You obviously have not studied enough this asset class.By borrowing from it you can make your money work at two places at the same time, increasing your total return.

The reason people seek for distress properties, so that they can acquire the property at a low price and renovate the house aka "value add" so that they can increase the property's value and create sweat equity, then pulling the money out or cash out we call out so that investors can liquidate their money and reinvest on the next project @Albert Bui @Carlos Valencia

We are looking to increase our rental portfolio.

Eventually, Class A property values increased to the point that even increasing rents didn't allow them to cashflow upon purchase.So, the flood of new investors switched to buying Class B properties.

If we rent quickly, we may increase rent for the next lease!

So if you're looking to increase passive cashflow you're probably looking in the wrong place. 

There may not be a lot of equity in it in just 2-4 years as real estate isn't increasing in value as fast as in the past.If you want to build a rental portfolio, your unrentable condo isn't going to help.Buying a new primary, that you can eventually rent out, would be better for building your portfolio.A challenge will be finding a new, TEMPORARY home, for your family that will be a good rental when you move from the area.

If I were to house hack, I would actually be increasing my living expenses significantly.

Consider refinancing carefully, as an 8% rate will increase your monthly payments significantly.

Tenants and investors in general don’t care for their buildings as much/well as residential owners  (who fights reserve increases and special assessments the hardest - investors).