@Caryn Fischer  The downside of gifting or selling property to your children is that it can have capital gains tax consequences.

Ultimately you will have to sell your house at a discount. 

This puts the home underwater.I've calculated the following two options: To sell the house, it would cost me about $60,000out of pocket.

Sounds like the house is not local to you, OP.

I work for a local house flipper in the Greensboro area (Winston Salem).

It’s a single family house that I bought for $160k.

@Matthew McCarty At the beginning of my investing career, I was constantly looking at websites like Zillow and Redfin to see what houses are selling for so that I have a good feeling on the market I picked.

If you sell for $460k and it costs you say $30k to sell, you net $430k.

I would sell and take your gains.

I have 2 options:- finance the construction pre-selling the apt, and take my profits (expected to be around 700K pre-tax); or- finance the construction with a 6-7%/year loan (collateral = my house), keep the 10 units, and once the building is completed in 24 months, rent them for circa 180K/ year gross.