patrick.net

A house valued at a million dollars should bring in about $10,000 in rent every month. How much are you making?

If it is less than $5,000 I would say get out while you can?

Free advice is what it is worth.

Have you refi'd at all? $200k debt on a $1M valuation or even more conservatively $800k value should be at least getting you $1k/mo above PITI, likely higher if you've refi'd to your current amount owed. Non-owner occupied loans carry a higher interest rate, but you can easily finance $200k of debt for $1,200-$1,500 a month right now (taxes and insurance not include).

$800K-1M should easily get you $4k/mo in rent. That's likely low. You should grossing(edit) net $24k-36k a year on a property like this with only $200k in debt. I don't know the CA market, but a couple hundred a month seems bizarre. Or your rent is super low.

Other options are out there if you're willing and able. This is outside the box thinking. If you own your current home and would be willing or can move into the rental for 2 years and the sell it, you just saved a fuck ton of cap gains. Obviously there's work and everything and who knows you may be out of state, but just a thought if you legally want to screw the feds over from getting taxes from a sale of it. Still have to pay the 10 years of depreciation, but if the rental is worth more than your current primary, it might be worth it.

A very big consideration is the property tax assessment.

fyi I am not a Bay Area real estate Cool-Aid drinker, not all all. More of a skeptic.

But... since the gyms closed my daily cardio has been walking outdoors in San Jose. Last year I walked every street in my zip code. This year walking neighborhoods all over the city.

Also been delivering Meals On Wheels all over the city most of last year and this year too.

What I have seen since "getting out" in my own city has altered my view a bit on residential real estate here. I am still skeptical about some aspects like for Worker Bees to sign up for a massive annual property tax bill that they will never get out from under as long as they own the parcel or condo unit or whatever. I am skeptical about the trade-offs of a high-cost living here and toxic environment for K-12 kids. And, I am most skeptical about the ability of Youngish Hipsters to pay the high tax and mortgage bills in the face of the larger Macro Trend of all those Hipster-at-a-computer-terminal jobs supporting the high costs in the face of outsourcing, off-shoring, and remote work. (Ask the Tech Titans relocating jobs to Austin).

Having said that, what I have seen has altered my view a bit: Oh my gosh we have a shortage of affordable housing in SJ like crazy. A lifelong resident of San Jose, recently I've walked through neighborhoods I'd not have set foot in for concern of personal safety even as recently as ten years ago. The thuggish people are all gone, off the streets. We have filthy whacked out homeless in numbers like never before, but those aren't the same sorts of thuggish people I would have tried to avoid in the past.

There are so damn many working adults and social security recipients doubled up, tripled up, living in covered patios, garages, and trailers-parked-in-driveways-or-side-yards everywhere. There are crowded apartment buildings impossibly shoe-horned into what were formally narrow spaces between older buildings or roads. There are miles and miles of streets in trailer parks. Many of these trailer park homes have expensive Hipster Imported Sedans and SUVs parked in front, that we would see in Silicon Valley tech parking lots all over the valley before the work from home phenomenon. I reckon, the number of folks in trailer parks, apartment buildings, condos, and double-tripled up in SFH's far exceeds those in the "traditional nuclear" SFH in SJ. This, even as our school systems empty out due to declining enrollment from demographic changes

There's a Crazy Shortage of affordable housing here. Even if we never see another Rich-Kid H1 arrive ever again, all those folks crowded and shoehorned in, are some kind of a floor for housing cost. It's just my opinion, but if I had a rental property with a low Prop-13 assessment a low enough cost of PITI and a positive cash flow, well, I think it might be a good asset to hold onto for a while.

Did you make a comparison against returns from stock market indexes.

Roi for 1 mil is low so cash it before property taxes go up..

Problem right now there r very few good places to invest.
U can put it in blue chip for 2 to 4% return thats still about 30k without any work.

Onvacation says

A house valued at a million dollars should bring in about $10,000 in rent every month. How much are you making?
If it is less than $5,000 I would say get out while you can?

At $10k/month your investment pays $120k yearly. Maybe net $100k in profits for your $1MM investment, giving an 10% return. That sounds very high to me! Sunnyvale area is hilariously bad to own a rental. My shack has a Zestimate™ of $2MM and $4200/month rental, yielding something around $30k/year profits, or 1.5% investment income.

As far as the original poster is concerned, the best time to sell is when interest rates are very low (which tends to increase prices).

I assume that few hundred is after you deduct all related expenses(mortgage, taxes, maintenance, insurance, rental expenses..).

If you don't ever plan to move back to the house, I'd sell. Market has already topped, and job situation will only get worse, making it harder to find renters. I'd use part of the profits to ensure at least 3 months living expenses in cash, readily available(not in a bank account). At least a handgun and shotgun, with plenty of ammo. Rations and a means of supplying water for at least three months, preferably six. The rest in physical silver, again easily accessible. Alternatives, helping to buy an off-grid house somewhere remote, investing in starting a personal business.

I believe you will make use of all of the above sometime in the next two years.

NuttBoxer says

I believe you will make use of all of the above sometime in the next two years.

At least someone is positive. :)

krc says

At least someone is positive. :)

You want positive.. The other side of this looks AWESOME!! Central government collapses, people decentralize back to the country and our agrarian roots. Family becomes the center of life again. People learn practical skills as they re-connect with nature and each other. Real money is used, preventing inflation, speculation, and usury. Industrial food and farming collapses. The earth becomes healthier and less polluted, as do the people. Medical prices drop like a ROCK as corporate insurance is replaced with cash, and community based assistance. People realize 90% of their ills were due to the sickcare system they relied on, combined with industrialized "food", and environmental toxins from companies like DuPont. The church stops asking for donations for bigger buildings, and starts really serving the poor and needy, like it SHOULD have done this entire time. Taxes, gone! Big Brother, eradicated! Personal responsibility, back in a BIG way.

1. Sell it
2. Pay taxes up the ass; tough shit, it’s located in California.
3. Buy tax efficient stock mutual funds with the proceeds.
Example of tax efficient fund; Vanguard Tax Managed Capital Appreciation.
Many other stock mutual funds are tax efficient of course; index funds are efficient as are some actively managed ones.

@krc, I blew about 500K on a beach front condo in Maui nearly 4 years ago. All cash. I'm clearing 35K/year after expenses/taxes etc., on VRBO so far but I've blown 10K each year on remodel upgrades - which I've completed thankfully because I was shut down 5 months in 2020 and made quite a bit less.

Prices there haven't changed much. You could get two of these. However, if I were to do it again I'd probably buy 2-3 200-250K properties that aren't right on the water. They seem to make a similar amount of money if the manager is motivated.

Then again, I like going there and doing remote work so...

I have regular house rentals as well but they are much cheaper (TX) cash flow less but the return rate on investment is better.

I'd say if you think the value is still going to go up and you aren't afraid of CA politics maybe keep it. You should be making way more on that value for a rental. 9% return on investment is good. You bought it for much less maybe and are beating that? It's matured now though.

The W5000 (total stock market index) rose 200% since January 2016.

I tell this to my friend who owns an expensive shack in Santa Cruz, CA.

“My place is worth $800,000!”
(I made that since August 1 in stocks)

If it provides a happy sense of ownership, bragging rights, etc. keep an extra house.

$500k in January 2016=$2 million today.

$2 million x .05 (5%)=$100,000 (possible yearly gross income from investments, annuity, etc.)