Just bought first home . . . what's the next game plan?

[Kristin Horowitz]

Hi guys, I live in a very high real estate cost market. I've been paying ridiculously low rent in comparison for the last ten years in the same place that it never made sense to buy. A house recently came onto the market that was cheaper in mortgage and fees than renting, so we jumped on it.

The plan before was to have invested money in cashflow buy-and-hold rental properties out of the area, but decided that throwing away rent when we could buy a very good buy-and-hold starter home in a market that I know well and believe will do very well in a few years if we are ready to move out of it -  seemed like a good call. 

Thing is, I'm still looking at a decent deposit for another purchase at the end of the year.

The house is undermarket currently and with about $20,000 in upgrades, it would be worth a lot more. We plan to live in it for at least 2-4 years. I could use the money to increase the value of the home for sale (and enjoyable living space), or I could use the money as a downpayment. 

That assumes that I would even qualify for a downpayment so soon after. It would have to be a conventional loan as we've tied up ourselves in this house's loan (and that's fine - we have dogs and livestock and couldn't swing a multifamily in the area with them).

What do you suggest?