Should I sell my old primary home?

[Ryan Sun]

In 2020, I bought my previous primary home with a 20% down payment and a 2.5% 10-year ARM mortgage. Since then, the housing prices have risen about 50%, reducing my leverage from 5x to around 2x. I'm considering purchasing a new home but unsure if I should sell the old one.

My plan is to retain the old home and rent it out. Taking into account my current monthly expenses, including potential vacancies and maintenance fees, it should break even. Considering I'm new to real estate investment and don't own any rental property yet, I believe this is a great opportunity for me to enter the field and learn how to manage rental properties. Additionally, I have sufficient funds to buy another rental property if a favorable deal arises. But not enough for an extra. 

I'm located in California, where the property tax yearly increase is capped at 2%. I'm hesitant to let go of the 2.5% interest rate, given that current rates are around 6-7%. 

The main reason I'm contemplating selling is the advantage of no capital gains tax for owner-occupied properties, allowing me to access the equity. And also the current leverage is only 2X, there are opportunity costs. Once I convert it into a rental property, I can either sell it with 3 years (there might be some complicated depreciation recapture and mortgage payment tax issue?) or through a 1031 exchange after that. A cash-out refinance appears unfeasible due to the present rent-to-value ratio and the  much higher interest rate, as it would lead to considerable negative cash flow.