Using home equity loan plus 401K loan for new primary in HCOL area versus renting

[Jack P.]

Hi all,

We are planning on moving next year to a very high cost of living area.  We are going to convert our current primary into a rental, and it will likely cash-flow well enough (including capex, maintenance, vacancy etc.) to also cover the loan repayment on a $60K home equity loan amortized over 25 years.  I was considering our housing options for the move and they fall into two options that I'm considering: 

1) Take out a  $60K home equity loan, and a $50K 401K loan, and dip into savings to come up with 20% down on a primary in the HLOC area.

2) Rent for a couple-ish years at $3k/month until we save up enough for 20% down


This is sort of how I've been thinking about it: 

Option 1

Pros:
1) Only have to move once

2) Appreciation on the house in the HCOL area over the two or two + years it would take to save up the down payment if I rented instead

Cons:

1) Reduced 401K performance
2) Feels a little scary to pull equity out with a home equity loan since I've never done this and it was not part of my initial investment strategy
3) Less cashflow from primary once it becomes a rental  


Option 2

Pros:

1) Less stress about 401k and home equity loans
2) Better 401K performance

3) Better cashflow from current primary once it becomes a rental

Cons:

1) Two years of rent
2) Two years of missed appreciation


Other info that might or might not be relevant:  We have two modestly cash-flowing rentals besides our primary. The house we are looking at in the HLOC area would meet the 30/30/3 rule (counting the 401K loan and the home equity loan).  

OK folks, what should I do? Am I thinking about this the right way? Thanks!