Thinking about having my primary home as a rental property in few years

[Yong Jin Lee]

Hello, I am evaluating an option with my wife to turn our current primary home into rental properties within a few years as my first step to becoming a real estate investor. Getting the expert's opinions on this would be wonderful for us! 

We purchased a newly built townhouse in 2019 for $584,000. On Redfin, it is estimated to be priced at around $737,800.00.  It has a double garage, three beds with four baths, 2,646 sq Ft, four stores, and one double car garage. 

We now have a loan balance of $480,000 with an interest rate of 2.25%. I think this is one of the reasons why we want to keep the house for a long time. 
Zillow estimate on my rent is about $3,674.00, but I would be more conservative and consider it $3,400. 

My property tax is about $5600 a year. I estimated the landlord insurance cost per year by multiplying 25% by what I currently pay for my home insurance = 800 * 1.25. I took Repair to 7% and CapEx to 5% of the estimated monthly rent. The HOA fee is about $98 per month. 9% for the property management fee. I want my tenants to pay for the electricity and water.

I am disregarding all the past costs we paid to purchase the house or obtain this loan, considering it is a sunk cost, and I would like to have some long-term investment property.  (Please correct me if this thought is wrong). 

We are considering moving to a new area with better school ratings as we are expecting a baby and will be renting out the place to ensure that the rental property management goes well before making some cash investment to buy another primary home.  We are also aware turning our primary home into a rental property will incur the capital gain taxes. However, I thought this would be minor compared to the profits we will gain over the long term. 

In Summary, this is the breakdown I have :

I am now looking at some negative monthly cash flow, but when I think about the tax deduction and our income range, this might be actually fine.

I couldn't figure out an exact way to analyze turning an existing primary residence into a rental property, and it would be wonderful to get other people's thoughts and feedback. If there are better calculations I could run on this, please let me know! 

[Huiya Xiao]

Yongjin, we were in your situation a few years ago. We rented out our primary residence then (also a townhouse) and purchased a SFH.

Real estate is quite expensive in Fairfax county. With RTP around 0.5%, the rental property barely cashflows. On the other hand, the properties here appreciate well. We could use some more appreciation vs. cashflow debate. In retrospect, we're definitely glad that we kept our townhouse as a rental instead of selling it. I think it's one of the easiest ways to get into RE investing, other than house hacking.

We also used HELOC on the townhouse as part of the down payment for the SFH. It took us a long time to pay it down, but at least you know it's an option.