Buying $800k house and renting out

[Crystal B.]

Bought my first 2-bedroom condo in the Seattle area in 2021 for roughly $500k. My family is growing and we need a bigger space. We were thinking of house hacking- renting out current condo and getting a new house then after a couple years rent out the new house and do it again.

However, the next step up to a 3 bedroom that isn’t terrible is roughly $800k in our area. We can afford it and still be able to invest in rental properties with a higher mortgage (we invest in STRs). Problem is with interest rates, I’m not confident we would be able to rent out the $800k house in a couple of years when we want to upgrade to a new house. We’d be competing with houses for rent that are the same size, but bought years ago and have lower mortgages and therefore lower rent.

For those of us in markets like this, what do you recommend? Just sell the $800k primary when wanting to upgrade or is there some way to make it work by keeping it and renting it out?