Please Help! New Member Looking For Advice- what to do with 1st Home

[Matthew Hanbury]

I have recently been divorced and my ex and I co-own a 2000+sqft, 3br, 2.5 ba, 0.75 acer property with an additional 16x25 office space that has its own exterior entrance/exit and 0.5 bath, and a large one car garage. Its 10min to downtown Hendersonville. I currently reside in the home with my daughter and son in Hendersonville NC. She left me and the kids 2yrs ago and I've been paying the mortgage over that time to now. She wants to sell the house now for her half (or part) of the money. Rent is averaging ~$1800-2400 for a 3br 2ba home in the area. What should I do?

Details: 

-There is now ~$170,000 in gross equity in the property. (which is practically what is owed on the mortgage)

-I would have to refinance from 174,000 owed to ~250,000 to pay at least ex~60,000 and ~15,000 in repairs/updates/improvements to the property.

-Property needs crawlspace dry in, minor roof att, new furnace, new appliances, kitchen flooring and possibly 5 windows replaced. 

-Currently at 5-6% interest refinance of $250,000 would be raising my mortgage from 1225/mo to 1750/mo. 

I would like to remain in the area for another year, finishing my degree. Also I want to start a small rental property business and considering this as possibly the first property since I already own it and have so much equity. The home has a asphalt driveway and almost parking lot like area. I am wondering if it could be turned into a multi-room unit (renting each room with shared living space) and converting the large office space into a separate rental if I can convert the 0.5 bath to a full bath and add a small kitchenette. (possibly an AB&B?).

Should I refinance , live in and transform the property for a year and repeat refinance when interest rates drop later then rent?... or just sell, move the family to a rental and take my part of the equity, then use that to invest in my first rental property? I am trying to learn all I can about rental investing and any advice would be much appreciated! 

Regards,

Matt H