Want to leverage my first house into multiple properties

[Adam Stiles]

Hi - I own a house in Oakland. I paid $339K. It's now valued between $750K - $850K and generates $5,700/month in rental income (pre-tax). I have a mortgage of approx. $195K. I've lived in the house 2 of last 5 years, so no capital gains if I sell.

I'm currently trying to decide between these options:

A. hold, continue renting it out, and use $100K HELOC as downpayment on another property in Oakland, or within 30 minutes.

B. 1031 exchange for a more valuable property (or multiple)

C. same as option B, + use some cash from the sale to invest elsewhere

Any suggestions would be greatly appreciated!

Adam

[Dave Foster]

@Adam Stiles,  as @Bryce Stewart said - no tax if you sell while you still qualify for the sec 121 primary residence exclusion.  If you're married all the gain would be tax free.  If you're single then only $250K would be tax free but because you are renting it now you could 1031 the remaining amount and get the best of all worlds - some tax free and some tax deferred money.

I'm very sensitive to tax ramifications as you can imagine given the world I operate in.  And CA is the 2nd highest taxed entity in the world.  So the opportunity to sell now and get some of that money out of CA tax free at this point in the market would tempt me.