I originally bought it as a primary residence and intended on building up equity in it to then tap into for a HELOC to buy a second property.

For context, we live in our primary residence and rent out the other rooms in the house.

It follows the first 3 rules of real estate, is zoned "light commercial" which would include multifamily, the direction I want to take it.It has a well established restaurant and 2 residences. 

Travelers don't care.

Investment Info:Single-family residence fix & flip investment.

The apt is rented for about 1400 and the tenant takes care of putting out trash to curb for whole building.

Can someone please explain the IRS rule that allows homeowners to avoid paying taxes on up to 500k in profit from selling their primary residence?

So if the operator has done 5 class A deals in Charlotte and now has a 1970s value add Class C deal in Dallas, I would be careful. 

I've read that this statute allows taxpayers to to ignore any "nonqualifying" use of a property that occurs after the last date the property was used as a primary residence. 

Navigating these from a distance can be more challenging.Market Risk: You might not be as immediately aware of changes in the market dynamics, and reacting to market shifts can be more challenging when you're not physically present.Travel Costs and Time: Visiting your property or dealing with issues may require more time and resources, especially if it's a considerable distance away.In summary, investing out-of-state offers the potential for diversification and higher returns, but it requires careful planning, reliance on local experts, and a willingness to adapt to different market dynamics.