Santa Clara, CA · Member since 2016 · 22 posts · 4 votes
Hi, Everyone,
This is my first post here, please advise if I should sell now or keep renting.
My rental townhouse is in south San Jose. I lived there for 5 years before I rented it out. Now it is about 2.5 years after I moved out. I bought it for $280k, and currently it's worth $520k, and monthly rent is about $3200-3300. I have $180k mortgage left, it is on the 4th year of the 15yr term, with a fixed interest rate 2.5%. My monthly PITIH is about $2200 and I manage it myself as it is not far from me.
If I sell it now, I can take advantage of capital gain tax free allowance, and get ~$300k cash in hand. I don't know where to invest it though.
Or, just keep renting it out, and in 10 years it will be paid off and generate me $2500-3000/month cash.
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
10y
I was in the same position and always say if you dont need the cash and can hold for over 5 years, you should never sell Bay Area property. And whatever you do , dont sell a Bay Area property and invest the money in cheap out of state homes. I own both and will tell you from experience that holding a Bay Area property will generate wealth in huge multiples of any out of state investment. Thats not to say my OOS properties have not generated positive returns. Yes they have. But I did it as an experiment with a small initial investment. And my equity in Bay properties is 10X that of the OOS properties. You have a great rental yeild on your purchase price. Why on earth would you give up that plus appreciation?
Investor-Realtor · Sanford, FL · Member since 2015 · 71 posts · 21 votes
10y
Really it depends on your strategy: Are you looking to keep investing right now? Are your goals volume or more for passive income. I'm really with @Kevin Harrison about keeping the property, refinance it with cash out and use the cash to buy a few new properties. HOWEVER, if you would rather switch from SFHs to multi-family (or other similar changes to your portfolio) then sell and re-invest in a property more in line with what you want. OR again, you re-fi, cash out and invest in the multi-family you're looking for. The great news is you have a TON of options! Congratulations! Excellent cash flow!
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
10y
People who dont live in places like the Bay Area will never understand the dynamics of the market and will follow the "cash flow" at the expense of anything else. Appreciation is not guaranteed but neither are cash flows, especially in low rent areas. However the past 20 years of data that includes probably the most significant national housing decline that we will probably see in our lifetimes suggests that over any 5+ year period, a well bought Bay Area property will appreciate. Thats as close to a guarantee as you will ever get. Case in point, my town house bought at the peak of the pre crisis market in 2007 for $620K went down to $550K at the bottom of the cycle and now is worth almost $1M. Meanwhile rents have risen to a point where it generates significant positive cash flow, plus pays off the mortgage. Rents are still rising and I have a fixed rate mortgage below 3.5%. Its similar to the OP situation and I would never sell unless I needed the cash desperately.
Damascus, OR · Member since 2016 · 87 posts · 24 votes
10y
Personally, I would keep it. I have a rental in Discovery Bay, nowhere near as desirable as San Jose, but it's still property in the Bay Area.
I would leverage its equity to purchase other properties. And like someone said, you can go outside of California. That's what I'm doing.
I'm only looking at appreciation due to the equity I can leverage. When California becomes a affordable again, I would definitely purchase another property in the Bay Area.
Keep it, in 11 years you'll be happy you did. Only reason to sell a bay area property, IMO, is to get after a larger, more cash flow positive, bay area property. Otherwise, enjoy your equity & positive cash flow.
San Jose, CA · Member since 2016 · 14 posts · 3 votes
10y
Most people not from this area have no idea what the market is like here - they'd be surprised at what a dump you could purchase for half a million. I would keep it and stay with the rental income.
Investor · Greenville, SC · Member since 2012 · 269 posts · 187 votes
10y
@Rong Liu you will get a million recommendations here, but I'll throw mine in, as well. I would keep it and get a line of credit on it. That way you can continue to get the rental income and have funds to pull out when you've got something to invest in.