Moving duty station(Sell or Rent the house)

14 Replies

Hi! Everyone! I currently have a house in Northridge, CA. I will be moving duty station out of state. I was wondering your thoughts about renting or selling my house. The estimate value of the house(according to Zillow or Redfin is around 500,000 to 540,000). My outstanding principal is 432,000.  I think I could rent my home for 2300 however I have a monthly payment of 2,700. So I have a negative cashflow. I was thinking of refinancing to lower my monthly so I could  to rent my house and to make a better cashflow. I know there are something that I need to consider such as emergency repairs, vacancies, and etc. I don't have a lot of emergency funds to cover of it.  Would it be better to Sell them or rent them out? Thank you in advance in your inputs. I would like to know your thoughts.

Raymond, with a negative cash flow and Californians pro tenant laws I would strongly consider selling your house in CA. Take the equity and use it for a rental in another location and use your vacation for your primary residence. Also look at a small multi family house as your primary residence in your new duty station. This is just a recommendation. Where are you pcsing to?

@Raymond Macasaet (first thank you for your service) PM so I can look up your Home's Value for you and give you a quick breakdown. I'm a USMC Veteran, Realtor in San Diego, CA I'll be happy to help you run the numbers for you. You should look into VA IRRRL and be aware of the funding fee if you do decide to clear out your VA Guarantee for the next VA home purchase.

Assuming your numbers are correct the property is not good cash flow for a rental even using San Diego's low rent to value expectations.  I seek rent to value ratios above 0.7% and prefer above 0.75%.  Your RE value to rent is 5.4%.  It will have huge negative cash flow when you add in items such as PM (use 12% because while the rates are lower there is typically items like re-sign fees, find tenant fees, and contractor service fees), vacancy, maintenance/cap expense estimate, and miscellaneous. 

Realizing this RE will have huge negative cash flow, how confident are you of market appreciation (property and rent) in excess of the negative cash flow as no one invests with a plan that shows them losing money on the investment.

Final thing to consider is your likelihood of coming back to San Diego and how nice a home is it for you and your family.  if you think you are going to return to San Diego in the next 5 years then eating the negative cash flow and hoping some of it is offset by rent and property appreciation may be worth.

I suspect your analysis will show that the smart financial decision is to sell the RE.  I believe if you get deployed elsewhere that your selling fees are covered but verify this.

Good luck

Aaron,
Thank you for the advice. I don't have orders yet. I would like to keep the house but I am afraid you are right. 

Originally posted by @Aaron Lee :

Raymond, with a negative cash flow and Californians pro tenant laws I would strongly consider selling your house in CA. Take the equity and use it for a rental in another location and use your vacation for your primary residence. Also look at a small multi family house as your primary residence in your new duty station. This is just a recommendation. Where are you pcsing to?

Cesar,
thank you for the advice.
 
Originally posted by @Cesar Castro :

@Raymond Macasaet (first thank you for your service) PM so I can look up your Home's Value for you and give you a quick breakdown. I'm a USMC Veteran, Realtor in San Diego, CA I'll be happy to help you run the numbers for you. You should look into VA IRRRL and be aware of the funding fee if you do decide to clear out your VA Guarantee for the next VA home purchase.

Dan,

Thank you!

Originally posted by @Dan Heuschele :

Assuming your numbers are correct the property is not good cash flow for a rental even using San Diego's low rent to value expectations.  I seek rent to value ratios above 0.7% and prefer above 0.75%.  Your RE value to rent is 5.4%.  It will have huge negative cash flow when you add in items such as PM (use 12% because while the rates are lower there is typically items like re-sign fees, find tenant fees, and contractor service fees), vacancy, maintenance/cap expense estimate, and miscellaneous. 

Realizing this RE will have huge negative cash flow, how confident are you of market appreciation (property and rent) in excess of the negative cash flow as no one invests with a plan that shows them losing money on the investment.

Final thing to consider is your likelihood of coming back to San Diego and how nice a home is it for you and your family.  if you think you are going to return to San Diego in the next 5 years then eating the negative cash flow and hoping some of it is offset by rent and property appreciation may be worth.

I suspect your analysis will show that the smart financial decision is to sell the RE.  I believe if you get deployed elsewhere that your selling fees are covered but verify this.

Good luck

@Raymond Macasaet Sell. There is almost no reason to keep that property. Even if you refi you are losing tons of money. Add in that California is the worst state for landlords, they hate anyone with a business ($800/year for LLC), and have some of the highest tax rates in the US and you can see that not only is the property not very good, but neither is the location.

If it were me I would sell the property, use the funds to buy a rental property that performs, and use my VA at my new duty station to buy a 2-4 unit property. In 2 years, you can come visit and buy me a thank-you beer :)

Best of luck!

Bryan,

Thank you for your inputs! I really appreciate it!



Originally posted by @Bryan O. :

@Raymond Macasaet Sell. There is almost no reason to keep that property. Even if you refi you are losing tons of money. Add in that California is the worst state for landlords, they hate anyone with a business ($800/year for LLC), and have some of the highest tax rates in the US and you can see that not only is the property not very good, but neither is the location.

If it were me I would sell the property, use the funds to buy a rental property that performs, and use my VA at my new duty station to buy a 2-4 unit property. In 2 years, you can come visit and buy me a thank-you beer :)

Best of luck!

If you sell the house you will have a very hard time ever owning in California again. If that is not a concern then having a large negative cash flow is a huge financial and emotional stress. If you can refi and manage to hold on without much financial stress you could always do that for a year or 2 to see what the future brings for you.

I’d sell. I avoid negative cash flow properties. 

@Raymond Macasaet Sell, sell, sell. And don't think twice about it again. It is a seller's market, Cali is incredibly expensive, land lord laws are not favorable, and you are in a negative cash flow situation. You will highly regret it if you hold onto it because it will just drain money from your account on a monthly basis. Refinancing won't help you in this situation. Sell it, take the money you made from it and go buy rental properties that create positive cash flow in markets that make sense (i.e. rent to purchase ratio's at or equal to 1%). The midwest and south have great cash flow properties: Ohio, Illinois, Michigan, Indiana, Wisconsin, Tennessee, Alabama, Kentucky, Kansas, Florida, Texas. You can buy 2-3 cash flowing properties with the capital you make from the sale of your house in Cali. Why keep one negative cash flow property when you can go by 2-3 positive cash flow properties? 

@Raymond Macasaet Sell, sell, sell. And don't think twice about it again. It is a seller's market, Cali is incredibly expensive, land lord laws are not favorable, and you are in a negative cash flow situation. You will highly regret it if you hold onto it because it will just drain money from your account on a monthly basis. Refinancing won't help you in this situation. Sell it, take the money you made from it and go buy rental properties that create positive cash flow in markets that make sense (i.e. rent to purchase ratio's at or equal to 1%). The midwest and south have great cash flow properties: Ohio, Illinois, Michigan, Indiana, Wisconsin, Tennessee, Alabama, Kentucky, Kansas, Florida, Texas. You can buy 2-3 cash flowing properties with the capital you make from the sale of your house in Cali. Why keep one negative cash flow property when you can go by 2-3 positive cash flow properties? 

I agree with Aaron Lee.  Sell it and a Quadplex would be a good way to go.

Thank you for sharing your knowledge.


Originally posted b22y @Stuart Grazier :

@Raymond Macasaet Sell, sell, sell. And don't think twice about it again. It is a seller's market, Cali is incredibly expensive, land lord laws are not favorable, and you are in a negative cash flow situation. You will highly regret it if you hold onto it because it will just drain money from your account on a monthly basis. Refinancing won't help you in this situation. Sell it, take the money you made from it and go buy rental properties that create positive cash flow in markets that make sense (i.e. rent to purchase ratio's at or equal to 1%). The midwest and south have great cash flow properties: Ohio, Illinois, Michigan, Indiana, Wisconsin, Tennessee, Alabama, Kentucky, Kansas, Florida, Texas. You can buy 2-3 cash flowing properties with the capital you make from the sale of your house in Cali. Why keep one negative cash flow property when you can go by 2-3 positive cash flow properties? 

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