Is this a good move? Help a noob out!

[Corey C.]

I've had my house for two years. Bought it for $179k owe $171k and it appraised 3 weeks ago for $193,500, but if we add a closet to make a 4th bedroom the REA said it could have potential to sell just above $200k.

Should I take the equity and pay down debt and keep the house and save the extra money after paying down some debt until I have enough for a down payment for an investment property?

or

Take the equity and use it as a down payment for an investment property now and pay down less to no debt. 

Also, should I do REA for the sale of my house or For Sale by Owner? I'm trying to maximize my savings.