Primary residence, 100% equity -- now what?

[Kurt F.]

Need some good advice. I have a 150K home that we paid off. I also have a duplex that is nearly remodeled and is worth about 110K with a 50K mortgage.

I have no desire to mess with the duplex situation just yet -- one side is rented, and the other soon will be. The good cash flow numbers are good at that point.

But as for sitting on that amount of equity in my primary residence, I've begun to think about options for putting that equity to work in some way. Granted, I do enjoy living in a nice house with no payment. But, I'm wondering if I'm really doing the smartest thing with my primary equity.

I've considered renting out my primary residence and buying a "new" house to live in and perform some rehab/sweat equity on. After giving the SF rental market a once-over, I believe I could get about 1600 or 1700 in rent for it. It seems like using a portion of that income to help pay for another house could work. My thinking is that getting a tenant in my current house could conceivably pay the mortgage/insurance/taxes on another house. Would that option make any sense?

By the way, I've read the cap gains posts with interest relative to renting out one's primary home... and this might kill my idea right there...?

Any better ideas or input will be GREATLY appreciated....THANKS!