80% people buy homes on spur of a moment. I suggest you unload it. May be able to regroup. You can call me for things I do not want to post. May have buyers here. Sam Shueh
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Are you trying to profit from his fear and earn that commission?
I would go for this option first.
I would remove earthquake insurance unless it was required by your lender, turn yard into drought tolerant yard (which doesnât require much of maintenance), remove PM (Santa Clara to Fremont is not too far to manage IMO).
Then, your monthly expense would be $3300.
I am sure your principal portion is larger than $300 per month.
Thus, your cash flow is actually positive.
This is pretty good cash flow in Bay area IMO.
Can you really make profit by selling after 8 months deducting all remodeling cost + realtor fee + tax etc?
After all, it all depends on your financial situation, but forced $300 saving shouldnât be too much of burden I guess?
If you need to use the money that you put in this house soon, then of course, you should sell it.
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If the current home would rent cash flow even, then why not rent it and move to the Fremont home? That seems like a solution that allows keeping both homes. Some how the OP got a mortgage for the Fremont home without selling the Santa Clara home. Thatâd take a HUGE change in situation to not be able to rent the SC home and live in the Fremont home.
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He said he canât move to Fremont because of the change in his situation.
The issue is he is expecting cash flow positive, including principal, within a year of purchase, otherwise he feels not safe. This is not at all possible with current bay area standards. If such homes are available, there are plenty of investors to buy !
It takes around 5 to 6 years, with crazy sellers market, or even more to get break even and may take 10 or more years to have sufficient cash flow (rent $4000 level)
But, Seller market is has hiked 20%-25% over the last year, esp last Aug 2017 price. If he gets 20% break within a year (since he is not comfortable in hold next 5 to 10 years), he can as well sell it and come out sleepless nights. This is safest approach and better with positive cash.
I can predict (or forecast) economic fall, but there will be heavy opposition from forum members like WQJ or others asking me where is the crystal ball?
Even with current cash flow, he is not comfortable. What if economy tanks (and rental market goes down 20%)? He will end up in panic mode and sell at loss. Rather, he can sell it now, make it positive.
With current sellers market, it is easy to get rid any home.
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Fear is with OP, like many had fear of buying home here, including me (first 10-12 years).
See this way, Sam is seeing an opportunity and trying to help.
I would get rid of yard maintenance and management fee. Just self manage and have the tenant take care of the lawn themselves. It is not that hard to self manage in the bay area and especially Fremont. That alone saves you $300. With that and removing earthquake insurance, you may be cashflow neutral (but be profitable if you include principle payment). Iâd try to test the market by posting on zillow and craigslist. 3.5% interest is quite low for investment and Iâd try to take advantage of that.
If you are really leaning towards selling, talk with realtors to assess the current market. The last couple weeks have slowed down and the comps you are seeing may not reflect your actual selling price.
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Given that property tax is $700 per month, the purchase price should be 700*12/0.012=700k.
Getting $3000 rent for $700k house with 3.5% 30 year fixed mortgage rate is such a good deal.
I would keep it but again it all depends on his financial situation. You canât really expect any better cash flow in Bay Area with recent purchase.
I forgot to ask, do you have any savings you can park in the house to reduce cash outflow? WQJ would have said put it on stock market, but then again, financial choices are a bit emotional too.
You can find a tenant who is willing to do rent to own at a higher price.
For example, you can find a tenant, charge 3k rent and 1k monthly fee for the option to purchase the house at 200k above todayâs price. You can give him 5 years to buy.
If the house appreciates 300k in 5 years, heâll buy at 100k discount.
The other option is to get a Heloc on the house. When price goes down, get cash from Heloc and use Heloc to pay for the negative cash flow, or pay down your primary home. Make the rental carry the maximum loan, make your primary home mortgage asa small as possible. If another great recession hits, let the bank foreclose the rental and keep your home forever.
Thatâs a horrible option. I would never compromise long term appreciation for short term cash flow.
{removed my comment as calculation is wrong}
I was proposing rent to own as an alternative to sell now. If he sells now, no future appreciation to speak of.
Why not let Jane buy the house with commission free? That way, OP can at least save on commissions 
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IIRC, Jane already bought a home at south bay !
He needs $700 cash income to keep this house according to his calc and many of us suggest that he can save $300-$400 by removing PM/gardener/earthquake_insurance. Where does extra $800 come from? I looked at your table but it was not clear to me without formula.
Any room for an ADU?
First of all, thanks everyone for your kindness in responding so thoughtfully. The main change in my situation is my health. I need to scale down to a lower paying job. That will constrain my cash flow and makes future a bit uncertain. So I turned cautious recently and thatâs the reason for EQ insurance on both properties. I donât think I will need the equity from the rental in the next 10 years.
I cannot move to Fremont because itâs convenient to live where I am now given my health. My main confusion is, now that I am not planning to live there, whatâs the positive case for keeping the house? How much can it appreciate in the next 10 years? When can it possibly turn cashflow positive? I understand there is no crystal ball but any educated guesses would help.
Thanks again for your consideration.