Trying to Explore Other Opportunities

[Tony H.]

Hi BP,

First of all, I apologize if I post this in the wrong forum. It's been a while since I posted on BP. and I finally have the time to go back in here =)

Me and my wife are now hitting a crossroad in our lives and I feel to get some insights from you guys.

Here is the situation:

We have a 2bed/2bath condo here in the Bay Area (East Bay) that we currently live in. PITI + HOA is about $2100. We are at Year 6 (24 years left to go!) - the problem with this condo is that we outgrow it. We have 2 kids and we are starting to feel it's too small. We dont have any storage or garage to put our stuffs (and we dont have that many stuffs).

We sold our duplex 6 months ago (made about 80% ROI) and used it to buy a single home up there. We REALLY like the home and its location.

We rent the house out with negative cashflow (about $200 which is very minimal impact to us). Yes, this may be a big NO-NO for most of you, but we are considering to relocate there in the future to have more space. We really like the house and its location that we dont mind the negative cashflow at all. Plus, rents keep going up in that area we think we should be break even in a couple years. PITI on the house now is $3100.

Now, our REAL problem is that if we move to that house, we will make a lot less money (because it wont be Bay Area salary). 

I am debating whether to :

1. sell the Condo and use the proceed to pay the house. It wont be paid off, but will shave of 26 years of mortgage payments. Leaving 4 years left to pay. At $3,100 a month for 4 years would be a major hit to our income (remember, we will make less if we move). I am not sure if I should just suck it up for 4 years, and mortgage free after that. Or Refi for 15 years to ease the pain in our household income.

OR

2. Rent out the condo and make $700 a month cashflow to help pay the mortgage on the house. Move to the house and Refi to get lower payment. I estimated the PITI will probably $2900 after Refi.

Which way should I choose? A friend of mine believes bay area property will just keep rising.. he said to keep my condo regardless. However, I noticed my condo value has gone down by about 50-60k in the last 1 year.. 

Sorry for the long post! I appreciate your insights. I may missed out on a few details, but if need more details in order to give insights, please let me know.

Thank you!!

[Arlen Chou]

@Tony H. you are 100% correct, once you leave the Bay Area it is extremely hard to get back in. I would suggest that you take an interim step and do some further analysis on your lending situation. You did not state your current interest rates on either loan. It might be worth the effort to go shopping for new loans. You might want to also consider either refinancing the loan on your condo or putting a HELOC on it so you can get additional money for a down payment on a SFR in the Bay Area. It is a little difficult to get to any specific strategy as there are many pieces missing in the story: what city is condo located, do you both work, would you be willing to move to a different city and keep your higher paying job, etc. Prices are coming down in the Bay Area right now, but that could be a good thing for you if you are looking at a long hold period.