Best NEXT STEP to property number two?

[Devin McGinley]

Hello all,

I've made some posts about this property before and have gotten some great feedback! However, the market here in Colorado is evolving so quickly and I want to make sure I make a good choice considering my options are expanding. 

With that said, I bought my first ever property a year ago using 12k-ish I had saved up on a 3% down FHA loan. I currently owe 274k on the home, have about 3-5k in sweat equity materials installed (floors, new tile, paint etc.) and the property is currently valued at 340k without my upgrades taken into account. The same floor plan has been selling in my neighborhood for about 350-370k.

While I enjoy living here, by no means is it my dream house or even something I see myself staying in for longer than financially appropriate. I bought the house planning to eventually save up, buy another, and rent this out. Potentially even doing a re-fi to get some cashflow for another. However I don't have enough equity to re-fi as of yet and my mortgage is a bit high ($1,600 a month at 3.25% (and I believe it would only rent for $1750-ish)). Which leads me to my point and question. 

Should I consider selling and taking the approximate 40k after closing cost and tax exchanging to avoid paying capital gains?

I can buy another property as primary residence FHA 5% down. Meaning about 20k down on a home worth 400k. This would leave me with a upgraded home and some cash in my pocket to get a head start on the next.

Open to all ideas and appreciate any and all feedback!