Has anyone reverse house hacked for tax exempt capital gains ?

[Chris Welch]

Hello all,

I am currently 49 years old and have accumulated more than a dozen single family homes along with some other real estate and investments. I love real estate and it has really helped increase my net worth. I house hacked a few, meaning bought a house and lived in it, then turned it into rental when I/we purchased another home. As I often ponder the idea of retirement I was wondering if anyone has reverse house hacked a few houses to get the primary residence exemption on capital gains. Meaning, every two or more years strategically move into a home you have owned for some time which has a large amount of equity and maybe not been a great rental performer with the sole purpose of selling and protecting the capital gains from taxes. Obviously, this would take some time as each would have to be your primary for two years but seems like it could be a great way to feather your retirement nest or reinvest that money into a better performing asset tax free. Also, while in the house for the two years you could make improvements to maximize the sale price and return on investment.  Once you go to put that house on the market after your two years, move into and establish a "new" primary you have owned for years and start the two year process over again. 

Depending on the size and location of your sfh rentals, I understand this may not work if you have the need for a big house because of many kids or your rentals are in war zones. 

Also, I know you can 1031 and trade up to increase income and for other purposes. But I was specifically wondering if anyone has done this technique with sfh's they have owned for some time specifically for the tax exempt capital gains. Would love to hear how it went and any downsides which I am not seeing.