Bay Area Moving Up - Keep current property as rental or sale?

[Jil]

@SmallBasil7

Thanks Jill,

With 5% annual return in next 10 years put 1600 sqft Cambrian home to 2M price. It just make me think what salaries needs to be to support that level. Will inflation take care of it ? Based on the past performance it seems right but past performance is not guarantee. I see technology changing world in future and SV being tech hub it may be possible. I do not see any big unicorn becoming next Facebook / Google in coming future. Do you think Uber can be that ? Tesla may change the valley but its got its own problem and not sure if Margins will be as high as software/internet companies.

For cap rate I have not included P&I in calculation. My P&I + Tax + Insurance is $1100. Property management is $125 for the property which rents @ 1595. Expecting near term capex and other expense to be low. If I keep $1000 for expense, I get about $3500 CoC, which is about 6.8 % . It is on 30 year fix @5.125

I am not basing on FAANGs or Tesla or Uber, but based on my past experience.

I had lot of chances, when I landed, to buy THs at 320k level in Cupertino, but did not pull a trigger and got home 12 years later more than double the price.

The home I bought is more than doubled now after 12 years. In short, I have seen housing doubled every 10 - 12 years.

I trust past performance continue to maintain in bay area. If you do not, it is your decision.

All I see is that you have an easy opportunity to grow with your real estate wealth by holding your home rather than selling. Both options have got pros and cons as you have chance to get LTCG exception for primary home.

Real estate is attractive to hold only when you have fixed mortgage and well within your financial limits. If it is full paid, Stocks are better way to grow than real estate.

It is up to you to decide. At the end of the day, it is you and your family decision how to proceed.

[SmallBasil7]

I really appreciate your insight.