I don’t think even I will live long enough to see PA full of high rises.
How about re-finance to cough out cash to invest in higher cap area?
Now, you have rentals in highly desirable neighborhood and rentals in higher cap area 
Have the cake and eat it2. Don’t forget you might want to come back to stay in the expensive area or let your children do so. Selling (1031 means sell) the house mean you might not be able to buy back if the price continues to rally for a few more years. Even if you can, may not be the right location or right layout
This is all hypothetical. But many with expensive houses in PA have plenty of options. They can send me a large check for any advice needed
I expect them to send me the cheque because I provide one advice and kept many
I sold my $3m RWC house to a 85 year old. Downsizing from his wife’s $6m Atherton teardown. He is now 88. I bet he and his 85 wife blow all the money . At that age might as live like each day is the last.
To be honest, I would not buy this 4.9M PA house to rent it out. But if I own this 4.9M house at the age of 85, I would not sell it. Just keep it and find a good tenant as a way to keep property maintained. It’ll be a good tax strategy to let the house be inherited instead of selling and pay a lot of tax now. Plus, many 85 yo may become lazy and don’t bother with a big decision to sell. They won’t bother with 1031 exchange. Keeping status quo is the easiest way to go.
And many young millionaires actually want to pay 4.9M to buy that house. Since there are many willing buyers, maybe it’s not that stupid to keep the house anyway.
Again, some people spends 4.9M on a piece of diamond, art or bitcoins. There is no obligation to maximize investment returns.
At certain point in time, money is not a concern any more, or not an important concern any more.
They wanted to enjoy there money before their greedy relatives get it. It is like winning lotto for these people that bought these homes for $40k.
I actually think now is a good time to buy in PA, because relative to the crazy price increases in the rest of the silicon valley cities, PA price has stayed flat to slightly up. Now we have 2M houses everywhere you look in the valley, for 2.5M you can still buy an SFH in PA with a standard sized lot that you can expand or even rebuild. So far PA schools are still one of the best in the bay area if people still care.
Rent_and_Vent is probably still young, and doesn’t know how old people think. 
Most homeowners are not investors when it comes to real estate, and maximizing cashflow or ROI is not their priority. At least in south PA (this side of Oregon Expressway), most of the long-term owners are usually not well-off. The whole south PA was a blue-collar town (used to be a separate city called Mayfield) filled with tract homes to house veterans. With the rapid appreciation in housing values, the weak hands have already sold and enjoyed life elsewhere on the planet. What’s left of the old-timers are the diehards who are either greedy and stubborn bastards banking on more appreciation down the road or determined to pass the “lottery fortune” to the next generation when the time comes. Asking them to convert the equity into a different cash flow business is not going to work.
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Not that it changes the numbers significantly, but 1543 Walnut isn’t worth 4.9M. It won’t rent for much because it isn’t made for the modern day renter who wants all the bells and whistles.
If you want to look at an example that is even more extreme, 630 Seneca sold for 5.9M in late 2017 and was on the rental market for ~8k.
@maluka, I’ve said the same thing before. I think it’s a little late for that arbitrage though. I don’t quite understand why a number of the PA schools I have seen have dilapidated facilities. You head over to MP and it’s quite the opposite.
Can 2.5 buy an SFH in PA that’s not a torn down? I thought the price is more like 3.5?
It’s too late now. It’s no longer 2.5 for a run of the mill lot/location.
Not ready for prime time!!! I guess I have to lay low with my sweat equities in WSJ/CCC/SF and wait for the right moment to buy into Palo Alto… 
I’m sure that moment will come… one of these days… It’s good to have a goal in life… 
thank you all for the interesting thread. So the consensus seems to be that yes, it is crazy, but that is just the way SV is.
For what its worth, we are going to look further up the peninsula but South of Millbrae. We want to rent in an area where we can eventually buy without changing schools again.
Belmont and RWC have the best values
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One data point at a certain point of time is not so useful. Historical data over many decades is needed to get any useful insight.
Also it would be intersting to get the average rent to price yield for the primary homes of the top Wall Street executives, they are supposed to know many alternative investment venues
I haven’t checked out any MP school. I should probably do that next time I drive by MP.
I wouldn’t say PA schools are dilapidated. just old since they’ve been there for a long time. PA passed some bond measure (Measure A I think) years back to raise funds to inject a new life into the old school infrastructure. Most of the construction related to that bond money went into the 2 high schools (new gym in Gunn, new performing art center in Paly, etc), with the remaining construction to some middle schools and elementary schools (you can see new building in JLS, Fairmeadow, Ohlone, and maybe others). Besides constructions, all schools got new equipment and other stuff too.
When you choose a school district, all these new shiny hardware sure looks nice but it’s not what ultimately drives you to make the decision. Same thing with choosing a house to buy. You need to look past the fancy countertop and the frameless shower doors (better be at least 1/2" thick as 3/8" is too cheap) in order to see the real house. The location, the lot, the neighbors, the street, the schools, etc. At least for me, how nice the house is is really not that important as I can always make it nice for a small fraction of the cost of the house.
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it’s all about the demographics of the school, sadly.
Don’t forget San Carlos.
I won’t forget EPA.
how about East Palo Alto? i am debating investing there.