structure it differently rather than giving up the property.
I’m interested in investing in opportunities like this and would be open to discussing a potential partnership or investment structure if the numbers make sense. Feel free to DM me. I’d be interested in seeing the property details and running through the numbers with you.
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
3w
Amanda, with a $3,700 monthly mortgage and market rent around $2,200–$2,400, I’d be very careful about keeping this as a long-term rental just because you expect appreciation.
The first thing I'd do is calculate the true monthly loss after taxes, insurance, vacancy, repairs, CapEx, and management. If the property is already negative before those items, the gap could be much larger than it looks.
I’d compare three paths side by side:
- Sell now and measure the actual after-tax proceeds after commissions, closing costs, and any gain.
- Keep it as an LTR and calculate how much cash you’d realistically need to feed it each year.
- Evaluate STR or mid-term rental only if local rules, HOA restrictions, insurance, and realistic demand support it.
On the refinance question, I wouldn’t refinance just for the sake of lowering the payment unless the rate and closing costs materially improve the economics. If your current loan is already high-rate, it may make sense to revisit later if rates improve, but I wouldn’t build the entire investment thesis around a future refinance.
From the tax side, if you convert it from personal use to a rental, depreciation begins once it’s placed in service. The depreciation basis is generally tied to the lower of adjusted basis or fair market value at conversion, so I’d document that carefully. If you later sell, prior depreciation also matters.
The bigger question is whether the property can become a good investment from today forward, not whether you already own it or believe Gilbert will appreciate.
Feel free to DM me. I'd be happy to send over a few resources that might help you compare the sell, LTR, and STR options.
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Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 901 votes
3w
Amanda, with roughly $3,700 going out each month and market rent in the $2,200 to $2,400 range, I'd be careful about holding this as a long term rental purely on an appreciation thesis. Start by working out the real monthly shortfall after taxes, insurance, vacancy, repairs, capital expenses, and management, because if it is already negative before those items the actual gap is usually wider than it first looks. From there I'd line up three paths side by side: sell now and measure the true after tax proceeds after commissions, closing costs, and any gain; keep it as a long term rental and calculate what you'd realistically need to feed it each year; and only consider short term or mid term rental if local rules, the HOA, insurance, and genuine demand actually support it. On the refinance question, I wouldn't do it just to shrink the payment unless the rate and closing costs meaningfully improve the economics, and I wouldn't build the whole plan around a refinance that may or may not materialize later. On the tax side, once you convert it from personal use and place it in service as a rental, depreciation begins, and the depreciable basis is generally tied to the lower of adjusted basis or fair market value at conversion, so document that carefully, and keep in mind that prior depreciation matters if you eventually sell. The bigger question is whether this works as an investment from today forward, not whether you already own it or believe Gilbert will appreciate. The exact answer depends on your specific numbers and facts, so walk through it with your own CPA or tax advisor.
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Patrick O'SullivanBusiness Member
Property Manager · Phoenix, AZ · Member since 2024 · 534 posts · 204 votes
3w
The tax benefits are real but separate from the problem. Start with the true monthly loss after vacancy, repairs, and CapEx, not just the mortgage minus rent. Once you have that number, compare holding, converting to STR/MTR or LTR, and selling side by side. Appreciation and a future refinance are assumptions, not a plan.
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Aaron ZimmermanBusiness Member
Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
2w
You'd be losing over $1,300 just using PITI if long term rental so that's not super viable. Could it work As a medium or short term rental? If no, I'd sell. You'd likely need at least $4,500 or more in rents just to break even
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Fulton Abraham Sanchez
CPA| New Clients Welcome| 50 States · Member since 2016 · 435 posts · 93 votes
2w
@Amanda Bisla
First compare the true monthly loss against the long-term appreciation potential. Cost segregation can help on taxes, but it won’t fix negative economics.
Run the numbers on hold, sell, and refinance based on total return—not just the deduction.
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Brandon Harwood
Property Manager · Chandler, AZ · Member since 2026 · 6 posts · 0 votes
1w
Hey Amanda! How did you arrive at the $2,000–$2,400 rent estimate?

I’d start with recently leased homes that match your layout, condition and location, then look at how long they took to lease and whether they offered concessions.

Asking rents alone can give an incomplete picture. Once that number is supported, factor in vacancy, repairs and management alongside the mortgage. That should give you a clearer monthly cost for holding the home and help you decide whether it fits your budget.
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Ryan ThomsonBusiness Member
Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
4d
If you're holding a high-rate mortgage on a property you don't need to live in, you basically have three moves: sell it, rent it, or refinance when rates drop.
Selling makes the most sense if the equity is there and you don't want to be a landlord. High-rate debt on a property you're not living in is just bleeding you every month. Run the math on what you'd net after commissions and closing costs, then ask yourself if that capital works harder elsewhere.
Renting can work if the numbers pencil. Take your mortgage payment (PITI) and compare it to realistic rent in that area. A lot of people are surprised to find a 6.5-7% mortgage still cash flows positive if they bought before 2022 and have equity. It doesn't have to cash flow great to be worth holding if appreciation is doing the work.
On the refinance angle: rates would need to drop meaningfully before it makes sense to reset the clock. Refinancing from 7% to 6.5% on most loan balances barely moves the needle after you pay closing costs. The breakeven on a typical refi is 18-24 months, so if you're not planning to hold it long, don't bother.
One thing most people overlook: if the property has an FHA or VA loan on it, that loan is assumable. A buyer can take over your exact rate and terms. If you're at 3-4%, that's a real selling advantage right now and you could command a premium on the sale price. Worth checking your loan docs before you list it the conventional way.
What's the rate and remaining balance? Happy to help you think through which path makes more sense.
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Harrison C.
Member since 2017 · 34 posts · 16 votes
4d
one option nobody's said yet: rent it by the room instead of to one family.
4 bedrooms, each person on their own lease. my rooms go $675 to $775 a month furnished. look up what rooms near you list for on fb marketplace and roomies before you decide. if its around $800 a room, thats $3,200 a month vs the $2,300 you'd get from one tenant.
it still wont cover $3,700. and the utilities and wifi stay in your name. i cover the first $100 of the bill and split the rest between the housemates, its in the lease. so the gap doesn't go away, it just gets a lot smaller while you wait on a refi.
two things to check first: your HOA rules, and the city's limit on unrelated people in one house. either one can kill it. and its more work than one tenant, somebody is always moving in or out.
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Alana ReynoldsBusiness Member
Real Estate Agent · Jacksonville Florida · Member since 2020 · 49 posts · 30 votes
4d
Sounds like my situation with a house I have. Bought 2023, mortgage was 2,900, lived there then decided to try airbnb. Refinanced twice already to chip the payments down, now its $2700 a month. (It'll just go back up because of taxes and insurance) had it rented for $3200 a month for almost a year, furnished. Then the tenant abandoned. But now I have no equity and market rent is about 2500. Selling would cost me 30k of fees out of pocket. Its about 3200 a month with all the utilities and care so airbnb stays don't really come close to covering all that plus the cleaners and we have to transfer with the military and figure out what to do when we are out. We used the VA loan so no equity, and rolled in costs of refinancing.
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Brandon Hendrick
Portland Oregon · Member since 2021 · 14 posts · 0 votes
1d
Amanda, one number to nail down before you decide is what selling actually costs. Your $10k estimate is before transaction costs, and between commissions, title, escrow, and any concessions, you're probably looking at 6 to 8% of the sale price. On a house in the $500s that's $30k or more, so selling likely means writing a check at closing rather than pocketing $10k. Compare that exit cost to the roughly $1,500 a month you'd lose holding it, and you can see how many months of holding equals the cost of getting out. I self-manage two houses alongside my fourplexes, and that breakeven is how I'd frame the decision. Have you gotten a seller net sheet from a title company yet?
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Mike PaolucciBusiness Member
Realtor · Columbus Cleveland Dayton, OH · Member since 2022 · 498 posts · 551 votes
10h
If LTR numbers aren't making sense, and you'd like to keep the property for the long term, I'd look into Medium Term Rentals. If you have a good market for it, you could potentially get 1.5-2.5x the normal long term rental (depending on local market pricing).
Look at places like furnishedfinder.com and see how the market looks for you. Might not be the golden cure all but if you can manage to get higher rent for multiple months, that might help you not have to contribute the residual amount for the mortgage.
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