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Can I use the proceeds from my primary residence to buy investment property tax free?
I had some cash saved for investing in property, and then the perfect home came along. However, they won't wait for me to sell my current home to use as a down payment on the second home.
If I use the cash I've saved as the down payment on my new primary residence, can I take the proceeds from selling my current home and apply them to new construction or a mortgage on an investment property?
Thanks!
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Matthew,
Yes, you would want to use those funds and do a 1031 exchange to avoid paying taxes on the cash or (boot) from the sale of the home. It's a fairly easy process and the bank works with you on the purchase to handle the funds through the 1031 exchange.
If you have any specific questions feel free to reach out I am always happy to talk REI!
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When you sell your primary (living there 2 of the last 5 years), you don't make taxes on the first 500k of profit.
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@Matthew Ockwell If the house you’re selling has always been your primary residence, what you do with the proceeds doesn’t matter. The gain is tax free, $250ksingle/$500k filing jointly. You don’t have to do anything with the proceeds to qualify.