Based on my calculations, even with a low down payment, I can achieve positive cash flow (with aggressive enough house hacking).

House hacking is a great beginning step in investing.

The property is zoned as a SFR house and likely in a neighborhood of the same.Was the property not appraised by the bank when you got your mortgage?

Is the paint latex, oil or water based?

Even if you only averaged 2.8% appreciation annually, which if you've had it 20 years I have no clue how that's true given prices have well more than doubled in that time, youre skipping over the fact that you have been benefiting from that appreciation on the ENTIRE house, not just the % you paid for.  

Why move the house . just cut a section off .

Context, i bought a house at a foreclosure auction.

I saw once where a developer gave the buyer a pass on paying HOA fees till a house was built on a lot. 

City water with one main at the street and how will they bill. 

They'd also probably be more aware of how much water, gas, or electric they are using when they have to pay the bill after each cycle.