Looking to house hack; what about my first house?

[James Rodgers]

We are looking to start our real estate investment career with a house hack. We own our current house, but want to move into hopefully a 4-unit property. My current plan is a combination of BRRRR and house hacking for this first property. What I would like feedback on in this thread is what to do with my current property.

I’ll try to just put all the numbers out on the table. We bought at $102k, 3B 1.5BA built in 1957. Minimum monthly payment is $645. Have lived here 1.5 years and the principal owed is now $97,983. We’ve put a lot of sweat equity into the house including landscaping, drywall work and new windows. Our neighborhood is changing for the better. Bottom line, I feel like it would appraise for at least 110,000 now.

I want about $3000 cash from this house for a 3.5% down payment on an FHA loan for the house hack. I plan on using a private lender to finance rehab.

I started out thinking we’ll sell our house and start this investing journey. But then I realized our closing costs and agent fees might wipe out most of the cash I want to move forward with.

So now I'm thinking about either taking out a second mortage, maybe HELOC, or refinancing to have some cash for the house hack down payment, and renting out the current house. Based on the market, I think it would rent for $1050/mo. I might could get $1100.

Here’s the numbers I’m using, and please give your opinion here if anything could or should go up or down:

vacancy (5%) - $52

repairs/maintenance (5%)- $52

CapX (I used spreadsheet from B. Turner’s Book on Rental Property Investing) – about $200

PM (10% though I will manage) - $104

With these numbers, I’m negative $3 cash flow. I’ll be managing the property, so I’ll actually clear $100, but my end goal IS to scale up and one day need to outsource PM…

I need to note that my goal as an investor moving forward will be a minimum of $200/unit, and the WHY behind my investing is to supplement 100% of my income one day (I’m working on getting more specific with my goals). So you can see that this particular property doesn’t really line up with that.. But I have it nonetheless, and want to make the best decision here at the very beginning.

My gut feel is to rent, get experience, equity build up and small cash flow, and be intentional to adhere to cash flow goals moving forward. How does that sound? Anyone see any other routes to benefit from my current property? Does either refinancing or getting an equity loan make more sense in this scenario?

One last question: If I rent, I think I will put carpet down over these pretty, original hardwood floors, and take it up again if/when I want to sell the house. Good idea?

Thank you everybody for reading my super rookie simple questions! Hopefully my next post will be about the MFR we're about to move into!

James