If you locked in a mortgage rate in the 2s or 3s, you’ve probably already run the math on selling — and landed on the same conclusion most of your neighbors have: it doesn’t pencil out. Giving up that rate to buy at today’s prices and today’s rates is a tough trade.
But “we’re not moving” and “we’re stuck” aren’t the same thing. More Seacoast homeowners are finding a middle path: instead of selling the starter home to buy the next one, they’re keeping it — and renting it out.
Why this works better than it used to
A few years ago, converting your home to a rental and buying again meant qualifying for two mortgages on one income, which was a stretch for most people. Today, a few things make it more workable:
- Rental income can count toward qualifying. Once you have a signed lease, many lenders will count a meaningful percentage of that rental income toward your debt-to-income ratio on the new purchase. DSCR (debt-service coverage ratio) loans go a step further, qualifying the property based on its own rental income rather than your personal income at all.
- Your equity is the down payment. A cash-out refinance or HELOC on the current home can fund some or all of the down payment on the next one — without touching your low rate on the original mortgage if you use a HELOC instead of a refi.
- The numbers on paper have to work. Run a simple cash flow estimate before you commit: expected rent, minus mortgage (principal, interest, taxes, insurance), minus a maintenance/vacancy cushion (a common rule of thumb is 1% of the home’s value per year for upkeep). If rent doesn’t comfortably clear that bar, renting it out may cost you more than selling would.
What changes when a primary residence becomes a rental
- Insurance: You’ll need a landlord policy, not a standard homeowner’s policy — notify your carrier before the tenant moves in.
- Your mortgage: Some loans have owner-occupancy requirements for a minimum period; check your note or ask your lender before listing the home for rent.
- Taxes: Rental income is taxable, but you can typically depreciate the property and deduct expenses. It also affects the capital gains exclusion if you sell later — you generally need to have lived in the home 2 of the last 5 years to exclude gains, so there’s a clock running once you move out. A tax professional should weigh in before you decide.
- Being a landlord is a job. Even a great tenant means occasional 10pm phone calls. Property management companies typically charge 8–10% of monthly rent if you’d rather not take the calls yourself.
The bottom line: this isn’t the right move for everyone, and it isn’t a way to avoid making a decision — it’s a legitimate third option worth running the numbers on before you assume selling is your only path to your next home. If you’re weighing it, I’m happy to pull comparable rents for your specific property and help you figure out whether the math works.
