Help with home sales strategy - What would you do? need advice

[Annie Balagot]

Hi BiggerPockets pros, I need some advice on what i should do. 

We live in a very desirable town 30mins outside NYC with great schools. My primary home, if sold, is prob worth around $2M and we only have $700k mortgage so tons of equity not being used. We have a $500k HELOC currently @ 9% we haven't used. we recently renovated and expanded this house so our basis is prob $1.5M so we're hitting the home exclusion cap.

Potential to buy a new home in town (kids still need 4 more yrs before going to college) for $1.2M with some work needed and potential to expand a bit.

Thinking we should sell home, take $500k tax free, put down 20% on new home so paying more in total mnthly payments but mainly in interest. Use the remaining equity ($1M) to go invest in more rental properties.

Or, keep primary home which has a 2.75% ARM until 2030 (mortgage out til 2050). My mthly payments are only $6.5k but I could rent my house out for $10-12K/mth. Can't use bonus depreciation but could use accelerated depreciation and get most (not all) of my rental income tax free. I'll still have my HELOC but it's at 9% and only $500k vs $1M cash.

What would you do? Sell primary or rent it out? Oh, primary house is in a flood zone and we had a major incident during IDA but our house was raised so meant to deal with floods so no damage but more a pain in the *** so concerned about dealing with that with renters or if more climate issues happen, could impact future value of the home.

Would love any thoughts or ideas! Thanks!

[Dave Foster]

@Annie Balagot, if you have more than $500K of profit in that primary and it would be a good rental then you might think about moving out now and converting it to a rental for a year or two or three.  As long as you sell it while you have still lived in it for two out of the 5 years prior to selling it you can still take the $500K tax free.  But you'll also be able to 1031 the remaining profit.  So you'll get some tax free and the rest is tax deferred

Access your heloc to go ahead and buy your next primary right now.