Purchasing Rental with Home Equity?

[Rene G.]

I am looking for some advice on our situation.  Our goal is cash flow passive income with rentals.  We are currently living in a single family home that we own free and clear.  We are also interested in moving to upgrade our home.

Here are the scenarios I can think of.   Is there a scenario I am missing?  I am looking for recommendations for those with experience with this situation.

1.  Since we have lived in our current residence for about 15 years we could sell the house and not be taxed on the capital gains.Use the cash as down payment for a new home and use the rest for down payments on rentals.

2.  Get a home equity line of credit on our current home and use it for a down payment on a new home and rent it out older home once we have moved out.(We would miss out on the tax free capital gains sale in the future?)

3.  Refinance our current home and use the funds for down payment on new home and rentals.  We could rent out this home (again we would miss out on the tax free capital gains for not selling the home).