Getting the most out of home equity to launch into investing

[Jennifer Kessler]

Hello, I am needing some guidance on the best strategy for us. We live in San Diego and will be coming up on the 2 year mark of purchasing our primary residence this February. Purchase price was 630k, currently worth about 800k, loan is 560k. We have about 75k in a savings account to use towards an investment. We would like to move out of our home at some point within the next 2 years. Do I: 

1. Sell our house come February, buy another primary residence that has room for rental income (i.e. space for ADU, downstairs with separate entrance).

2. Keep our house. Purchase long term rental property out of state for around 200k or less. Then figure out another primary residence in a couple years. 
3. Keep our house but rent it out. (Would break even or be in the red until our loan is payed down a bit). Purchase a primary residence in same area. Finance options: home equity loan vs conventional??

Happy to provide more details if needed. 

Thank you!

Jennifer

[Jim Spatzenfeld]

Just keep in mind that you don’t pay tax on your $170k gain if you sell now or during the first 3 years of renting (must have lived at least 2 years of the last 5 years in the house to qualify for tax exemption).

If you decide to sell after renting it for more than 3 years then you suddenly have to pay capital gains tax on $170,000 or maybe even more.