If you're talking about borrowing more than that, you should be consulting with an attorney AND an accountant.

Your choice, but before you do it you have a decision to make. 

If you're also borrowing to finance your investment, I think it's very likely you'll be cash flowing negatively with a purchase price of $175K and rents of $1,300 in Grand Rapids.  

You get 6k plus your expenses may be as much as 10k and they, the borrower, gets the rest of the money above what is owed to you... 

I don't have any data but my gut feeling is that it's because there's a lot of $ available to borrow for a mortgage. 

While Watertown probably would not be our first choice otherwise as an investment location, he will be there with the Army for 2 more years and has to live somewhere and house hacking always seemed like a great option.

Given the cost of tile and time, it certainly isn't worth cheaping out on mortar, but modified is not always a better choice.  

Should I borrow money on the equity I have in the rental when i do the refinance or do I use money I have in my savings?

@Jessica ZolotorofeI want to pull my money out of the deal and refinance once i have tenants in, how would i ask the bank if i am a "good enough borrower" so i know i will be able to refinance. 

Generally an S Corp is not the best choice for holding rental real estate.