Refinance or HELOC?

[Timothy Johnson]

Hello, purchase our first property it is a townhome in September 2022, using down payment assistance with 3.5% down, conventional with 6% interest. Built in 2006, we got it for 175k and it was listed and valued at 191k. HOA fee of 150$ a month. It was in bad shape cosmetically such as paint, terrible dog smell from carpets, no window screens, etc.. owner inherited it as their child had passed away so wanted to get rid of it. It is in a developing neighborhood with new townhomes across the street being sold for 300k and up. It is a 2 bedroom 1 and a half bath, 2 car garage, washer and dryer with an unfinished basement that is already insulated. We made cosmetic repairs such as painting, laminate flooring in living room instead of carpet, new vinyl in bathrooms and kitchen, new carpet, and added ceiling fans in the rooms.

The estimated ARV if we were to add another bedroom and bath is 250k, which is the plan.

My dad is a contractor so he would help me in doing so and gave me a low and high end for the cost of materials, plumbing/electrical, etc. 

We don't have the funds currently to move forward with the plan but figured since we started out with equity, what would be a good strategy? I am thinking should we use some of the equity we have to fund the add on and refinance after paying for another appraisal and the value of the house increasing? My end goal would be to make some profit to use towards a down payment on a rental property in the future.

[Kerry Baird]

If it were me, I would hold on to that house and save up your money.  If I lived there two years, I would sell.

I would sell at the 2 year mark, and I would move into another owner occupied house, that I could house-hack and rent out a unit or a room.  I'd improve that house, and stay there for 2 years. 

That was similar to the start of my journey, and I would do it all over again.  I didn't house hack, and we bought our first house when we were stationed in England.  But the rest is house we did it, slow and steady.  Read my bio to see the rest of the story...