Need creative help - House Hacking

[Jacob Emens]

Hey everyone, I’m brand new here so thank you in advance for all of the great posts! BiggerPockets, if nothing else, has opened my eyes to what I may have gotten myself into. 

My fiancé and I have been looking for a home, not necessarily an investment property, just a home that perhaps one day we could make into an investment property if our budget allowed for it. In our Seattle market though, competition is tough, so we looked a bit north to find a decent single family property with not much luck. That's when my agent recommended taking a look at a duplex that we could rent one side out while we live in the other (I now know this as house hacking, but didn't when I bought it). The only number I was concerned about was the monthly payments, which looked great in comparison to the SFH I was looking at. So, I bought a duplex in Everett, WA...for $675000 (I know, wow). It appraised at 690K which is better I suppose, but it definitely needs work. According to the appraisal it has an ARV of 720K. I can give you a breakdown of the numbers, but in this market if I rent out the larger side after rehab, I'll be at around $2500-3000mo, and the small side around $1800 (the small side has a renter and doesn't need much, if any rehab). Even if I can refinance in a couple of years out of FHA and drop mortgage ins, I'm looking at a mortgage payment of ~3600 which would be okay if I could get $4300 in rent out of it, but part of the house is old (1932 old). I have to put a new roof on it, floors, paint, luckily only $500 in plumbing, and ground some electrical outlets. Since the house is enormous (4660sf), the rehab and repairs are probably going to eat away almost any cash flow that I can get from renting each side out as is. However, appreciation has been fantastic in this area, it's really close to Boeing, really close to a Naval base, and is in a class B or B- location. The only thing I can think of to salvage this place is to rent out the larger side (3100sf) room by room until it appreciates enough to sell for a decent amount. The layout is funky as heck, but with a little work we can have 3 full bathrooms on the big side, 5 full bedrooms, and a two car garage with extra street parking for the other tenants. I'll post the details of the house in next post so you can see what I'm talking about.

What queued me into all of this was starting to read up on becoming a landlord for the first time. I had no idea what I was getting myself into, I just knew I didn’t want to lose all my money to this place. Well, that quickly led me down the path of reading about rental property investing, which led me to “The Book on Rental Property Investing” by the one and only Brandon Turner, which led me here (and in turn to “my god, what have I done”). Please help! 

Details to follow.