Finish current rehab or acquire a 2nd place if the price is right

[S Buhidma Caudill]

Hi everyone! I’m pretty new to this, so I apologize if my question seems basic or obvious. I’m in the middle of Brandon Turner’s awesome book on Rental Property Investing, but I could use some advice sooner than later.

The question: should I refinance my property to complete the house-hacking rehab I started? Or refinance to acquire an additional property? Or refinance for both (and is that an option?)?

My goal is to build a strong foundation for a small, but strong investment portfolio. (I’d prefer quality over quantity, though I’m sure that could change down the line).

The context: my real estate agent sent me a property this week that failed the 2% (and 1%!) test and the 50% rule actually showed it giving me negative cash flow. The only clear benefits I see to pursuing this duplex for a much lower price is 1) it’s appreciation is pretty sure because of its location and 2) it’s two houses down from the duplex I currently own and am house-hacking.

My current property: my husband and I bought this duplex 5 years ago with ZERO education on what we were doing. We lucked out - it was super cheap for the location due to foundation issues. We leased it to a (patient) friend while we threw all our startup money into rehabing it. We ran out of said startup money just as we got the first side rentable.

Now that side looks beautiful, but the side we live on is NOT renter-ready (cabinets pulled away from the walls, holes in the laminate floor where they had to fix plumbing the foundation repair broke, etc).

Thankfully the last 5 years has not been a complete loss: we’ve paid down the mortgage loan a good amount and between a combination of appreciation and forced appreciation, we’ve got some equity in the property.

The economic climate presents some interesting possibilities for us, but I don’t want to pursue something blindly and overleverage myself.

Thanks in advance for any feedback you can give me!