Question on next move

[Jannah M.]

Hi everyone!  

I'd love some advice here.

I currently live in a large 4 bedroom, 3.5 bath home in Oakland, California. A conservative estimate of it's current value is $900,000 with about a $600,000 loan remaining. Yearly expenses for PITI is about $50,000. I am able to get rent of about $52,000 but that doesn't include water, sewage, gas and electric, and wireless, and yard maintenance which are included in rent. I could spend another $100,000 and convert the garage to get about $1300-$1500 more a month in rent.

I am now in contract for a new house at $650k in Oakland, and it needs about $50k in repair work. Yearly PITI is about $44,400. I could rent out two of the three houses in the house for $21,600. The new house is on a huge 10,000 sq foot lot.

Here's my question: 

Should I keep my current house, and count on bay area appreciation or benefit from the house paying itself off?

Or should I sell my current house, take out the $250k or so that would be remaining after expenses in selling the house and use that money to try to build another 3 bedroom house on the lot of the new house?  We could get at least $36,000 in rent from the 3 bedroom house, which I estimate will cost $300,000 to build.

Or, should I keep both houses and just not build?  Or keep both houses and find a way to finance the second house on the new house's lot?

Thanks for your thoughts!