re: Turning your primary residence into a rental question

If I understand your question, you want to know if you should sell this property and invest in smaller rental units with the proceeds, or hold this property as a rental and sell it down the road?

I guess it depends on the amount of gain you would have that would be taxed.

Also, you can rent this property out for the next three years and then sell it under the principal residence exclusion. To qualify as a principal residence, it has to be your principal residence for 2 of the previous 5 years. So you might want to rent it for three years and then sell it- as you would have three years of rental income, more home paid off, and still not be taxed on the gain.