Hey everyone! We are looking for some words of wisdom from those more experienced than us with our situation. We are a family of 5 looking to move out of California. Our primary residence is in Orange County, paid $610k, currently owe about $550k, market value is (per my realtor) around 900k. Monthly mortgage, taxes, insurance is just under $3200. A couple local PM companies have said they think we can get around 3.5-4k/mo for it rented. We are looking at moving out of state and initially renting in our new location while we get a feel for the area and new lifestyle. There's obviously a chance we could complete hate it and want to move back to Cali, but we're leaning towards that not happening. So we are debating on whether we should sell our primary and use that cash to purchase a property (or two) elsewhere, or rent out our primary while renting for a year and saving for our next property. To be honest I haven't bothered using all the fancy calculators to calculate the exact dollar amount we would profit/lose every month after taking maintenance etc into account. Our thoughts on renting is obviously to still retain the property in the event we decide to move back, all the while having someone else pay most if not all of the mortgage. Our concerns are all the usual concerns one would have with renting (i.e. bad renters, missed/late payments, California being so renter-focused, etc). And our concern with selling is that we may not be able to afford to come back to the lifestyle we've grown accustomed to in CA if we in fact returned. So just curious to hear from those who have been through a similar situation and how that worked for you. Any insight or advice would be greatly appreciated!
I made a similar move, but on a smaller scale. Moved from a $130k home to a $200k home, but the process is the same. I've been renting out my previous house for 3 years now. One of the things that helped that decision was the status of my house before I moved out, it had new carpet, new appliances, new HVAC; so I knew there shouldn't be any major expenses in the short term. Calculated how much the mortgage would be paid down in 5 years, if I rented it for 5 years and then sold, and compared that to if I had sold then. It's currently cash flowing $400 a month and getting paid down. Screening tenants is probably the biggest factor. I show the house myself so I get to personally meet everyone (usually before they've submitted applications). The ones truly interested will submit applications within 24 hours. I've been lucky with good tenants, no evictions, no major damages (dog smell and fleas in carpet though was a pain). I found that here and with my house anyways, I was able to get a higher rent than I expected. Look at similar properties in the area to see how their rate is compared to yours. What I actually did was listed it for rent a couple months before listing for sale to see if we had any interested in the property as a rental for my price, and I did. That gave me a fall back option of selling if I didn't have enough interest. Good luck.
@Jon S. based on those few numbers if you were to rent it as an investment it would be terrible compared to anything in a productive market. When we left Ca after 30 years our friends said 'don't sell your house you won't be able to afford coming back'. Well we sold the houses we had and bought many more profit producing rentals elsewhere. Ca used to be a really great place to live and raise a family-we lived in Silicon Valley; I would be very hesitant to move there today.
In the last 5 years we have made a lot more money in real estate than we would have made by keeping our Ca properties.
@Bill Ward - Thank you for the insight! We've also done a lot of upgrades including roof, HVAC, flooring, etc so the house is in good shape. Do you self-manage from out of state? Any issues doing that?
@Bjorn Ahlblad Yes I agree. We aren't so much looking at it right now as an investment property but moreso as a failsafe in case we do want to come back. I think if we rented it out we would eventually sell in a year or two to put that money to good use.
@Jon S. undefined
I self manage but I only live 20 minutes away. I’ve never had a call that was an “emergency”, and most tenants prefer to text over call anyways. My house attracts young families or couples. Only complaints I’ve had were of insects or rodents which I have solved with contracting a local pest company that does maintenance there. Tenants can call them directly too, so I don’t have to be involved.
I do an open house style showing when I’m due for new tenants, allows me to meet everyone interested before they put in applications. (I schedule showings 15-30 min apart) And it limits the number of times I need to be over there to conduct viewings.