My house has appreciated astronomicaly

[Jimmy Johnson]

First off - Sorry about the topic, this is my first post and I didn't realize you can't correct topic spelling/grammar mistakes after posting. If anyone has any insight into how to correct it that would be great. Anyways...

I bought a multifamily house in Berkeley, Ca in late 2008 about 2 months after housing prices here had bottomed out. It was in pretty bad shape so I got it for 360k. I then put 3 1/2 years of blood, sweat and tears into it and completely remodeled it inside and out.

Enter the new bay area housing bubble - My realtor now says I can get upwards of 750k for it (and in the process take an equity payout of ~360k) or I could also rent it out for ~4500 a month. We have 2 new additions to the family on the way and need more space but, I can't justify buying another house here during the bubble. We need to move, so I'm thinking we will rent for the time being. Should I sell it and invest the money, rent it, or stay put? I feel like this bubble can't go on forever and I shouldn't look a gift horse in the mouth. I am leaning towards selling now and renting then eventually reinvesting some of the money in another house in Oregon or Washington and the rest in index funds, but I wanted to get some other people's opinions. It seems to me by investing it I could get a much better return on my money rather than leaving it tied up in a house that I don't think can go much higher. The real estate market here never ceases to amaze me, when I bought this place it was in a "undesirable" part of Berkeley which has seen numerous improvements over the last 5 years and I thought I was paying to much 5 years ago. I would love to hear what you guys think.

Thanks for your thoughts.

[Jon Holdman]

A value of $750K vs. potential rents of $4500 tells me you should sell. Given you low purchase price, though, you're probably not going to be cash flow negative. So, you could hang on and hope for some more appreciation. Maybe that happens, maybe it doesn't, maybe prices fall. Its nothing but a guess.

IMHO, in this situation you have been lucky. You got it at the right time, did some improvements and now have a significant gain. Do you want to try to parlay that gain into more? Or take it off the table? I'd be inclined to take it, especially if you're going to move anyway.

Sorry, @Rick Baggenstoss I couldn't disagree more. A house you live in isn't an investment. @Jimmy Johnson was lucky and has made a nice return on this one. That doesn't always happen. I'd even say it doesn't usually happen. A house you live in is a liability. An expensive doo-dad, like a car or boat. This is a windfall. Use that windfall to actually invest. IMHO, Jimmy, you should buy the cheapest house that suits your needs. There's nothing wrong with buying expensive doo-dads is you have the income to support them. But a cheaper expensive doo dad that meets your needs will consume less of your money than a more expensive one, leaving you more cash to invest into your and your family's future.