What to do with primary residence

[Account Closed]

My wife and I are seeking out our first investment property, with the goal of acquiring a portfolio of cash flowing rentals for passive income. We purchased our current home (SFH) with an FHA in 2010, before we had any plans of getting involved in REI. It is a 3/2 in a nice neighborhood. Here's the options I'm currently considering to get started:

1. Stay where we are, continue to save up for a rental downpayment and simply buy what we can afford when a good deal is found. I would be open to somewhat less desirable areas (not war zones, but not neighborhoods I would necessarily want to live in myself).
2. Look for MFH rentals with the intention of moving into one of them (which would restrict the search to more desirable areas), and doing one of two things:
   1. Sell our current residence and pocket any gains to go towards the next deal, pay down the MFH, etc.
   2. Rent out our current residence (cash flow would be very thin or break even, but we used the homeowner credit in 2010 to do alot of improvements, and it requires little maintenance).

In the end, I guess my question boils down to whether it's worth finding a way to get out of paying our current mortgage to live for free so we can really get some momentum, or just stick with what we have for a home. I'm also not sure if it's possible to use an FHA myself on our first rental, since my wife used one on our current property before we were married and I'm not on the title. Maybe someone could chime in on that as well.

So, what would you do?

I hope I explained that well enough. I can provide some numbers if needed.