Need help with decision on options for First time buying investment property

[Genevieve Pietroski]

I've been thinking of investing in a multifamily for about 3 years now and finally taking action. We've been pre-approved but running into confusion on the best option going forward. 

Background: We currently live in a single family we bought in 2020 with a 3% interest rate. We think it would be crazy to sell this house with such a good interest rate and we got it before prices increased and it's now worth about $150K more than what we paid. We were hoping to keep the single family/rent it out and move into the multi-family so we can put 3% down. About 6 months ago we were approved for a HELOC for $64K.

Option 1: Use HELOC for down payment on Multi-Family. Lender says we have to move at least 50 miles from single family if we want to take advantage moving into Multi-Family for the 3% down option. Potential rent for our single family cannot be part of lenders calc so the single family mortgage and HELOC loan lowers the amount we can be pre-approve for to $400K/$450K. Main drawback of this option is having to move 50 miles away from the city we currently live in.

Option 2: Sell Single Family. Use house sale as down payment on Multi-Family. We no longer have to move 50 Miles away and also have enough left over potentially to pay off a large chunk of student loan debt. Without the Single Family Mortgage and HELOC expense we could be pre-approved for $600K/$650K.

Option 3: Keep Single Family and continue living in single family. Use $64K HELOC as 25% down payment on Multi-family. Down payment would only get us as far as $200K/$250K so anything we bought in this price point would need a lot of work. Possible BRRR using savings/credit card to renovate.

Each option has its ups and downs. Option 2 is tempting but would we be crazy to let go of the single family with such a low interest rate??? Any advise or insight would be appreciated.