To Sell or Keep as Rental? Best House in NOT the Best Neighborhood

[Julian Martinez]

We’re debating whether to sell our first primary residence or keep it as a rental. It’s a beautiful custom home, one of the nicest in a so-so Oakland neighborhood ("biggest house in not the best area").

Here’s the context:

• - Bought in 2014 for $590k, appraised in 2022 for $1.2m.
• - Located in a C- to B neighborhood—close to amenities and mostly safe but not for everyone.
• - Converted to a rental in 2024; initially rented for $4,750/month, but tenants moved out, and the soft Bay Area rental market has made filling it challenging. We’re now listing at $4,295/month.

Financial details:

• - Loan balance: $640k on a 30-year fixed @ 2.85% (PITI: $4,020/month).
• - Selling could yield $400-$600k, mostly tax-free, if sold by spring 2025 while within the 2 of 5-year capital gains exemption.

Options:

1. 1.) Keep as rental: Rent comps range from $3,800–$5,000+. The home is above average for the area, but rental demand has been tough. Current listing at $4,295/month is getting some interest.
2. 2.) Sell: The home is stunning, with features like a 2-story wall of windows and a central, convenient location. However, neighborhood limitations may cap future appreciation. Proceeds could be reinvested in better-performing assets across multiple doors.

Our goal is to build appreciation over cash flow, acquiring 1-4 doors/year to allow my wife to retire by 50. I’m a real estate professional, and we benefit from tax strategies.

Would you sell or keep renting? Any advice would be appreciated!