Did I upgrade my first house too much to rent it out?

[Chris Guthrie]

I bought a 1400 sq ft 3 br 2 bath HUD home in late 2012 for ~$130k after closing costs in Puyallup WA on a 15 year fixed mortgage at 2.875% interest. (Why 15 year? Wife listens to Dave Ramsey and the difference was only like $300 or something). The loan balance is $113k.

Payment breakdown:

Principal & Interest	~$850
Homeowner's Insurance(s)	~$40
Mortgage Insurance	~$35
County Tax	~$210
Total Scheduled Payment	~$1135

For a living I run various internet businesses and I feel I already take a lot of risks in my day to day "job" I'd like to have less than 5 mortgages at any one time. I simply want to buy a single family house or two every year with surplus cash I generate and use debt snowball approach to pay down their mortgages (I don't mind growing slower if it reduces the risk of the cards falling down).

Have I Upgrade My House Too Much To Rent It Out?

Our plan was to use this as our first rental when we bought our next house, but because we're living in it now while we upgraded we surely did things that we shouldn't have done had we bought this house initially as an investment (or maybe you think I'm ok?)

I do pretty well with my online businesses so we paid cash to redo all of this stuff and I could probably pay my house off this year (but I'm not so eager to pay off such cheap 2.875% money). 

Here's What We Did / Paid Other People To Do 

(I don't recall exact prices unless I go back through receipts):

1. New IKEA kitchen with granite counter tops, nice undermount sink etc ~$10k
2. Replaced carpets with laminate floor ~$5k installed (I assumed hard woods would be too nice for house price and we have a dog + new twin babies)

3. Removed walls in living room to make it more open concept ~$2.5k (we did demo)

4. Replaced deck $1,500 (we did this)

5. Replaced molding $1,500 (I think)

6. Replaced all duct work when we moved in $1k (we did this)

7. Had to pay to have insulation from under the house removed $2k (it was vacant for 18 months so rats were in there etc)

8. Replaced all the doors (happening this month)

9. Redo main bathroom ~$8k - $9k (happening this month)

10. Redo master bathroom ~$8k - $9k (happening before year end)

11. Replaced all appliances ~$4k (there were none)

12. Removed popcorn ceiling $2k

13. Repaint etc

14. Added external AC unit $3k (we did some of the install e.g. ran the lines etc)

So by the time we decide to move everything in the house will basically have been redone to our liking.

Rents In My Area:

I did a search through Craigslist to see what houses were renting for and found a rough estimate of around $1,250 to $1,400 a month for 3 BR 2 Bath. Only one of the houses I found had granite (that's not the only quality indicator of course I'm just trying to make comparisons) but at the $1,400 on up mark the houses have around 1,800 to 2,000 square feet.

Do you think it's better to buy another property strictly as an investment and do the appropriate upgrades for the price? Or do you think an upgraded first time buyer home is worth it in terms of better rents and (presumably) higher quality tenants?

I've listened to as many podcast episodes as I could. If I'm going to do this I know I just gotta do it. Just trying to decide if the first time I go forward I do it with this property or if I do it with something else bought specifically as an investment.

Thanks in advance sorry if post is long still new here. I'll figure it out.

EDIT: Perhaps some people would advise pulling the cash out of the house that we have from the increased value. Interested in any advice.