Rent or sell my San Diego County home?

Question

Hi everyone, looking for advice on whether I should rent or sell my home. I’m moving about 5 hours away for a job and to be closer to family, so I can’t live in the house anymore.

The house is a 2 bed / 1 bath in San Diego County, a few miles from the beach in a solid working-class neighborhood.

I bought it in 2023 for $565k and put about $60k into renovations. After a refi last year (5.25%), my monthly payment is $3,750 (includes taxes and insurance).

Based on comps and conversations with a realtor, I could probably sell for around $650k, which would leave me with about $60k after realtor fees, essentially letting me break even.

II could rent between $2800 - $3,000/month.

Estimated monthly numbers:

·       Mortgage (PITI): $3,750

·       Maintenance estimate: $300

·       Rent: $3,000

Total monthly cost: ~$4,050

So I’d be negative about $1,050/month.

Of my mortgage payment, about $650 goes toward principal each month. So I’m wondering if the “real” cost of holding the property is closer to $400/month after accounting for the equity gain.

A few questions I’m trying to think through:

1.     Is it worth holding the property in the short term given expected appreciation? Homes in this part of San Diego County have historically appreciated around 3% or more annually, especially near the coast.

2.     Are there any tax advantages I’m missing? I make over $150k, so I believe I don’t qualify for the rental loss deduction and I’m not a real estate professional. Are there any other strategies that could help offset the monthly loss?

3.     Am I thinking about the “true cost” of the property correctly, or should I strictly view it as losing $1k/month?

Emotionally, I’d prefer to keep the house. I’ve put a lot of time and love into it, and long-term I’d like to use it as a retirement home since I’ve vacationed in this area most of my life.

Financially, I can afford the $1k/month loss, but I don’t want to make the decision purely based on emotion.

I would plan to self-manage the property. I’m pretty resourceful and still have a lot of good contractor/maintenance contacts in the area, so I’m comfortable handling repairs and tenant issues remotely if needed.

Any feedback is appreciated — good, bad, or ugly.

Alex Rastorgouev · Answer

@Caleb Ram great breakdown of the numbers. The other replies cover the qualitative side well, so let me add something nobody has done yet — run the actual return on equity math so you can compare apples to apples.

Your equity position right now: ~$60k (sell price $650k minus ~$590k loan balance). That's also roughly what you'd walk away with after selling.

Scenario: Hold for 5 years

Cash flow loss: -$1,050/month x 12 = -$12,600/year

Principal paydown: ~$650/month x 12 = +$7,800/year

Appreciation at 3%: $650k x 3% = +$19,500 in year 1 (compounding each year)

Depreciation tax shield: ($625k cost basis / 27.5 years) x your marginal tax rate — if you're at 32% bracket with $150k+ income, that's roughly $7,270/year in tax savings

Year 1 total return: -$12,600 + $7,800 + $19,500 + $7,270 = +$21,970

On $60k of equity, that's roughly a 37% return on equity in year 1. Even if you use Dan H.'s more conservative flat appreciation assumption for the near term, you'd still be looking at ~6% return on equity from just principal paydown + tax benefits — which at minimum matches the risk-free rate.

Over 5 years with 3% appreciation, that $650k property hits ~$753k. Your equity grows from $60k to ~$200k+ (appreciation + principal paydown), minus the ~$63k in cumulative cash flow losses. Net equity position: ~$140k vs. $60k today.

The sell scenario: you take $60k and invest it. Even at 10% annual returns in the S&P, $60k becomes ~$97k in 5 years. So the hold scenario roughly doubles the sell scenario in total wealth — IF San Diego appreciates at 3%.

The key variable here is appreciation. At 0% appreciation, holding barely breaks even vs. selling and investing. At 5% (which Dan H. suggests is closer to SD historical averages), holding wins by a landslide.

I'd suggest stress-testing these numbers at different appreciation rates. I use the ROI calculator at calculatorica.com/finance/roi for comparing scenarios like this — plug in your net annual return against your equity to see where the breakeven appreciation rate is for your specific situation.

Bottom line: the math favors holding if you believe San Diego appreciates at 2%+ annually and you can stomach the monthly cash flow hit. Given your $150k+ income and emotional attachment to the property, holding seems like the stronger play.

Joe Watson · Answer

I would personally keep it, we are in a downturn currently. as soon as the money printing begins we will accellerate for several years again, you may end up cash flowing sooner than you think. You bought the house for a reason. does the market rent change that reason? San Diego rents will go up, Home values will go up. Iflation is undeniable at this point, dont want to become cash rich in a period of high inflation, want to own assets that rise with inflation.

Andrew Glisson · Answer

Own couple hundred rentals and wouldn't want to be that far upside down on cash flow. Take the $60k and find something that pays you!

Jim Johnson · Answer

Thoughtful breakdown — you’re already looking at the right variables.

A couple lenses that might help clarify the decision:

1. Cash flow vs. total return.From a pure operating standpoint, the property would be ~$1k/month negative, and that’s the real cash leaving your pocket. The $650 principal paydown is forced savings, but it doesn’t help liquidity if something unexpected happens.

2. Risk tolerance.With margins already negative, things like vacancy, a turnover, or a larger repair could temporarily widen that gap. Coastal markets tend to appreciate long term, but the short-term operating risk is still real.

3. Strategic hold vs. emotional hold.If your goal is to eventually return and use it as a retirement property, the decision becomes less about short-term cash flow and more about whether you’re comfortable subsidizing the asset for several years.

4. San Diego fundamentals.Near-coastal supply is limited, which is why many owners accept negative carry in that market. The question is whether you want to hold through that phase or redeploy the equity somewhere that produces cash flow.

You’re framing the math correctly — the real question is whether you’re comfortable treating the ~$1k/month as the cost of holding a long-term asset in a constrained market.

Ashley Bitner · Answer

@Caleb Ram - maybe MTR potential for all the crew developing the area? Plus Olympic stuff coming in a couple of years!

Ashley Bitner · Answer

@Caleb Ram Oh hmm that's a bummer that they aren't allowing permits outside of the coastal zone. I've always operated ours with a permit, so I don't have any personal experience with city enforcement, BUT I do have a friend down the street who, for a short period of time was renting out a room on Airbnb, and within about 3 months or so she got a letter from the city telling her she was operating an illegal Airbnb and needed to stop.

Ashley Bitner · Answer

@Caleb Ram - I'm in Oside too! (STR). If you can swing it financially,  I would definitely hold onto it and rent it out. Are you near where they are developing that Ocean Kamp? That might create some demand for MTR and STR!

Caleb Ram · Answer

I’m very close to where Ocean Kamp will be! STR is was what I thought I’d be able to do if I ever decided to leave the area however as of Feb 2024, Oceanside does not allow STR’s outside of the Coastal Zone (Basically everything west of Coast Highway). I believe they grandfathered in all prior STR’s had you filed it properly with the city.

Maybe you can provide input if they actually enforce this as I know people in other areas of the County who do STR against fity regulation with no problem.

Dan H. · Answer

Not an accountant, tax professional, etc.

There are many flaws with the tax benefit part of the post.

- moderately high income can not typically write off the passive losses against active income, exception for REP or STR benefit but OP is not planning either.   So the whole rest of that part of post is not relevant to OP but I will continue as education.

- the depreciation only occurs on improvements.   The land is not depreciable.

- the depreciation is off the lesser adjusted cost basis or current fmv. Adjusted basis $625k.  Then subtract the land value which is a very large percentage on a property 4 miles from the beach in San Diego.

-32% bracket does not imply 32% taxed.   The 32% is only applied to amount that places the person into the 32% bracket.

- for new acquisitions, consider if accelerated depreciation is beneficial.  I let my tax man do my taxes, but I consult him to minimize the taxes I owe.   This includes use of accelerated depreciation, REP, STR benefit or anything else I can legally use to minimize my taxes.  This requires me to somewhat understand the rules, but not compared to CPAs, tax professionals, etc.

I invite any CPA/accountant to correct anything in my post.

Dan H. · Answer

I am curious where this property is a few miles from the ocean and only worth $650k?   The areas that come to mind are national city and maybe Chula Vista.

Next I question the source of your 3% annually as San Diego historical RE appreciation is near double that.

However, I view the near term as having more uncertainty than usual.

I invest in San Diego RE.   I have done well.   I have purchased the most negative cash flow non commercial residential that I have ever of.   $2.3m purchase with fully occupied at purchase rent of $6k total.   My underwriting showed negative $6k/month cash flow.  Negative cash flow clearly does not scare me.

My situation was different.   I knew it was not stabilized and I had confidence that I could make a lot of money on the property (the current value is over $1m above my purchase and rehab cost).

Now what do I think of your property?   For the past couple years I have been doing my underwriting as 5 years flat on appreciation and rent growth.   I started a little early, but last year my projection was pretty close to accurate.

Now a more long term perspective.   Every one of my San Diego properties has appreciated at least $2600/month for the hold.   I have some that have appreciated over $10k/month for their hold.  San Diego RE is about value adds, leverage, appreciation, and rent growth (many of my tenants got rent increases of at least $100/month, and some over $200/month on this flattish rent growth year).

I have zero doubt over the long term your property will appreciate far more than $1k/month (in fact I have little doubt it will exceed the $1600/month of my RE with the lowest monthly appreciation).   Short term I am a lot less confident and why I have been underwriting 5 years flat.

Something else to consider is the 2 of 5 year gains exemption.   your gains are not that big, but still something to consider.

So how long do you plan on holding?   To me if it is less than 5 years, selling now is ideal with all gains being tax free (in your case).   If it is more than 10 years, I think you will do good to hold.   The 5 to 10 years is the less certain duration.

A return below the passive SP500 is not sufficient for the effort and risk or residential RE.   This implies modest cash flow and flattish appreciation is not worth it.   10 years highly leveraged RE I have confidence will significantly exceed the return of the sp500.

Good luck

Rent or sell my San Diego County home?

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