I live in California but am looking to invest in Texas, Alabama.  

.- The townhouse you're moving into is currently a rental, but you plan to live there two years for the 121 exclusion.

@Khaled Seirafi I've invested in several things in real estate: residential, commercial, small multifamily, mobile home parks, short term rentals, co-living (rent by the room) and I just bought an assisted-living facility.

You can't rent out a PO box and live there.And yea that sounds like a huge red flag to me. 

I think it would be the right direction since we already decided to buy using a VA loan and live in SC. 

I live in California and invest in multiple states, if that matters.

Finding deals outside of California can definitely open up new opportunities, especially given the cost of living and market dynamics in the state.When looking for properties in other states, consider focusing on areas with strong rental demand, economic growth, and population increase.

@Michael Smythe the repairs were never completed while the tenant was living there.

Easy living, comfortable furniture.

Tell the tenant if they are having problems affording rent, they are welcome to give notice and find a less expensive place to live.