A serial homeowner can make a financial killing
By Jay MacDonald • Bankrate.com

The longer you hold a property, the better your chance for a handsome, tax-free payoff. Lucier likes this scenario: Buy one rental property every year for 10 years. By that time, the oldest will have appreciated 40 percent or more. Then start moving into them in sequence, starting with the oldest or the one that has appreciated the most. Sell each after you have lived there two years, take the tax-free money and run -- or reinvest.

"You can do this forever. It's an excellent deal," he says.

Excellent, but not foolproof. Since you probably depreciated the house as a rental, you'll have to recapture that deduction (taken after May 6, 1977) and pay capital gain taxes on that cost recovery. But you can exclude from taxes any additional gain on your converted rental-to-principal residence up to the $250,000 (or $500,000) maximum amounts.

You also have to be sufficiently savvy to find good, self-supporting rentals, have the wherewithal to make mortgage payments when vacancies occur, and ideally be handy enough to do the maintenance and spiff-up work yourself before you sell.

"If you enjoy working on some of these places, a 'This Old House' kind of guy, then it makes perfectly good sense," says Kyle Krull, a certified tax planner in Overland Park, Kan. "But if you're a person who would have absolutely no digits on their hands if they grabbed a power tool, you probably want to think about it."

Do try this at home
Not the landlord type? Become a serial killer in your own home.

"This strategy works just as well for homeowners. That's the beauty of it," says Lucier. "You could move, say, every five years. In five years, your appreciation could be 30, 40, 50 percent of value."

It's also a way to support yourself in your golden years by doing what you may have been dreaming about doing anyway: traveling the country. Thanks to the Internet, you can easily narrow down potential properties to buy, even in small towns. Downsize, stay light, meet new friends. Think of your serial homes as a cash cow that you milk a little more often.

"Most people are not going to realize a half-million gain on a house, but what if you made $50,000 to $70,000 tax-free? That's more than most people make at a full-time job," says Lucier.

His advice: "Buy some place people are going to want to move, not where they're trying to get out of." His best bets are Florida and parts of Texas (still affordable); worst bets include Atlanta (overbuilt), Seattle (overpriced) and most of New England (overtaxed).

Boomer boomerang?
You might even consider starting the kids off as serial killers.

Rather than forking over rent money for four-plus years for your college-bound son or daughter, you buy a good investment property near campus as the student's own private Animal House. You deed the house over to them in their sophomore year and continue to help them pay their note with the IRS annual gift exclusion, which currently is $11,000 a year per taxpayer, meaning mom and dad could give their student up to $22,000. Upon graduating, they have the choice to keep the house, rent it out or sell it and take the gain tax-free to pay for law school, med school, or to invest in their next "hit."

This works even better if you have two or more children planning to attend school in the same area, because it allows for greater appreciation.

Krull thinks it's a smart financial move: "I've had clients who buy a house in Collegetown, U.S.A. It's also a good way for an out-of-state family to establish residency for in-state tuition purposes."

Remember that advice about investing where people are moving? Guess where the baby boomers are headed? That's right. Back to their old college towns.

Krull thinks the perfect counter to the boomerang kids era would be boomerang parents choosing to kill off the family home and downsize right into the college rental their kids just destroyed.

"The boomers are going to want to be active, and there's a lot going on in a college town, from sports to arts to intellectual pursuits. A lot of baby boomers are going back to their old alma mater towns. They like the college life," Krull says.

"That's what we're seeing in Lawrence with the University of Kansas. There's a big housing boom with lots of retirees moving there. Sure, move the kids out. And their roommates. And that pet monkey they had!"

Jay MacDonald is a contributing editor based in Mississippi.