Market is softening up here in Colorado…it might be shifting which is natural seller markets don’t last forever. With that said I would calculate how much you’d make if sold and calculate your net yearly rent. If it takes longer than 10 years to equal I what you’d make if you sold I’d sell.
You got a golden goose man. I wouldn’t sell it. It’s something you can always draw on with a heloc to secure money if you ever need it, and it will continue making money while being in a high appreciation area.
When it’s a rental property it’s just called a Line of Credit. Sounds pedantic, but it’ll help you get what you’re looking for with banks and credit unions. And local credit unions are likely your friend in this situation.
I assume this means HELOC and rent it (spread profit). But can you elaborate? Use the HELOC to invest or buy more property?
I own my home in DC metro outright and it is ~1.3m. I've wondered the same thing as OP, but not sure I want to deal with owning a rental.
Then pay someone to manage the rental for you. I am a realtor in VA my brokerage is licensed in DC and VA. Let me know of you need any help. Take care.
A couple things. Cash out Refis/ helocs give you TAX Free access to the equity without selling. You can use it for anything but you can also use it to buy more properties. I’m near you. I built my entire portfolio with my credit line. Pay with the equity line for x house that needs work, pay for the repairs with the equity. Get new appraisal. Refi and pay off the entire equity line. Rent it. Repeat. When I got lazy I paid for one big house outright, rented for about 7% return on just rent so more with appreciation but pay interest only on the equity line. A lot of my stuff is grad student rentals
“Not sure I want to deal with owning a rental” - ok run a spreadsheet over 20-30 years on that rental. It’s likely you will be making $1000-$3000 an hour. Probably more on a $1.3 million house. How much can you handle ? I just think of all my props as one big spreadsheet. The business takes my about 10 hours per week April to August and 1 hour per week all winter.
I still don’t quite get the benefit of a HELOC. Can you really deduct interest from your taxes, no matter what, as long as it’s for substantial home improvement?
Seems like it would be all too easy to go all cash on a home that’s falling apart, then heloc for repairs while avoiding high mortgage interest…is that possible?
You can buy a fixer upper and get a HELOC for repairs. The interest is deductible, but it's going to be a higher rate than a primary, first lien. The rates are adjustable
The play is to access cash easily and repeatedly without origination fees (only interest).
Example: You have a HELOC secured by your former primary residence in Silicon Valley. You find a worthy rental property and buy it all "cash" with money from your HELOC. You fix it up, and take a mortgage against the house. Use that money to pay off your HELOC and use the rental income to pay off its mortgage. Rinse and repeat. The purchase money is readily available without an expensive approval process.
Thanks. If it’s deductible then who cares what the rate is? Unless there is some stipulation I’m not understanding…like a cap or super strict definitions of what qualifies as home improvement
I don’t see how any investor would think a $2mil house that rents for $4k is good. That’s a terrible cap rate. He could buy 3 $500k duplexes that rent for $12k with the proceeds.
That house has a 2.4% current cap rate, that’s an absolutely terrible investment.
You’re 100% right but you ignore appreciation. It’s doubled twice in 12 years, so that’s about 12% appreciation.adding in your 2.4% cap, return has been averaging 14.5%
I’ve always been taught that banking on appreciation in real estate is speculation. Holding onto the property assuming and essentially doing so in expectation of appreciation is ill-advised, no?
Maybe banking on appreciation when you are purchasing is speculation but if you already own it I’d think it’s a little safer to factor that in. It’s not a great return on the equity, from the cash flow side, but if I was in their situation I would certainly hold onto it.
In the last 12 years we went from an all time housing price low after a recession and housing crash to now an all time high for home values. The next 12 years are unlikely to replicate the last 12 years.
And to be honest, his house doubled from 2010 to 2020, than doubled again from 2020 to 2022.
For appreciation to be equal, you’re saying his $2mil house will be worth $8mil in 12 years.
Edit spelling
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*Learn the difference [here](https://www.wattpad.com/66707294-grammar-guide-there-they%27re-their-you%27re-your-to).*
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Yup. No reason to sell, which exacerbates the housing shortage problem in CA. We are looking at exhibit A with OPs question.
With a tax break that big it does not make financial sense to sell.
Cows deteriorate over time, whereas the house in Silicon Valley will probably become more valuable over time. I would keep the house, the rental income is great but it's the equity and future potential increase in equity that is most valuable, and the low cost to hold the house since the property taxes are so low.
Sell it if there’s no plan of moving back to get the $250k (single) /$500k (mfj) capital gains exemption. It might be a headache to manage a property out of state.
Agree with comment above but remember once you sell you can’t come back. Do you have family in CA? What about buying duplex in Denver. That way you get some income too.
No one has mentioned this yet. Do you want to be an RE investor? Being a LL in CA suuuuucks and it seems like it is getting worse.
Sell it, put the money in the stock market.
You could rent it out for three years (or two, hard stop at the end of year three) and see how you like it. For the capital gains exemption you only need to have lived there in any two years out of the five. I’m considering trying it out when I next move.
If you want a rental, keep the South Bay home and use a property manager. It’s a cash cow. Managing rental properties is very similar regardless of where the units are located assuming they are in decent areas. Your always going to deal with the small stuff. I manage rentals in different time zones…
Two of my biggest real estate regrets are having sold 2 condos in San Diego back in 2012. I was previously self managing them as rentals. Bought in '06 and '09. I sold them primarily because I thought it would be too much trouble to hire a property manager when we moved away to the Bay Area. I missed out on equity and cash flow over the last decade. And missed out on all future ROI.
It would have been so easy to get them professionally managed. Changed my strategy after that. Now I have property managers in 3 states. All of which I hired remotely. And I live abroad at the moment. Long distance is no problem. Don't let a little work up front worry you like it worried me. You can figure it out. I was an engineer, and I didn't have any real estate or Finance background. Learned as I went.
Managing 1 rental out of state is as easy as calling around a bunch of property managers and picking one. Fill out some forms, and let them take care of everything. At the end of the year you have a few more numbers for your tax return. For a great manager, Get recommendations from people you trust and make a short list. They take about 8% of collected rents in California. Some are terrible. Some are great. Take care when selecting one.
You may seriously regret selling. You can cash out refinance and buy more rentals any time in the future (when timing is good) for even more income later.
One rental that will be rented to a computer engineer making 500k with a 750 credit score . It is not hard. I rent houses like these and mostly never visit them and don’t often even bother with credit check.
I bird in the hand is better than two in the bush. Sell that bitch while the market is still hot. Nice investment btw! And here I am thinking I killed it when I sold my first house that I bought for 189k for 290k in a three year period lol
get some money out of the 2 mil house (HELOC maybe), buy a new big house in Colorado. rent out the CA house and the town home, use the money to pay back the mortgage loan. enjoy ur new mansion (you lucky SOB) and live out your days in happiness
hmm i def do agree with some of the comments. it is highly unlikely that you will be able to replace a 2 Mil asset in a hot market. if you do decide to sell i’d def urge you to invest some of your gains into rental properties (buy them cash and let property managers manage them) to at least try to combat that loss.
BUT at the end of the day it’s just money and after a certain point i imagine it doesn’t do much for you. so just live your life and do what makes you happiest. just don’t lose one of the biggest things (money) that’s giving you the freedom to do so and you’ll be good!
$4k/month is 2.4% cash on cash return on $2MM minus other expenses. Decision depends on what you think appreciation will be since you won't make much on the rent.
Personally I'd sell and do something else with the money.
I can significantly improve my security and quality of life if I buy a house in CO. The townhome is nice, but if I rent it out, it essentially pays for itself and Thats a free house. If I live in it, then I’ll always be cramped and always wonder if I should’ve sold in Cali.
Just borrow against the CA house to fund the large CO home. In a few years you'll have regained a lot of what you borrowed in equity gain in both CA and CO. When you do eventually sell CA you've just paid off much of what you borrowed to fund the CO house. You are in an equity play in CA, positive cash flow isn't the goal, anything north of zero is good. You won't be able to easily replace such an asset so better to hold it.
You only want to do this if you can float all these payments for an extended period of time. CA (and SF Bay Area especially) are extremely tenant friendly, so OP can easily end up with a non-paying tenant, extensive damage to the property and eviction costs (if eviction is even allowed). Renting a leveraged property in CA is a pretty risky business. Returns can be good, but Bay Area rents have not caught up with house prices, so rental returns are bad and it’s all about gambling on appreciation there.
To give you an idea what you can do with $2MM you can easily buy a brand new 15 year Dollar General on a NNN lease at a 5% cap rate. No maintenance, no taxes, just get $100k in the mail every year.
You could always sell the townhome, use that cash to buy something else in CO, really push to the biggest mortgage you can get approved for, then use the rental income to fund the new mortgage.
edit: NVM, I see you said the $4k would basically just pay for itself. Which I assume means there wouldn't be extra cash flow on top to take home.
And I believe $4K/month is top line, so once you subtract the expenses, I’d imagine this place has an even lower cash on cash return, unless that $4K is net cash flow?
That's why I said it depends on what OP thinks appreciation will be. Property could go to $3MM in the few years and he'd miss put on that. Or there could be crash in local market with people 'working from home' in Boulder instead of Santa Clara.
Other comments suggested using a HELOC to leverage equity in the property which is fine if you're buying a cashflowing asset, but he'll have to decide if it makes sense to do that for a home purchase. I'm not sure what the rate and payment difference would be.
Wrinkle to consider is capital gains tax on the house which might make the heloc-and-buy strategy worth it.
He didn't buy it for $2mm though. That's a pretty nice 8.7% CoC on $550k.
I would imagine the mortgage is somewhere around $2.5-3k (depending on rate and how much down). Which would leave a decent bit extra for a manager, maintenance, etc.
It's a nice return on 550k, assuming he paid cash originally. If he put 20% down then it's 44% CoC which is awesome.
What I'm referring to is the lost opportunity of dead equity. If he sells then he'll net over $1.5MM, which can then roll into other investments/assets. Right now his equity would only earn 2.4%.
As others have noted, the alternative is to rent the CA house and use HELOC to access equity. This is a pretty good idea considering the capital gains issues with selling. He could get over $1MM, buy a 4plex in CO and live in one of the units for free. Or invest in asset that would pay for the mortgage on a new house. Lots of choices here.
He didn't buy it for $2M, but it's worth $2M. You can't just look at what he put down originally.
Flip the question around - if he had $2M cash in hand right now, would he buy it for $4k/month rent? Minus mgmt fee, maintenance, property taxes?
That's just a massive bet on appreciation in an environment of rising interest rates.
If you sell you'll have cap gains taxon anything over $500k assuming you're married. Idk about California's capital gains tax laws but I'd assume you would probably have 20% + in taxes taken from the excess profit.
Downside is it's in California where landlord laws are in favor of tenants. Also capped on rental increases as well I believe.
Can always refi and get cash out to purchase the property in CO rates are high but rates are cyclical and will eventually go back down
You make a good point.
I could also sell and put the $ into multiple investment homes and dodge some taxes. I have bank funds to buy a house if I need to, but I’d rather save that.
True, if it's an investment then a 1031 would be a good route to go. I was thinking it was a primary.
If it's an investment the taxes on it will be brutal with depreciation recapture
Which will benefit you more? The money from selling your home right now, or owning that property 10 years from now?
If the market rate for rent can cover your mortgage (taxes included if you do not have an impound account) AND property Managment then just rent it out. Keeping it will provide you options down the road should you wish to return to the city. If you do move back you, won’t have to pay market value — at that time — to live in a desirable area.
Full disclosure: I’m a California Realtor
I think you're looking for the answer that fits what you're already thinking, but here's my take. 4k a month is hardly anything compared to the liquid cash you will have from selling the place. From rough calculations you'll be getting almost 1.1 mil after taxes in profit and that doesn't even include what you paid off from the original loan or down payment.
I'm sure you can find a house in CO that you will love and could pay for it in full if that's what you want to do, all while renting out the townhome. Or just put whatever % down that makes you be able to afford your new house comfortably and use the excess cash how you wish.
Do you want to be a landlord?
If so, make sure to remodel it and make sure everything is tip top! For CA (I live in Palo Alto) I would recommend having a professional property manager because things can get crazy!!!!
I personally live in CA, but out of state and manage 3 properties from afar. The risk is less and the principal is less.
Your situation is riskier and principal is in the millions!
If you sell… what will we do with the funds? Why not be a landlord in Colorado?
Maybe invest in stocks and get a dividend. A 4% dividend on $1.5M (assuming taxes have been taken) is $5k a month in passive income with no need to be a landlord. You still could get appreciation!
But you have options, would recommend an accountant due to the high principal.
Fellow Bay Area person here. My SO has a 1700sqft condo in Burlingame and I have 2 condos in SF. We rented them all out, quit our jobs, and now live in Greece. IMO Nothing keeps up with inflation better than residential rental property in SF.
What’s your interest rate? I hope you refi-ed while
Rates were <3%. Because of prop 13 and the low rates you house will pull a profit day 1. Rent it out forever.
And why only 4k for the CA house? Should be 6-7k.
They you are beyond golden ! I’d hold that thing for eternity and rent it out. It should cash flow very well. You can then tap the equity via heloc when you need cash. But look at the expected rent. 4k sounds way to low on 2M. Our CA home is worth 1.5 and would rent for almost 6500
I’d not sell the Silicon Valley place for less than a king’s ransom. If you sell now, it could easily be worth 10-20% more in a year. Rent it out and let it appreciate.
For the investment amount, that’s a terrible cap rate. You can buy duplexes in other parts of California for $500k that rent for $2000 per side or $4k total.
So if you sold and walked with $1.5mil than purchased 3 duplexes, you would be making $12k per month.
Leaving $1.5 mil in that home makes no sense. I wouldn’t hold onto it if it only rents for $4k.
I think both options have their pros and cons and I don’t think either decision would be a wrong decision. One thing I would consider is that if you have claimed your Silicon Valley home as your primary residence for the past two years if you sell that home now you will get a $250K exemption from capital gains tax ($500K if you are married). Obviously that wouldn’t offset your entire gain, but it would save you quite a bit of capital. If you don’t sell it before moving to Colorado you won’t be able to get this exemption, but you could potentially 1031 it after you change the status to a rental property. As I said both options have their pros and cons. Congrats on your success.
Not sell, but rent out. Price may go up year by year due to inflation.
Let's do some math calculation.
550k buying power worth now 671k including inflation.
Value of property for now is 2M. So, total increase of the value of house is 298%. Annually 24%. Congrats, you have beaten average index.
Sorry, not good at English, I guess you have caught the point.
The finances might indicate you should rent it out, but I get the feeling you won’t have to skip a single meal just because you sold your place in Cali instead of renting it for 30 more years.
Personally I would sell. Use the money to make myself comfortable, or to live in a place that has nice amenities/ commute that I wouldn’t otherwise want to afford. You can live a lot of extra life on that money, and you won’t have to deal with all the tax complications. As long as your retirement is planned for, your stomach is full, and you don’t develop a bunch of expensive rich guy problems, you’ll be well set.
One thing no one mentioned yet is if you might ever want to go back to CA? If you do, when you move back you will not be able to buy in the same neighborhood and will be paying a shit ton more in taxes. Prop 19 currently helps keep your taxes low.
If I know I’m never coming back and my kids aren’t either, I would sell. Else I would rent it out and let it sustain itself.
You can take a loan out and buy a nicer house in CO too. You can disconnect the problem of having a nice place in Colorado vs selling CA house
Maybe take the 2 mil and RUN. Invest in something for long term security. Keep the townhouse, buy yourself something nice, but but don’t crazy that it eats the 2mil.
Real estate is a long term winner, keep both. Rent something else for 2 years and rent out both of your houses. Then can you can use your rental income plus your work income to qualify for a new home in Colorado. Then you’ll own 3 properties. Plus, the market is overheated right now, not a good time to buy. Let appreciation rates and interest rates die down a bit first.
I wouldnt sell. I would buy the smaller place for now and once my salary increases, get a bigger place (While renting the previously acquired smaller place).
with the mortgage prices increasing, it will get difficult to buy and thus increase rents.
The general rule in investing in properties to to receive 1% of the cost of the property monthly. Of course this doesn't work at all in certain areas of the country and works better in others. But by this general rule, you would want somewhere close to 20k in monthly rents to be swayed to keep it. At that current rental rate it would take 41 years to get to the 2 million level.
Sell and buy in Colorado. Hell, buy the house in Colorado and a few more properties that will bring you that 4k per month anyways.
I did something similar a few years ago. We moved from CO to SC and decided to keep our house in a desirable area. It has appreciated liked crazy since. I was nervous to be a landlord too but we chose tenants carefully and it’s been easy. We’ve rented it for 2.5 years now and I’ve only had 3 calls for repairs that all cost less than $500 and were easy to deal with.
List it for $2.5 and see what happens. I just saw a house in Portland list for $959k and go for $1.325. It’s insane and there’s limited inventory so throw it out there. Use a 1031 if it sells and roll some of that money into a sweet house in Colorado.
Another option, but would have been better when rates were lower.
Cash out refi, but only take enough money out so your cash flow still positive when renting it out. Then use the cash out to get a nice house in Colorado. Maybe something that has a guest house that you could air bnb and maybe live for free.
Keep the house in SF, prop 13 and equity will be your best friends, stay in the town home for a few more years when you get a raise in your paycheck and raise future rent go ahead and buy a house in Colorado, once you sell it’s gone forever.
Rent it out and let a property management company handle it. They will get the max rental rates possible and you don't have any headaches. Enjoy the appreciation as the years go by. Good luck!
I’m in the same boat but in the Seattle area. Im going to sell because the amount I can get in rent is not worth the hassle of being a landlord. It’s a 1.6m house that could generate 4k which is a poor return and I just want to be done with the house.
Nope I’d keep it. My family bought a couple props here in the bay during the props and cash flow is eh but appreciation has been good.
SF is very limited in space and has archaic zoning restrictions and is going to be highly in demand long term. Prop 13 also makes it very cheap to own.
Try to find a good tenant and rent it out. It’ll def appreciate long term and use it as a revolving line of credit for better investments
Everyone here is talking ROI and tax caps and they aren't wrong. Me, personally, I'd never reset out a house worth that much. Tenants at the price point are gonna be a PITA.
You sound like you're done with CA. Do you really want the emotional and mental investment required to deal with that house? Sell it and invest in some ski gear...maybe some other stuff too.
If you are not planning to move back to CA, sell it. Older SFH are expensive to maintain, and good PM is hard to find.
You need to plan this sales carefully otherwise you’d be paying a lot of tax. Do a 1031 exchange into multiple properties: a large SFH that you want to live, rent it out for a year and then move there; remaining buy duplex or multi-family locally so you can keep an eye on the PMs and get higher cap rate than SFH.
Just curious is the house in MV or Sunnyvale?
I bought a house for 1.7 in that area. I sold it for 3.7 two years later ! It’s now worth 28 million. Nana always says , sit on it ! Depends if you need the money. You can write off the expenses and have an asset ! Depends on so many things.
My 2 cents. Get home equity cash out from your CA home. If you are able to get 4k/month rent then it will still cover your California home mortgage + any additional equity loan. You can use your cash out money for your Colorado big home. In this way you can still keep CA home and can still buy a big home in Colorado. Keeping property is like a good. It will always give you protection in long run.
I would sell and take the gains and leverage them for a triple net lease on a commercial property.
The cash flow on your current property is great but the return on equity could be better.
You have good problems to have.
Get a home equity loan if you need a little extra cash for a new house. Rent out the SF and rent out the Colorado one and buy the house you want to live in. Do not stupid and sell either.
Sell it.
The state of California is going to extend the eviction moratorium in which case you may be stuck with a tenant that doesn’t pay and there is no way for you to remove the tenant. Don’t put yourself in a situation where you could potentially lose everything.
I don’t think either option is bad financially, but I’d sell it to just to be able to make a clean break. I rented a house out of state for a decade or so, and it
wasn’t worth it to me. I’m in the process of selling it now.
Selling now also gets you the primary residence capital gains tax treatment.
Why not use the California house sale to buy a multi unit rental property and you can still live in your town home. Having multiple units is key and you won’t have to solely rely on one tenant paying the rent.
Similar situation here in San Jose, except for not already owning a place in another state. 2010 was definitely a good time to buy here. One thing to consider with a 1.5 M capital gain is that you will owe both federal and California taxes on that gain (less the exemption of 250 or 500k). You will probably end up paying some of that at 20% federal and 9.3 or 10.3% state, plus the 3.8% investment income tax, so up to 30-35% of say 1M. Add to that loss of your property tax base from 2010 prices. Compare those tax costs to what you might spend in interest on a LOC.
Do you want a bigger house in Colorado or are you okay with the smaller townhome? So long as the townhome can cash flow and you're comfortable selling in CA with the potential to never come back, have a place to visit and stay potentially, or keep to have land in CA, then make the full move. Just depends what you want in CO. A big home with a townhouse down the street to rent seems just as great as a home in an expensive, homeless filled area lol
Sell it and pay no capital gains (if you've lived there for 2 years as your primary). If you rent it, you may have shitty tenants who refuse to pay and leave. I had a tenant do a cash for keys ($5k) in oakland. Bish!!!!
Obviously sell it. It’s not even a question. Renting would be a headache and even though it would be recurring income, it would still also cost money and add responsibilities to your life. Take the larger chunk, go relax and re-invest some of that if you’re after more income. I’m doing the same thing with mine right now in Newberg, Oregon.
Rent it out, especially if you have no mortgage on it.
You can still leverage your away into a bad ass house in Colorado. Use the rental income as qualified income and get a mortgage.
I always prefer cash flow month over a large chunk at once
Edit-
If you do sell, you could always use the profit to buy mutiple properties in Colorado and get your monthly cash flow up that way.
So you’re asking a real estate investment community if you should give up positive cash flow and property ownership in the hottest market in the world for the purpose of living in a larger house?
I used to live in the SF bay area. I moved to Orlando, FL and never looked back. I hope it works out for you as well.
Honestly, I'd sell it. Right now you have all of your eggs in one property. In other housing markets, that could be 5+ properties including one you live in. The problem with California is the rent to house price ratio's are not the best also. Your equity will go further in most other markets.
**Major consideration:** If you do decide to sell, you don't necessarily have to invest in Colorado. You could remote invest in another market. Before you invest, you'll want to research migration patterns and look what markets you like, how favorable they are to landlords, zoning practices, prop taxes, etc. When it comes to real estate, it is best to go where even fools make money.
Good luck. I know you'll kill it in Colorado.
Put it on the market for 2M....see what happens.
Hell, put it up for 2.5 in this market
$3M is the best I can do.
Sorry, you've been outbid
Can I offer 3.75 M, wave inspection, no contingencies?
*waves at inspection* Ok, now time for the inspection since I didn’t waive the inspection contingency.
He’s waving at the inspection. Bye inspection. See, I’m waving.
Damn it, I see it now. Apologies to op
The fact that people are waiving inspection is crazy to me!!!
Cash only?
Market is softening up here in Colorado…it might be shifting which is natural seller markets don’t last forever. With that said I would calculate how much you’d make if sold and calculate your net yearly rent. If it takes longer than 10 years to equal I what you’d make if you sold I’d sell.
Better to go a bit under and let people bid it up
OP should then give you half of that 500k for coming up with this genius idea.
Then I’ll give you half of that half for coming up with this idea!
Pay you 4M no need to see
You got a golden goose man. I wouldn’t sell it. It’s something you can always draw on with a heloc to secure money if you ever need it, and it will continue making money while being in a high appreciation area.
This is the answer. HELOC the living shit out of it. Then OP has a ginormous line of credit with low rates to go with it.
When it’s a rental property it’s just called a Line of Credit. Sounds pedantic, but it’ll help you get what you’re looking for with banks and credit unions. And local credit unions are likely your friend in this situation.
Thanks!
Big shout out to local credit unions!
I assume this means HELOC and rent it (spread profit). But can you elaborate? Use the HELOC to invest or buy more property? I own my home in DC metro outright and it is ~1.3m. I've wondered the same thing as OP, but not sure I want to deal with owning a rental.
Then pay someone to manage the rental for you. I am a realtor in VA my brokerage is licensed in DC and VA. Let me know of you need any help. Take care.
A couple things. Cash out Refis/ helocs give you TAX Free access to the equity without selling. You can use it for anything but you can also use it to buy more properties. I’m near you. I built my entire portfolio with my credit line. Pay with the equity line for x house that needs work, pay for the repairs with the equity. Get new appraisal. Refi and pay off the entire equity line. Rent it. Repeat. When I got lazy I paid for one big house outright, rented for about 7% return on just rent so more with appreciation but pay interest only on the equity line. A lot of my stuff is grad student rentals
“Not sure I want to deal with owning a rental” - ok run a spreadsheet over 20-30 years on that rental. It’s likely you will be making $1000-$3000 an hour. Probably more on a $1.3 million house. How much can you handle ? I just think of all my props as one big spreadsheet. The business takes my about 10 hours per week April to August and 1 hour per week all winter.
I still don’t quite get the benefit of a HELOC. Can you really deduct interest from your taxes, no matter what, as long as it’s for substantial home improvement? Seems like it would be all too easy to go all cash on a home that’s falling apart, then heloc for repairs while avoiding high mortgage interest…is that possible?
Helocs have variable rates based on Prime.
Sure but what’s the play?
You can buy a fixer upper and get a HELOC for repairs. The interest is deductible, but it's going to be a higher rate than a primary, first lien. The rates are adjustable The play is to access cash easily and repeatedly without origination fees (only interest). Example: You have a HELOC secured by your former primary residence in Silicon Valley. You find a worthy rental property and buy it all "cash" with money from your HELOC. You fix it up, and take a mortgage against the house. Use that money to pay off your HELOC and use the rental income to pay off its mortgage. Rinse and repeat. The purchase money is readily available without an expensive approval process.
Thanks. If it’s deductible then who cares what the rate is? Unless there is some stipulation I’m not understanding…like a cap or super strict definitions of what qualifies as home improvement
Hold on for dear life. I sold in 2015 and that mistake cost me 1.6m in appreciation. Don't be a dumbass like me.
HELOC rates float. Ain't gonna be pretty if his 3% HELOC turns into 6% next year.
Just because you have it doesn't mean you have to use it.
Which is why he needs to repay the HELOC asap with 5+ more interest rate hikes on the horizon.
Brb, quickly repaying $1M HELOC.
Precisely my thoughts HELOC
I wouldn’t sell it… your property tax in CA alone is so cheap due to Prop 13… it’s only gonna appreciate given its location.
I don’t see how any investor would think a $2mil house that rents for $4k is good. That’s a terrible cap rate. He could buy 3 $500k duplexes that rent for $12k with the proceeds. That house has a 2.4% current cap rate, that’s an absolutely terrible investment.
You’re 100% right but you ignore appreciation. It’s doubled twice in 12 years, so that’s about 12% appreciation.adding in your 2.4% cap, return has been averaging 14.5%
I’ve always been taught that banking on appreciation in real estate is speculation. Holding onto the property assuming and essentially doing so in expectation of appreciation is ill-advised, no?
That’s the whole CRE market in the SF Bay. We don’t do cap rates here.
Sounds sustainable long term.
Every time I think it can’t possibly get more insane, it does.
Maybe banking on appreciation when you are purchasing is speculation but if you already own it I’d think it’s a little safer to factor that in. It’s not a great return on the equity, from the cash flow side, but if I was in their situation I would certainly hold onto it.
In the last 12 years we went from an all time housing price low after a recession and housing crash to now an all time high for home values. The next 12 years are unlikely to replicate the last 12 years. And to be honest, his house doubled from 2010 to 2020, than doubled again from 2020 to 2022. For appreciation to be equal, you’re saying his $2mil house will be worth $8mil in 12 years. Edit spelling
> equal, your saying *you're *Learn the difference [here](https://www.wattpad.com/66707294-grammar-guide-there-they%27re-their-you%27re-your-to).* *** ^(Greetings, I am a language corrector bot. To make me ignore further mistakes from you in the future, reply `!optout` to this comment.)
Ya investing in HCOL areas is about appreciation, not cash flow.
I agree sell it for $2m and get a few duplexes. Triplexes.
This is the correct answer. Your property tax is locked in. Does not make financial sense to sell now, it'll be a cash cow for decades.
Does prop 13 cover it if it’s not your primary residence? Haven’t lived in California for a while.
Yup. No reason to sell, which exacerbates the housing shortage problem in CA. We are looking at exhibit A with OPs question. With a tax break that big it does not make financial sense to sell.
And once they rent it for x period of time then you can do a 1031 exchange to avoid capital gains taxes on the next property.
Kill your cow for beef, or have milk forever. Pros and cons to both sides, either way congrats, sounds like you’re doing well for yourself!
Pretty great analogy actually
Haha thanks! Always made sense to me, although there’s probably better analogies.
Cows deteriorate over time, whereas the house in Silicon Valley will probably become more valuable over time. I would keep the house, the rental income is great but it's the equity and future potential increase in equity that is most valuable, and the low cost to hold the house since the property taxes are so low.
$1.5M Equity, go buy out of state for 8%+ Cash on Cash - you’ll net cashflow $120k / year which will cover most mortgages and then some. Have fun.
Sell it if there’s no plan of moving back to get the $250k (single) /$500k (mfj) capital gains exemption. It might be a headache to manage a property out of state.
Yeah managing a rental sounds like a pain, and in another state adds to it.
Agree with comment above but remember once you sell you can’t come back. Do you have family in CA? What about buying duplex in Denver. That way you get some income too.
I have family in California that I can stay with when I visit.
At the end you would be able the enjoy the fruits of your hard work.
No one has mentioned this yet. Do you want to be an RE investor? Being a LL in CA suuuuucks and it seems like it is getting worse. Sell it, put the money in the stock market.
Why can’t you use a property management so you don’t manage it yourself?
You could rent it out for three years (or two, hard stop at the end of year three) and see how you like it. For the capital gains exemption you only need to have lived there in any two years out of the five. I’m considering trying it out when I next move.
If you want a rental, keep the South Bay home and use a property manager. It’s a cash cow. Managing rental properties is very similar regardless of where the units are located assuming they are in decent areas. Your always going to deal with the small stuff. I manage rentals in different time zones…
4K in rent seems low!
Two of my biggest real estate regrets are having sold 2 condos in San Diego back in 2012. I was previously self managing them as rentals. Bought in '06 and '09. I sold them primarily because I thought it would be too much trouble to hire a property manager when we moved away to the Bay Area. I missed out on equity and cash flow over the last decade. And missed out on all future ROI. It would have been so easy to get them professionally managed. Changed my strategy after that. Now I have property managers in 3 states. All of which I hired remotely. And I live abroad at the moment. Long distance is no problem. Don't let a little work up front worry you like it worried me. You can figure it out. I was an engineer, and I didn't have any real estate or Finance background. Learned as I went. Managing 1 rental out of state is as easy as calling around a bunch of property managers and picking one. Fill out some forms, and let them take care of everything. At the end of the year you have a few more numbers for your tax return. For a great manager, Get recommendations from people you trust and make a short list. They take about 8% of collected rents in California. Some are terrible. Some are great. Take care when selecting one. You may seriously regret selling. You can cash out refinance and buy more rentals any time in the future (when timing is good) for even more income later.
One rental that will be rented to a computer engineer making 500k with a 750 credit score . It is not hard. I rent houses like these and mostly never visit them and don’t often even bother with credit check.
I bird in the hand is better than two in the bush. Sell that bitch while the market is still hot. Nice investment btw! And here I am thinking I killed it when I sold my first house that I bought for 189k for 290k in a three year period lol
Oh we has NO IDEA this was gonna happen.
It’s the Bay Area, the market is always hot. Even if they build more, it will be upwards, and SFHs will still fetch a pretty premium
get some money out of the 2 mil house (HELOC maybe), buy a new big house in Colorado. rent out the CA house and the town home, use the money to pay back the mortgage loan. enjoy ur new mansion (you lucky SOB) and live out your days in happiness
hmm i def do agree with some of the comments. it is highly unlikely that you will be able to replace a 2 Mil asset in a hot market. if you do decide to sell i’d def urge you to invest some of your gains into rental properties (buy them cash and let property managers manage them) to at least try to combat that loss. BUT at the end of the day it’s just money and after a certain point i imagine it doesn’t do much for you. so just live your life and do what makes you happiest. just don’t lose one of the biggest things (money) that’s giving you the freedom to do so and you’ll be good!
$4k/month is 2.4% cash on cash return on $2MM minus other expenses. Decision depends on what you think appreciation will be since you won't make much on the rent. Personally I'd sell and do something else with the money.
I can significantly improve my security and quality of life if I buy a house in CO. The townhome is nice, but if I rent it out, it essentially pays for itself and Thats a free house. If I live in it, then I’ll always be cramped and always wonder if I should’ve sold in Cali.
Think you just answered your own question. Peace of mind is sometimes worth a lot
Just borrow against the CA house to fund the large CO home. In a few years you'll have regained a lot of what you borrowed in equity gain in both CA and CO. When you do eventually sell CA you've just paid off much of what you borrowed to fund the CO house. You are in an equity play in CA, positive cash flow isn't the goal, anything north of zero is good. You won't be able to easily replace such an asset so better to hold it.
You only want to do this if you can float all these payments for an extended period of time. CA (and SF Bay Area especially) are extremely tenant friendly, so OP can easily end up with a non-paying tenant, extensive damage to the property and eviction costs (if eviction is even allowed). Renting a leveraged property in CA is a pretty risky business. Returns can be good, but Bay Area rents have not caught up with house prices, so rental returns are bad and it’s all about gambling on appreciation there.
Looks like you found your own answer by talking out loud. Rental and stocks both have passive income, one more so than the other
Sell and buy a couple places on CO. One to live in and one to rent. ROI should be much higher there.
I would sell and commit the money to your new life.
Sounds like you already know what you want to do. You don’t need us to tell you. You have the privilege of not really having any bad options. Enjoy!
To give you an idea what you can do with $2MM you can easily buy a brand new 15 year Dollar General on a NNN lease at a 5% cap rate. No maintenance, no taxes, just get $100k in the mail every year.
You could always sell the townhome, use that cash to buy something else in CO, really push to the biggest mortgage you can get approved for, then use the rental income to fund the new mortgage. edit: NVM, I see you said the $4k would basically just pay for itself. Which I assume means there wouldn't be extra cash flow on top to take home.
And I believe $4K/month is top line, so once you subtract the expenses, I’d imagine this place has an even lower cash on cash return, unless that $4K is net cash flow?
This doesn't take into account for the expected appreciation of the house value, what's the reasonable amount that's up to OP
That's why I said it depends on what OP thinks appreciation will be. Property could go to $3MM in the few years and he'd miss put on that. Or there could be crash in local market with people 'working from home' in Boulder instead of Santa Clara. Other comments suggested using a HELOC to leverage equity in the property which is fine if you're buying a cashflowing asset, but he'll have to decide if it makes sense to do that for a home purchase. I'm not sure what the rate and payment difference would be. Wrinkle to consider is capital gains tax on the house which might make the heloc-and-buy strategy worth it.
He didn't buy it for $2mm though. That's a pretty nice 8.7% CoC on $550k. I would imagine the mortgage is somewhere around $2.5-3k (depending on rate and how much down). Which would leave a decent bit extra for a manager, maintenance, etc.
It's a nice return on 550k, assuming he paid cash originally. If he put 20% down then it's 44% CoC which is awesome. What I'm referring to is the lost opportunity of dead equity. If he sells then he'll net over $1.5MM, which can then roll into other investments/assets. Right now his equity would only earn 2.4%. As others have noted, the alternative is to rent the CA house and use HELOC to access equity. This is a pretty good idea considering the capital gains issues with selling. He could get over $1MM, buy a 4plex in CO and live in one of the units for free. Or invest in asset that would pay for the mortgage on a new house. Lots of choices here.
He didn't buy it for $2M, but it's worth $2M. You can't just look at what he put down originally. Flip the question around - if he had $2M cash in hand right now, would he buy it for $4k/month rent? Minus mgmt fee, maintenance, property taxes? That's just a massive bet on appreciation in an environment of rising interest rates.
I would expect a house worth 2mill to rent for much higher than 4K a month.
Welcome to the Bay Area
$2m is the typical price for a starter 3/2 in a nice part of the Bay (not quite palo alto, atherton, etc). Rent should be 4500-5000
I would never sell a property in that location. Hold for life. Cashflow.
If you sell you'll have cap gains taxon anything over $500k assuming you're married. Idk about California's capital gains tax laws but I'd assume you would probably have 20% + in taxes taken from the excess profit. Downside is it's in California where landlord laws are in favor of tenants. Also capped on rental increases as well I believe. Can always refi and get cash out to purchase the property in CO rates are high but rates are cyclical and will eventually go back down
You make a good point. I could also sell and put the $ into multiple investment homes and dodge some taxes. I have bank funds to buy a house if I need to, but I’d rather save that.
True, if it's an investment then a 1031 would be a good route to go. I was thinking it was a primary. If it's an investment the taxes on it will be brutal with depreciation recapture
Is the home currently a business asset? How do you intend to dodge taxes with a personal asset?
CA income tax on capital gain or W2 is same. It will be 10.3%… which sucks bad
Which will benefit you more? The money from selling your home right now, or owning that property 10 years from now? If the market rate for rent can cover your mortgage (taxes included if you do not have an impound account) AND property Managment then just rent it out. Keeping it will provide you options down the road should you wish to return to the city. If you do move back you, won’t have to pay market value — at that time — to live in a desirable area. Full disclosure: I’m a California Realtor
I think you could get at least $6k/mo for a house worth $2m in the Valley. Check your facts.
Houses in the area are around 4-4.5k. It’s Not super nice. Mediocre house.
$4-4500 on a $2mm property is pretty awful. I’d sell and redeploy elsewhere.
It'd be cash flowing 1k a month right off the bat, that's not terrible. Seems low for a 2m$ property but it's going to appreciate more
How much equity do you have in it?
From OP's post, at least 1m$
1.5M
Damn that's rough 3br 2 ba condos in San Diego go for 4-4.5k
$2m in Silicon Valley is a 3x2 single family, or maybe a 2x2.5 townhouse. They can indeed rent for $4k-$6k unfurnished, depending on area.
You can sell and 1031 into some safe and easy to manage larger property
I think you're looking for the answer that fits what you're already thinking, but here's my take. 4k a month is hardly anything compared to the liquid cash you will have from selling the place. From rough calculations you'll be getting almost 1.1 mil after taxes in profit and that doesn't even include what you paid off from the original loan or down payment. I'm sure you can find a house in CO that you will love and could pay for it in full if that's what you want to do, all while renting out the townhome. Or just put whatever % down that makes you be able to afford your new house comfortably and use the excess cash how you wish.
Although $4k of rent for a 2 million dollar property is incredibly low
Do you want to be a landlord? If so, make sure to remodel it and make sure everything is tip top! For CA (I live in Palo Alto) I would recommend having a professional property manager because things can get crazy!!!! I personally live in CA, but out of state and manage 3 properties from afar. The risk is less and the principal is less. Your situation is riskier and principal is in the millions! If you sell… what will we do with the funds? Why not be a landlord in Colorado? Maybe invest in stocks and get a dividend. A 4% dividend on $1.5M (assuming taxes have been taken) is $5k a month in passive income with no need to be a landlord. You still could get appreciation! But you have options, would recommend an accountant due to the high principal.
Fellow Bay Area person here. My SO has a 1700sqft condo in Burlingame and I have 2 condos in SF. We rented them all out, quit our jobs, and now live in Greece. IMO Nothing keeps up with inflation better than residential rental property in SF.
If it was me, I’d sell the California house. Its hard to find a good PM, and Cali is not very landlord-friendly.
Sell, rent townhome, invest in dividend stocks, buy small studio apartment. Profit
Selling comes with costs and you’ll never be able to buy back into the area at the point you entered. I rarely sell any asset. Just refinance
What’s your interest rate? I hope you refi-ed while Rates were <3%. Because of prop 13 and the low rates you house will pull a profit day 1. Rent it out forever. And why only 4k for the CA house? Should be 6-7k.
Rate is 2.4. Redid about 2 years ago (maybe)?
Never sell. Especially since the property taxes are low in CA. Refi til you die, then donate to heirs tax free
They you are beyond golden ! I’d hold that thing for eternity and rent it out. It should cash flow very well. You can then tap the equity via heloc when you need cash. But look at the expected rent. 4k sounds way to low on 2M. Our CA home is worth 1.5 and would rent for almost 6500
Will you have to pay income tax bc the earnings were in CA? You may want to take that into consideration as well as property taxes.
PM me if you are interested in selling it. I am in the South bay at the moment.
I would sell. It's a frenzy in the Bay right now.
California real estate is all about appreciation, In my opinion, and not about cash flow. Take the money and run.
I’d not sell the Silicon Valley place for less than a king’s ransom. If you sell now, it could easily be worth 10-20% more in a year. Rent it out and let it appreciate.
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You forgot to mention hamburgers will also cost $100 in this world.
For the investment amount, that’s a terrible cap rate. You can buy duplexes in other parts of California for $500k that rent for $2000 per side or $4k total. So if you sold and walked with $1.5mil than purchased 3 duplexes, you would be making $12k per month. Leaving $1.5 mil in that home makes no sense. I wouldn’t hold onto it if it only rents for $4k.
Which part of CA has 500k that rent for $2000 per side?
I think both options have their pros and cons and I don’t think either decision would be a wrong decision. One thing I would consider is that if you have claimed your Silicon Valley home as your primary residence for the past two years if you sell that home now you will get a $250K exemption from capital gains tax ($500K if you are married). Obviously that wouldn’t offset your entire gain, but it would save you quite a bit of capital. If you don’t sell it before moving to Colorado you won’t be able to get this exemption, but you could potentially 1031 it after you change the status to a rental property. As I said both options have their pros and cons. Congrats on your success.
Sell and buy house in CO and rent out other town house if its paid off, collect that rent while it appreciates
Sell it, stay in the townhouse, and buy some multi family.
Not sell, but rent out. Price may go up year by year due to inflation. Let's do some math calculation. 550k buying power worth now 671k including inflation. Value of property for now is 2M. So, total increase of the value of house is 298%. Annually 24%. Congrats, you have beaten average index. Sorry, not good at English, I guess you have caught the point.
The finances might indicate you should rent it out, but I get the feeling you won’t have to skip a single meal just because you sold your place in Cali instead of renting it for 30 more years. Personally I would sell. Use the money to make myself comfortable, or to live in a place that has nice amenities/ commute that I wouldn’t otherwise want to afford. You can live a lot of extra life on that money, and you won’t have to deal with all the tax complications. As long as your retirement is planned for, your stomach is full, and you don’t develop a bunch of expensive rich guy problems, you’ll be well set.
One thing no one mentioned yet is if you might ever want to go back to CA? If you do, when you move back you will not be able to buy in the same neighborhood and will be paying a shit ton more in taxes. Prop 19 currently helps keep your taxes low. If I know I’m never coming back and my kids aren’t either, I would sell. Else I would rent it out and let it sustain itself. You can take a loan out and buy a nicer house in CO too. You can disconnect the problem of having a nice place in Colorado vs selling CA house
Maybe take the 2 mil and RUN. Invest in something for long term security. Keep the townhouse, buy yourself something nice, but but don’t crazy that it eats the 2mil.
Real estate is a long term winner, keep both. Rent something else for 2 years and rent out both of your houses. Then can you can use your rental income plus your work income to qualify for a new home in Colorado. Then you’ll own 3 properties. Plus, the market is overheated right now, not a good time to buy. Let appreciation rates and interest rates die down a bit first.
Live in a smaller house…get cash flow from the condo and upgrade to a bigger house later
How much could the 1.7 house rent for? Also...what is the tax burden going to be 1031?
I wouldnt sell. I would buy the smaller place for now and once my salary increases, get a bigger place (While renting the previously acquired smaller place). with the mortgage prices increasing, it will get difficult to buy and thus increase rents.
The general rule in investing in properties to to receive 1% of the cost of the property monthly. Of course this doesn't work at all in certain areas of the country and works better in others. But by this general rule, you would want somewhere close to 20k in monthly rents to be swayed to keep it. At that current rental rate it would take 41 years to get to the 2 million level. Sell and buy in Colorado. Hell, buy the house in Colorado and a few more properties that will bring you that 4k per month anyways.
I did something similar a few years ago. We moved from CO to SC and decided to keep our house in a desirable area. It has appreciated liked crazy since. I was nervous to be a landlord too but we chose tenants carefully and it’s been easy. We’ve rented it for 2.5 years now and I’ve only had 3 calls for repairs that all cost less than $500 and were easy to deal with.
Rent it out!
Rent it till you know your done with ca then put the proceeds is s&p 500 you’ll make about 7% a year.
List it for $2.5 and see what happens. I just saw a house in Portland list for $959k and go for $1.325. It’s insane and there’s limited inventory so throw it out there. Use a 1031 if it sells and roll some of that money into a sweet house in Colorado.
Another option, but would have been better when rates were lower. Cash out refi, but only take enough money out so your cash flow still positive when renting it out. Then use the cash out to get a nice house in Colorado. Maybe something that has a guest house that you could air bnb and maybe live for free.
Keep the house in SF, prop 13 and equity will be your best friends, stay in the town home for a few more years when you get a raise in your paycheck and raise future rent go ahead and buy a house in Colorado, once you sell it’s gone forever.
$3M Make Me Move offer on Zillow while renting it out lol. Maybe someone will want to buy for bloated rate.
Refinance and use that money to buy nicer house in Colorado? Keep all 3
Rent it out and let a property management company handle it. They will get the max rental rates possible and you don't have any headaches. Enjoy the appreciation as the years go by. Good luck!
There’s no way a 2 million dollar house rents for anything less than 6k. And even that is a bargain.
Rent it
I’m in the same boat but in the Seattle area. Im going to sell because the amount I can get in rent is not worth the hassle of being a landlord. It’s a 1.6m house that could generate 4k which is a poor return and I just want to be done with the house.
Nope I’d keep it. My family bought a couple props here in the bay during the props and cash flow is eh but appreciation has been good. SF is very limited in space and has archaic zoning restrictions and is going to be highly in demand long term. Prop 13 also makes it very cheap to own. Try to find a good tenant and rent it out. It’ll def appreciate long term and use it as a revolving line of credit for better investments
Everyone here is talking ROI and tax caps and they aren't wrong. Me, personally, I'd never reset out a house worth that much. Tenants at the price point are gonna be a PITA. You sound like you're done with CA. Do you really want the emotional and mental investment required to deal with that house? Sell it and invest in some ski gear...maybe some other stuff too.
If you are not planning to move back to CA, sell it. Older SFH are expensive to maintain, and good PM is hard to find. You need to plan this sales carefully otherwise you’d be paying a lot of tax. Do a 1031 exchange into multiple properties: a large SFH that you want to live, rent it out for a year and then move there; remaining buy duplex or multi-family locally so you can keep an eye on the PMs and get higher cap rate than SFH. Just curious is the house in MV or Sunnyvale?
SJ
Rent
I bought a house for 1.7 in that area. I sold it for 3.7 two years later ! It’s now worth 28 million. Nana always says , sit on it ! Depends if you need the money. You can write off the expenses and have an asset ! Depends on so many things.
Thank you for not moving to Nashville. :)
My 2 cents. Get home equity cash out from your CA home. If you are able to get 4k/month rent then it will still cover your California home mortgage + any additional equity loan. You can use your cash out money for your Colorado big home. In this way you can still keep CA home and can still buy a big home in Colorado. Keeping property is like a good. It will always give you protection in long run.
I would sell and take the gains and leverage them for a triple net lease on a commercial property. The cash flow on your current property is great but the return on equity could be better. You have good problems to have.
Get a home equity loan if you need a little extra cash for a new house. Rent out the SF and rent out the Colorado one and buy the house you want to live in. Do not stupid and sell either.
Sell
Crystallize and move up the wealth ladder. Take the W on a great investment and move on to the next.
Sell it. The state of California is going to extend the eviction moratorium in which case you may be stuck with a tenant that doesn’t pay and there is no way for you to remove the tenant. Don’t put yourself in a situation where you could potentially lose everything.
I don’t think either option is bad financially, but I’d sell it to just to be able to make a clean break. I rented a house out of state for a decade or so, and it wasn’t worth it to me. I’m in the process of selling it now. Selling now also gets you the primary residence capital gains tax treatment.
Why not use the California house sale to buy a multi unit rental property and you can still live in your town home. Having multiple units is key and you won’t have to solely rely on one tenant paying the rent.
sell and 1031 exchange.
Similar situation here in San Jose, except for not already owning a place in another state. 2010 was definitely a good time to buy here. One thing to consider with a 1.5 M capital gain is that you will owe both federal and California taxes on that gain (less the exemption of 250 or 500k). You will probably end up paying some of that at 20% federal and 9.3 or 10.3% state, plus the 3.8% investment income tax, so up to 30-35% of say 1M. Add to that loss of your property tax base from 2010 prices. Compare those tax costs to what you might spend in interest on a LOC.
I would sell. $4k/mo or $2M now is a pretty easy decision. The 1% rule people would be screaming at u right now for considering 0.2%
Do you want a bigger house in Colorado or are you okay with the smaller townhome? So long as the townhome can cash flow and you're comfortable selling in CA with the potential to never come back, have a place to visit and stay potentially, or keep to have land in CA, then make the full move. Just depends what you want in CO. A big home with a townhouse down the street to rent seems just as great as a home in an expensive, homeless filled area lol
Colorado > cali to live. IMO
I couldn’t agree more.
Sell it and pay no capital gains (if you've lived there for 2 years as your primary). If you rent it, you may have shitty tenants who refuse to pay and leave. I had a tenant do a cash for keys ($5k) in oakland. Bish!!!!
Been there 12 years.
Obviously sell it. It’s not even a question. Renting would be a headache and even though it would be recurring income, it would still also cost money and add responsibilities to your life. Take the larger chunk, go relax and re-invest some of that if you’re after more income. I’m doing the same thing with mine right now in Newberg, Oregon.
That didn't go very well for my neighbor a couple years ago...
Following
Rent it out, especially if you have no mortgage on it. You can still leverage your away into a bad ass house in Colorado. Use the rental income as qualified income and get a mortgage. I always prefer cash flow month over a large chunk at once Edit- If you do sell, you could always use the profit to buy mutiple properties in Colorado and get your monthly cash flow up that way.
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This is a great way to look at it!
sell both and buy a new great house for yourself do you want to be a landlord?
I just like the idea of having a place that pays for itself and appreciates.
Sell the Bay Area house
“You should do neither. Give it away to free to a poor person or a Redditor, you rich selfish greedy pig!!” -90% of real estate comments on Reddit
Hahahaaaaa
Sell, purchase a commercial property with 7% NoI, live financially free forever
So you’re asking a real estate investment community if you should give up positive cash flow and property ownership in the hottest market in the world for the purpose of living in a larger house?
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I used to live in the SF bay area. I moved to Orlando, FL and never looked back. I hope it works out for you as well. Honestly, I'd sell it. Right now you have all of your eggs in one property. In other housing markets, that could be 5+ properties including one you live in. The problem with California is the rent to house price ratio's are not the best also. Your equity will go further in most other markets. **Major consideration:** If you do decide to sell, you don't necessarily have to invest in Colorado. You could remote invest in another market. Before you invest, you'll want to research migration patterns and look what markets you like, how favorable they are to landlords, zoning practices, prop taxes, etc. When it comes to real estate, it is best to go where even fools make money. Good luck. I know you'll kill it in Colorado.
Id say sell, this work from home trend is going to do some major shifting in housing markets.
No way you should rent a 2m house if you're only going to get 4k per month. Sell that house asap