Should I sell or Rent?

[Michael Held]

So my lady and I are looking at taking the next step and have started looking at houses. I currently own a home (3BR, 1.5 bath, 1,200 sq ft ranch) that's valued at around $165K, I bought at $79K, I still owe around $35K, that's too small for the two of us. At this time I'm relatively cash poor as all my money is tied up in IRA's and other investments that would be rather costly to pull out. I was originally planning on turning my current house into a rental but seeing that I don't have cash on hand for a good down payment on the new house I've started to think about selling it instead.

I have a home equity loan from many years ago with zero balance that's still active but I'm afraid if I use that for the necessary upgrades to my current home to make it rent ready and for the deposit on the new home that it will ding my credit when purchasing the new home. Thus the thought of selling.
So what's your advice, should I rent, sell, or something else?