How would you approach my situation? Oakland v Midwest/Dallas
Hey All,
Would love to hear your opinion/logic on my situation... Keep in mind I'm a newbie at this so I appreciate any insight/opinions...
tl;dr - (negative) cash flow v/s betting on appreciation
My fiance is likely to secure a job in Dallas and moving there in the next two months. I would stay in Oakland for the next 6-12months and then move out there to join her. I'm wondering what I should do with my two properties out here...
*keep in mind I started on Bigger Pockets after getting these two spots, so I purchased more as a homeowner/consumer as opposed to an educated investor
**Also, I have a good paying W2 job selling enterprise software, and have been trying to get into REI only on the side. This gives me quite the financial buffer for negative cashflow in exchange for equity.
***My goals/strategy is long term buy and hold/cash flow props/brrrr when I can find them (all midwest /dallas moving forward)
****My ultimate question is, should I keep it, rent it out, and take a negative cashflow and bank on debt reduction/bet on appreciation, or should I just sell it and cash out? I'm fairly certain that the way the market is now, I can get minimum the appraisal values if I sell.
1. The current house we live in is in Highland Terrace (Fruitvale area), and it seems like the area is improving quite nicely. I purchased a (horribly) flipped house Dec 2015 for $550k, 4 bed 2 bath, 1300SF, completely remodeled. I recently did a cash out refi for $562k @ 4.25%, appraising the property at $750k (I am planning on taking the cash to invest in some actual cashflow props in the midwest). PITI is ~$3600/month.
So far, I've probably put in an additional ~12k into repairs, drainage, updated appliances, gutters, termites etc., getting stuff built the right way to make the house last. There is probably still around ~15k more to do (earthquake retrofit, minor stucco repair, landscape) before it is rent ready, long term. I have the cash ready from my refi.
I'm estimating rent I can get will be minimum $3750, possibly up to $4000/month. Afterall, the house itself looks really great, pretty much brand new, and with the additional work I've put in, the house should last.
As you can see, the rent would only barely cover PITI. Any maintenance/repairs, capex, vacancy, and property management for when I leave, will be the negative cashflow.
Now having said all that, the only reason I'm still considering keeping it is because of the potential of Fruitvale. Even though Uber is no longer coming into town, they are looking to sell the remodeled Sears building, which will bring more jobs into Oakland. Blue Shield is bringing over 1200 more employees as it relocates it's HQ to downtown Oak in 2019. There are primarily condos / apartments around downtown & Lake Merritt, so naturally, if you want more space, you would go have to go east, west or north. The Brooklyn Basin, after getting developed, will provide more trendy shops, restaurants, etc. to make East Oakland nicer. So if I were to bet, I'd bet on my area to improve quite significantly in the next 10 years. So my logic is, marginal negative cashflow + reduction of debt + gentrification/appreciation might make it worth it to hold long term?
2. Similar situation in my condo in Adam's point (Lake Merritt), although I'm already renting the spot out. I bought it at $341k in 2014, refi'd recently at $362K, 4.375% w/ $550K appraisal. PITI is $2100 + HOA is $421 (for ZEROOO amenities I kid you not). I'm renting it out at $2555/month, but will raise that up to $2700-2800 in next couple years. Tenants I have in there are awesome, and there are rarely any repair costs, capex, and vacancy rate for this area I can ensure will be 0%. The only thing here, is that Lake Merritt has already gone through the crazy double digit appreciate phase, so upside potential is perhaps a bit more capped, although more stable than fruitvale in the event of near term adjustment.
What are your thoughts? Should I hold long term to see where Oakland as a housing market ends up? Or cash out and take my money to other markets (Dallas/Columbus) to see what damage I can do out there? Or perhaps even 1031 exchange on a duplex+ in Oak and BRRR (no repeat) before I leave..on an actual good deal? (Let me know if you know of anything...)
Please let me know if you need more information that I've missed!