Sell/Refi/HELOC - Best Way to Leverage Our Equity?

[Colby Willetts]

We are in a situation where we have built a good bit of equity in our current primary residence and are trying to figure out the best method to leverage that equity to continue building our portfolio as fast as possible. (Goal is financial independence mainly via buy and hold rentals)

Basically we purchased a "fixer upper" in early 2016 for $230K. Now that house, as is, comps for anywhere from $370-$410 (per local realtor in the neighborhood). Completely fixed up the ARV would be around $500-525k. We owe around $210K still.

The way I see it we have basically 3 main options, but I would love input from others with much more experience than myself. Perhaps I am not considering something that may be obvious/import from other's perspectives?

1. Sell the house and pocket the proceeds. Depending on the rehab estimate from contractors, we would determine if it makes sense to fix it up first or just sell as is. Then we would take the cash in hand and purchase a primary residence to live in (say ~$50K down payment) and then put a substantial down payment on another buy/hold property to rent out. Possibly pay off some credit cards/student loan debt with any remainder.
2. Cash-out refi and basically do the same thing (i.e. put substantial down payment on another property/pay off debt) . However, the payment would then be so high that I think we would struggle to afford living here still after that. 
3. HELOC and use that for the same thing.

We love the location/neighbors, etc. and like the house (particularly if we did the full rehab). So options 2 or 3 are appealing in that sense, but I am trying to figure out if either of those would make sense given that the monthly payment would go from $1,450 to probably around $3K or more, making it a) hard to afford and b) even harder to save/grow our portfolio. Not sure that renting it out would make a lot of sense as its mainly a higher income/family area and, for whatever its worth, the "rent zestimate" is $1,650/month. With this being an older house with lots of little issues/needed upgrades, I worry that renting could be an issue without first making several updates. 

We do not have kids, so are not tied to this school district or anything like that.  

Looking forward to hearing everyone's thoughts on this. I appreciate the feedback!