Wetting my Feet

[Steven Styron]

Hello BP. Looking to get my feet wet in real estate investment. About two years ago we bought our first house, a "starter home," 100% financing using a USDA loan. I always had in mind, that we would move on and rent this one out, but I never looked into the actual cash flow or tax incentives, as it was honestly nothing more than an idea (or dream). Prior to me purchasing the home, it was renting at $1100/month, only ~160 more than my mortgage.  We have done several major upgrades (kitchen updates: not high-end, roof, A/C, laminate flooring, ect.), and the house is in far better condition now, than then.

We are now to looking to purchase a larger home and possibly renting this one. Is this a good way to start? Would we be better off selling, using the equity as downpayment, and purchasing an investment in a few months? I bought FSBO, got a fair deal, and have approximately 20% equity in the home now (minus the cash I put in out-of-pocket for upgrades). My goal is to own several rental properties over the next few years. I just need some guidance on the best way to get there.

We do not have a ton of savings, but have enough to cover a 5% downpayment on the new home, and a small emergency fund. We have also considered borrowing from my 403B as a downpayment, and keeping all of our savings in the bank, though I still couldn't come up with 20% doing that. We are going to be stuck with PMI for several years, from the looks of it. Worst case scenario, we have a few toys we could liquidate if we needed cash quick, but would prefer not to sell. We have to be somewhat conservative, as we do have two children we need to provide for.