Found out this week I have about $200k in equity in my house. How should I think about leveraging the money? Ultimately would like to keep it and rent it out in 1-1.5 yrs. Other than $35k invested in 401(k), I have 7 months expenses saved and a small amount in crypto.

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You don't need to 1031 a primary residence. 1031 is to avoid/defer cap gains tax, usually on heavily depreciated properties. If it's a primary the gain isn't taxable.

If you want to sell it to get the equity out, just sell it. Or you can withdraw some of your equity to finance another purchase. If you turn it into a rental the existing appreciation becomes fully taxable after 2 yrs of renting.

You could always just live in it and enjoy the comfort of owning your own home. Getting rich takes time and short cuts are risky.


First you’d have to get the $ out through a cash out refi or something. Then, invest as you see fit. Just bc the equity is there, doesn’t mean you can use it.


Without other assets you could pull from in a worst case scenario I don’t know if cashing out equity is the best play.

That said, you won’t be able to cash out all 200k. How much would you get if you refinance for 80% of the house’s value?


My favorite option is a 1031 exchange for properties that have gone up significantly. Buy a house as personal and live there for several years. If the value continues to rise then rent it out a couple years until you no longer see good cash flows or it stops appreciation. After 4 or 5 years, 1031 exchange into a new property or 2 completely tax free.

You can do a cash out as well but I always question what people will do with the money and if they are really going to put it to best use.


Yup that’s why you have to wait a year before you turn into primary residence. Also you must stay at least two years to be eligible.

If you want to rent it out in a few years, consider refinancing (no cash out).

Besides your cap rate, a very important metric on your rental property is your monthly cash flow. Try to leave at least $300 cash flow after provisioning for mortgage, taxes, insurance, association fee, closing cost, commission, vacancy, management, and maintenance.


These responses are all very helpful! Thanks to all of you.

Make sure if you plan to rent it out that you keep the Home exclusion capital gain tax advantage. Certain rules you have to make sure you abide by.

You’ll also have to pay the depreciation on the property as ordinary income.

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