Home Equity for new down payment?

[Kelly Williams]

I have read a few posts about taking out home equity loans for a new down payment but I cant seem to wrap my head around it. I am moving out of my current home. Its value is about $300,000. I owe $200,000 on a 30 yr note at 3.6%. I have been planning on turning the house into a rental when I move. The house will cash flow (yes I have run all of the numbers). However I do not have the cash to purchase a new home yet.

So my question is, should I just sell, take the proceeds and buy 2 new properties? Or should I get a home equity loan on the 1st house to purchase the second? How does that work? Could I borrow the difference of 80% of the value and what I currently owe ($40,000). I like the idea of keeping the current property due to the very low interest rate, as apposed to getting an investment loan for a new property.

Thanks in advance for any help.