Primary residence: how fast can you move from 1 to the next? max?

[Lei Lu]

Hi BP strategist:

How fast can you move from one primary house to next with primary residence rates? Am I thinking in the right direction?

[Andrew Postell]

@Lei Lu thanks for posting! Always great to hear from a fellow Texan. Bigger Pockets does have some good state specific forums and Texas is their most active forum. Feel free to post there if you ever need some more "local" advice about things.

Usually when you purchase a primary home you are using FHA/Fannie Mae/Freddie Mac types of loans. Those state that you occupy the property for 12 months. So in theory, you could buy a new primary home every 12 months. Hope all of that makes sense. Thanks!

[Ashley C.]

@Lei Lu are you considering buying a 2nd principal residence and turning the first home into a rental, and growing your portfolio that way? If so you might also want to factor in the IRS 2-out-of-5-year rule to see if you can save yourself capital gains tax on the sale of the home. There are restrictions on how quickly you can sell and still realize a gain tax free. I don't know how to post a link but I found a helpful explanation at the balance.com "paying capital gains on the sale of your home - the profit from your home sale might not be taxable." Scroll down to "The 2-Out-of-5-Year Rule." Best of luck whatever strategy you choose!

[Michael Glist]

If you are looking at purchasing the home to live in and then turn into a rental and move onto the next "primary residence" and repeat the process you ill be looking at needing to live in the home for at least 12 months. The only way around this if under extenuating circumstances such as need to go from a 2 bed to a 3 bed place due to family size growing or moving out of state or further away due to job relocation. 

Also when doing this make sure that when you are purchasing property number 2 that you have a great lender that knows investor loans as well as a back up lender ready. The reason I say that is even though you can move every 12 months a lot of lenders leave the guideline up to underwriter discretion. This means that if the underwriter feels that you are cheating the system they can deny the loan. So you would want to make sure that you can avoid that or have a back up lender in place in case that does happen. 

I hope this helps.