Selling Primary Residence and Rolling Into Investment Property?

[Austin Quick]

BiggerPockets Peeps,

Looking for some advice! I'm a 28 yr old real estate newbie wth 2 properties in Austin,Tx. 

I bought a condo as a primary residence roughly 4 years ago and moved out of it last year (so living in it 2 years out of the last 5 for 1031 exchange purposes). I'd like to sell and roll the funds into a larger (multifamily) investment property. I will not be living in the multifamily property.

I estimate that I'll have roughly $130-$145k of equity to put down. 

*Is there a penalty for moving the money from a primary residence into an investment property?

*Is there anything specific that you'd do with roughly $150k? Looking for equity/upside and ways to snowball my investment portfolio. 

Thanks for any and all input!!

Austin

[Dave Foster]

@Austin Quick, you're confusing sec 121 which deals with your primary residence and 1031 which deals with investment real estate.  

When the property has been your primary residence and you have lived in it for 2 out of the 5 years prior to sale you are allowed to exempt the first 250K (500K if married) in profit tax free.  You can exercise sec 121 once every 2 years.  There is no reinvestment requirement.  You can do anything with the money you want.  So if you want to sell and buy investment you can.  You can also buy another primary.  Or you can buy stocks or go to Vegas.  It's tax free.

Sec 1031 deals with investment property.  When you sell an investment property that you bought with the intent to hold you can do a 1031 exchange and buy another investment property and defer indefinitely paying the tax on the gain.  

When it's been your primary you can do anything you want with the proceeds and it's still tax free. When it's investment you have to reinvest in more investment real estate to get tax deferred treatment.