Basically, I'm at a crossroad; don't know which path to choose

[Kochu Kothukka]

I currently own a house which is worth (according to zillow) $260000. I've ~100k remaining to payoff on the house. Currently I've 30year loan for $600/month. The place we live now has good elementary and middle schools. However, the high school is bad. So we want to move to an area where the high school is good. As it stands, we have another 4 years before the kids reach high school.

Given that I've ~70k cash to use and the intention of doing some tax write-off with having a rental property, I'm trying to decide between these two options:

1) I buy the new house in this good high school district in the next few months and convert our current house into rental. The houses in this area (good high school district) is averaging around ~350k and my current house may (not sure) bring in ~1000/month as rent. The downside is that I may have to spend some money to make the current house in a rentable state (thanks to small kids!). The other concern with this option is that house prices (in good high school district) are already high (higher than what it was before 2008) and I may not get the best deal now.

2) I use the ~70k to buy a rental property, like a condo/townhouse or some foreclosed home in good condition (without having to spend extra to repair it), and wait for another 4 years to buy good school district house. With this option, I'll get a monthly cash flow & get some tax write-off, but will have to save aggressively to achieve the downpayment for the new house in 4 years. Then sell our current house (will have to do spend a little to make it sellable). With this option I don't anticipate (I might be wrong) the house prices to go up drastically in the next four years from what it is now. They are already at a high (higher than what it was before 2008).

With both options my goals are: 1) move to a good school district 2) get a rental property for cash flow and tax write off.

Any advise that would help me make a better decision would be greatly appreciated. Also, please share any another other options that you think would be helpful.