Options for Interesting Scenario

[Andrew Still]

We are relatively new to STR's but not new to owning/operating businesses. The finance side of this business is where I like to look for opinions to get perspective. With that said, here's the situation ------- We purchased a home with the intent to turn it into an lake vacation home in January of this year. Bought for $1.2M and leased it back to the previous owners. The previous owners could not find a new house and bought the house back from us for $1.5M. We 1031'd the proceeds into another property that cost us $1.425M. The house is much nicer/newer, but is some features make it slightly less ideal for a vacation home. Neighbors are much closer and the walk to the lake is much further. All this being said, we obviously have a huge amount of equity in this house and trying to figure out what to do with that. Currently my wife and I are looking to move to a larger house as we are expecting and need more space. We live in a house in a prime location in the city and would like to not give up the property. The property we live in we are about 25% loan to value and the house is worth roughly $650k w/ primary mortgage of $420 and HELOC of $75k. We could long term rent this house out for about $3200 - $3600 a month which would have a relatively small cash return but given the area, the appreciation on the property over 10 years would be the primary benefit. What should we be thinking about here? I was considering pulling equity from the STR to buy our current home from ourselves, convert the current home to a LTR and then purchase our new home which would likely not be too much more expensive than our current one.