Moving overseas... what to do with current home?

Question

Hello all!

Please bare with me as I am new to the real estate investing world.

I am currently active duty military and just received orders to move my family to Okinawa, Japan for 3 years. I currently have a home in Temecula, California that I use as my primary residence. My question is, should I try to rent it out for 3 years while I’m gone (keep in mind, the rental rates aren’t high in my area and adding a property manager to it all, I’d likely be paying out of pocket monthly) in hopes that I’ll gain enough equity to make it worth my while in a few years time? Or should I sell it now, and take the small profit? Anything helps.

Martin Carstens · Answer

Hunter, you can always sell. However you only get to do it once! Try the rental, see if you can work it out? I spend eight months a year on the high seas. If I can do it "with a manager" anyone can!

Best of luck!

Donald E Appleberry · Answer

@Hunter Bernius

"You only lose when you sell". It definitely boils down to the numbers on the property. If you've owned it for a while, it could make more sense to rent it. I manage property here in San Diego. So I can tell you first hand filling the vacancy isn't a big concern right now. Who you fill it with will always be one however. Vetting is CRUCIAL.

On the flip side, if the numbers for renting it don't make you feel comfortable, then the discussion moves to how the selling market is right now. That my friend is good news for you as it is INSANE. Hahha. All of our listings (with the exception of downtown) have been put into escrow within the first few days being put on the market. I wish I could take all the credit for that, but realistically its just how the market is right now.

I hold real estate investing meet ups once a month with @David Pere. The next one being the Second Saturday of December. Come out and talk with other investors and get some more info or feel free to connect with me on here and we can do a deep dive on the strategy. Best of luck, brutha.

David Pere · Answer

@Hunter Bernius "it depends".

How much money could you make selling it?

Do you plan on being stationed here again, or living here in the future?

Mark Frattini · Answer

Hi @Hunter Bernius

Welcome to BP! If you need some help with "running the numbers" to see if renting your house makes sense feel free to reach out. There are a lot of factors to consider and it will also depend on your long term goals.

Beth Vandroff · Answer

@Ray Alsaigh Thank you for your service. If you’re able think about keeping it and renting it out. RE still the best investment & think about what you’d do with the money from the sale. No where to put it and make a decent return!!!! Be safe.

Ray Alsaigh · Answer

@Hunter Bernius First of all, thank you for your service!

Like many people have already mentioned, the answer to your question will depend on your goals long term. From my experience working with investors in San Diego, most of them will hold on to the property if they can because this is an appreciation market.

If you do decide to hold on to it and rent it, like @Donald E Appleberry mentioned, finding a tenant in the current market condition will not be a challenge, as there's a high demand for housing and lower supply from what I'm seeing. However, picking the right tenant will be crucial, specially since you will be oversees so I would make sure to vet everyone and pick the one you really feel comfortable with.

When it comes to cash flow, I know it's a little difficult cash flowing on a property in this market but obviously your loan will have a big impact.

Feel free to reach out if you have any questions.

Best of Luck!

Claudio Salvatorelli · Answer

My honest recommendation, Hold that property it will provide extra cashflow while rented plus you most likely will get a lot of equity in the next 5 years or so.

Good luck,

Claudio Salvatorelli

Dan H. · Answer

Southern CA real estate has a long history of outstanding appreciation.   When financed, even modest appreciation can produce great returns.  we have owned rentals in San Diego since 1993.   Every property we own has appreciated at least $1k per month over our hold.  This implies that holding the property is very unlikely to not provide a positive return even if the initial cash flow is a little negative.  Have you lived in the home at least 2 years?   This is critical to get the sales tax exclusion.  Without the sales tax exclusion, your small profit would be reduced.  In that case it could make more sense to make it a rental and 1031 exchange it when you identify another investment property.

Good luck

Kenneth Donaghy · Answer

@Hunter Bernius, That is a hard question to answer without knowing more about your goals. Even more difficult because you will be in Japan. I can give you an example of one my clients in a similar situation. They bought a home here in SD a couple years ago while stationed on North Island. When they received orders to the East Coast, they initially rented it out to another military family. Little time went by, when they realized it would better for their investment strategy to capture the equity, sell, and get better, faster returns purchasing assets out of state.  So what are your goals? Do you have a plan? Will you be flexible if you need to change the plan?

Kevin Hunter · Answer

@Hunter Bernius, did you use a VA loan on the property or a conventional loan? As a military investor, like you from the locations your talking about, I think the loan makes a difference because it will affect the cash-on-cash return.  It also depends on what your long term goals are.  Are you trying to build a nice portfolio for when you retire, are you looking to move the money into something else, are you on the fence regarding real estate investing?

I bought a place in Santee in 2005 with a VA loan and kept it.  It was the second property I ever bought.  I have paid out of pocket a bit since I left in 2008.  However, I can refinance right now if I want and cash flow, but extend the life of the loan, or pay it off in 2035 as planned after having people pay 98% of it off for me.  I chose the latter because of my long-term goals.  It all depends on YOUR goals.

Feel free to PM me and I can walk through the analysis with you so you know exactly what it is going to cost you.  I am happy to help.

SF,  Kevin

Moving overseas... what to do with current home?

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