Converting MY house into my first rental property?

[Mike Alber]

Hi all!  I'm a very new RE investor who has a full-time job I have no interest in quitting.  However the idea of building a stream of passive income for retirement is really appealing.

So I'm wondering for my first project, should it just be my current house? Obviously, I didn't buy it looking to maximize cash flow. I bought it because I liked the location/size/cost/etc. But as my 2 kids get older, the 3BR SFR I'm in feels too small and I'm thinking of moving. I recently got a nice chunk of capital (I work in the entertainment industry and my income is very boom-and-bust) and so coming up with a new downpayment isn't a huge issue... but I don't know if it makes sense to keep what I have and buy, or just sell and look for a better first-investment opportunity.

Some details:

Currently 3 years into a 20-year, $560K refi mortgage at 3.625%. The current mortgage payment w/ insurance and taxes, is $3982

The house originally sold for $579K (relatively cheap in my area of Woodland Hills, CA)

The refi I did 3 years ago gave me an appraised value of $654K, though similar comps are now closer to $720-750K.  I still owe $500K on it, so there's a bit of equity there.

Rental comps in my area show me I would likely NOT get cash flow if I kept this 20-year mortgage.  The average seems to be $3500-3800/mo.

So my questions:

--Does it make more sense to sell it, use the equity as a downpayment on a new house to live in, and just look for a better property for my RE investment goals?

--Refinance back into a 30 year where (assuming a decent interest rate) my payment might be around $3100

--Just accept a couple hundred/month of negative cash flow because I'm paying down my property and ultimately I'll own it outright in 16 years in a very expensive, high appreciation area. (This seems like a no-go, based on what I've seen in BP thus far, but owning more So.Cal property never seems like a bad thing.)

--And finally: if I sell or rent, should I try to upgrade even more (add a pool, update the kitchen, etc) to get a better price?  We've done some improvements, but I could definitely sink $50K into a pool and another $20k into a new kitchen to help the value.

--Am I even asking the right questions??

Thanks for reading!

-Mike