Do I sell in order to buy more??? Looking for advice...

[Andrew Hinkley]

Hi all...So here's my situation.  I currently own a home in Los Angeles CA (Highland Park 90042).  I have gained substantial equity in the house over the past 2 1/2 years since I purchased it.  I am going to be buying a home near by which was my Grandfather's which has been offered to me a bit below market value.  I will rent the house that I am currently in which will provide monthly cash flow.  My question is if I should sell my current house instead.  I believe that I will be able to pocket around $250K profit without being hit by capital gains taxes, as the law now allows up to $250K tax free with certain requirements which I qualify for.  If I were to sell, I would use that $250K for other rental property purchases in other regions of the country.  Any advice?  Many thanks in advance!  ~Andrew

[Charlie Fitzgerald]

My short answer would be don't sell what you intend to buy.  My long answer would be, since you are going to move to the home previously owned by your grandfather, get a loan to buy that from the trust as your primary residence.  Keep the property in HP and rent out the house AND cash flow the improvements to convert the smaller unit in back to an additional rental.  That's my $0.02 worth.