Is it normal for it to just go out randomly like that? Is a transmission rebuild something that i could do or would you recommend taking it to get rebuilt?
Yep. That's how most do. What usually happens is the clutches finally wear to a point that they no longer hold. Old seals can let go also and cause the same issue. I can't really answer your question of do I think you could rebuild it because I don't know your mechanical skill level. There are several video's on YouTube on rebuilding torqueflites. You may want to watch one to give you an idea what you'd be in for.
A torqueflite is without a doubt the easiest trans. to rebuild but you do have to have pretty good mechanical skills to do it and it requires a few special tools you may not have. Here's a list of tools you'll need
Inch lb. torque wrench.
A slide hammer to remove the front pump
A dial indicator to check end play.
A couple different size snap rings one of which has to be pretty big to unlock the extension housing snap ring.
A set of feeler gauges.
A way to compress the clutch pack spring retainers. Or if you have a shop near by you may be able to get that done for a nominal fee.
Parts washer.
You should also invest in a rebuild manual such as a ATSG manual if you don't have a factory service manual. You can find them on Amazon for about $15
BTW: One thing I forgot to ask earlier is if you have checked the fluid in neutral? If you check it in park and it shows full it's actually way low. If it's full in neutral it's likely worn out. Another indicator of it being worn out is the fluid will be brown looking and smell burned.