Thank you all for the responses. I realized while reading them that I didn’t think the numbers were THAT good and then I re-read my post and saw that I made a mistake in my math. After running this math many times on my own, of course I make a mistake when I write it up to post it!

First off, apologies for the mistake.

Second, the mistake. In my post, I calculate the capital gains taxes and deducted that from the sale price to come up with the net proceeds, but I forgot to also deduct the mortgage balance. I’ve fixed that mistake below. This was a significant error on my part.

Thirdly, yes, the $500,000 capital gains exclusion would actually be more like 2/3 * $500,000 (since 1/3 of the house is the apartment that we rent out and we live in the other 2/3), which is $333,000.

So, here are the corrected numbers for option B:

Option B: sell duplex to access equity, thus super-sizing our stache, keeping PITI the same, but probably not replacing rental income:

House sale proceeds estimate:

Estimated sale price: $1,800,000

Mortgage balance: $570,000

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Proceeds from sale, gross: $1,230,000

Purchase price: $900,000

Remodel costs that raise cost basis: $250,000

Capital gains exclusion, for a couple: $500,000 * 2/3 the house = $333,333

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Amount of sale price that could potentially be tax-free : $1,483,333

Taxable portion of sale price: 1,800,000 - 1,483,333 = $316,667

15% capital gains tax applied to $316,667: $47,500

Proceeds from house sale, net, = sale price minus capital gains tax cost minus mortgage balance

$1,182,500 = $1,800,000 - $47,500 - $570,000

Cost to sell the house and move 10% of sale price: $118,250 but I think that’s being generous/conservative, so I’m going to round down to $110,000 for an easy number.

Total net proceeds = $1,072,500

Of the net proceeds, we can take $180,000 as a down payment on a new house. Even a fixer in our neighborhood is going to cost $1M easy, but let’s say we find one for $900,000. Then we’d take an additional $100,000 to fix that house up.

This leaves us with $792,500 left to invest. Add that to our existing $400,000 investment portfolio and it brings us to $1,192,500 invested.

Stats:

PITI is about $4,100 a month

We live in a single family house (no rental income)

Stache is $1,192,500 (split across retirement and brokerage accounts)