Equity Rich - Need Advice

[Ronin Crimmons]

First, thank you for any advice or recommendations.  We would like to buy a bigger house and move up.

I am equity rich on my primary residence.  Own free and clear with value estimate of 2.3 mil.  My cost basis is 1.1 mil.  If I sell, after realtor's fees and homeowner's exemption (500K), I would owe tax on 685K or almost 200k.  The thought of giving 200k to the government makes me sick.

Any recommendations to avoid this?  It appears my options are:

1. Keep and rent out, use new rent to help pay newer larger mortgage - thus expanding my real estate portfolio and then 1031 after a couple years.

2. Sell and just pay the tax and consider myself fortunate to be in this situation.

Anything else I am missing?  Thank you in advance

[David M.]

Quote from @Ronin Crimmons:

 @Ronin Crimmons your welcome.

I'll take a minute to point out my pet peeve, i guess..  If you wanted to rent it out with a cashout refi...75% of 2.3.mil is 1.725mil.  For the sake of argument, lets say you get a loan at 6%, the same as the effective one time federal tax rate.  That's ~$103.5k in interest the first year.  The subsequent years will be similar... (yeah, I'm assuming yourproperty is free and clear)

So, your opt1, you'd rather pay a lender $~100k per year, at least for the first several years, instead of paying the gov't $137k?  It might be $200k if you inlcude CA taxes (ihave no idea).  These sales pitches are really spiteful about paying taxes.

"They'll say that you get rent."  "flip it around:"  you sell and pay the say $200k, whatever.  Now you have 2.1mil in cash.  Sitting in a money market fund thats 5%+ annually --- $105k.  Oh, rates won't stay this high forever..  You have those dividend aristocrats doing near or at 5% dividends..  You have various income oriented funds and securities doing not 10% and even 12%+..  Oh, you hate the stock market --- how about private lending (in real estate) doing ~12%?  Holding debt is really the way to go.

Oh, you really want to be a landlord, sell and take some of that capital to buy a rental property.  You are borrowing "more" money, not your own from your own property.  One should look at  / educate about overall investing, not even just one niche of real estate investing.

Anyway, happy to chat about this if you like.  Hope this helps.