HELP! My first house hack - What the best strategy?

[Cole DeLucas]

Hello BP Community!

I have just purchased my first home in the Northern Virginia area and plan to house hack the property with two other roommates for the next two years. It is a three bedroom townhouse in an appreciating area. I know there are a couple different ways to use the rental income ($1,750) from the two tenants each month, but I am having a hard time deciding which method would be the most beneficial for me and my long-term RE plans. I have been renting for the past two years for $1,200/month, which has been fitting into my budget. SO I have considered the following two thoughts: The principal and interest on the mortgage will be $1,789..I could use the rental money to pay that down almost completely, and I would be responsible for the utilities ($375/month), HOA ($85/month), insurance ($69/month) and property taxes ($5,200/yr). So, it is not a total. house hack where I will be living for free, but it's better than nothing! During this time I would be saving that $1,200 I was paying in rent for the prior two years since I am used to that money leaving my wallet and save it towards my next downpayment on a rental property. SECOND THOUGHT: Applying my $1,200 along with the rental income to the mortgage and overpaying in a mini debt snowball play and not save towards my next home. Just focus on paying down the mortgage as fast as possible. Is one more beneficial than the other? Also very much open to any help/advice on possibly another option I should be considering with this house hack.

Thank you all for your help!

Second question: I believe the answer is yes to this question, but will I need to pay taxes on the rent I collect from my two tenants ($1,750) even if I live in the home with them? I will collect $21,000 so I believe I need to earmark funds for taxes in April each year right?