Author Topic: Relocating and downsizing from CA to OR  (Read 899 times)

Dream168

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Relocating and downsizing from CA to OR
« on: November 05, 2018, 03:34:03 PM »
My husband and I are living in the SF Bay Area.  We are planning to relocate to Portland, OR to be near his family.  We got a rental property at Portland and knew the area pretty well.  Within one or two years we might move up there and live in that property, which is a single family house with a huge detached garage. 

We have a condo (our primary house) in the SF Bay area, which has appreciated by 300K.  I think we can sell the condo and get 400-500K for profit.  The idea is to use part of that money to convert the huge detached garage into a small living unit.    We can move in there while someone is renting the main house. Also, we have extra money for another property investment.

We are in our 40s with no kids.  Our goal is to get off the corporate world treadmill.  I am a biotech professional and my husband is a teacher.  Most likely we will reinvent our careers at Portland.

My fear and concern is this a right move?  Or we should just keep the CA condo as a rental?

Any inputs are much appreciated.
« Last Edit: November 05, 2018, 04:02:28 PM by Dream168 »

lhamo

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Re: Relocating and downsizing from CA to OR
« Reply #1 on: November 05, 2018, 04:32:48 PM »
Do you WANT to be long-distance landlords?  How much would the condo rent for?

The biggest advantage of selling the condo is you would pocket your capital gains immediately tax-free (federal, anyway).  If you kept it as a rental, you would only have a three year period from the date you move out to harvest any tax-free gain (since to claim the exemption you need to have lived in the home as your primary residence 2 out of the last 5 years), and it you would have to figure out how that works with/if it is offset by the taxable income you get when renting out the condo.

Dream168

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Re: Relocating and downsizing from CA to OR
« Reply #2 on: November 05, 2018, 05:27:55 PM »
lhamo-

We have been long distance landlord for the Portland house for a few years and luckily we have a reliable property manager.  Unfortunately, we are not gaining muchincome from the Portland property at this moment.

As for the condo, I am a bit hesitate to sell the place due to the desirability of the location.   We live near to a ferry station, which is a 20 min ferry ride to SF.  I know that we can easily rent out the condo for more than $3500.  Currently, we are paying about $1900 mortgage plus $250 HoA.  We have been living in the condo for more than 10 years.

Sounds like we might need to verify with my accountant about the---

"The biggest advantage of selling the condo is you would pocket your capital gains immediately tax-free (federal, anyway).  If you kept it as a rental, you would only have a three year period from the date you move out to harvest any tax-free gain (since to claim the exemption you need to have lived in the home as your primary residence 2 out of the last 5 years), and it you would have to figure out how that works with/if it is offset by the taxable income you get when renting out the condo."


« Last Edit: November 05, 2018, 10:00:50 PM by Dream168 »

Jon Bon

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Re: Relocating and downsizing from CA to OR
« Reply #3 on: November 05, 2018, 05:28:17 PM »
I think we can sell the condo and get 400-500K for profit.

Uh, what is the problem here?

Seriously though this theme seams to be recurring in the MMM forums as of late.  As a general rule of them your primary residence that has appreciated like crazy the past 5 years is going to make a horrible rental versus selling outright.  So I am thinking your condo is probably worth 700k or so? If you want to keep it as a rental you need to get $7,000 a month I highly doubt you would get that. I mean SF is insane but is it that insane? So you have already made your money. Congratulations! Now cash out and move to Portland and be near that family. Nice work!

Mind you I am completely leaving out the tax free nature of all the profits! When else can you make a bunch of money and no pay taxes on it!

I mean 400k in your pocket has got to put you within striking distance of your fire number does it not?


Dream168

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Re: Relocating and downsizing from CA to OR
« Reply #4 on: November 05, 2018, 06:32:55 PM »
Jon Bon-

You are definitely right about taking the profit!  Just our first time selling a property or might be my attachment to my first home.  Still learning about Fire number--most likely we are closing in. 

Our goal is take ~$250K to convert a garage to a two bedroom house.  Then buy another rental property at Portland.  Sounds like a win-win situation--might be my own fear of what if we made a wrong decision!?!?!

SF Bay Area is definitely insane with home price, rent and traffic!  Our condo was at 380K and now is selling at 650-700K.  Buying a single family home in my area might be more than a million now. I don't think I am crazy enough to tight ourselves up with a million dollar mortgage and will never be able to retire.

Still exploring this website and learning....

waltworks

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Re: Relocating and downsizing from CA to OR
« Reply #5 on: November 05, 2018, 06:42:27 PM »
Do not buy any more rental properties. You have clearly demonstrated here that you have no idea what you're doing.

Sell the condo. Move. If you really want to build your garage/house thing, pull the permits and do it. Plan for 20% more cost than you think. Put the extra money in VTSAX or something similar where you can't screw yourself.

-W

lhamo

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Re: Relocating and downsizing from CA to OR
« Reply #6 on: November 05, 2018, 07:07:12 PM »
Yeah, I'm finding it hard to understand how you could have owned a property in Portland for "a few years" and not be making decent money on it. 

Posting a full case study might help you get better feedback on how to deploy your assets for the FIREd life you desire.

Dream168

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Re: Relocating and downsizing from CA to OR
« Reply #7 on: November 05, 2018, 08:46:04 PM »
The tenant's rent covered the mortgage and the property management fee.  I  think we made less than a few hundreds after increasing the rent recently.  We bought the house before the peak of the housing market and it did appreciate quite a bit.  If we decided to buy the same house right now,  I think we will be paying more than 150K. Might be critical that we sort the finances out to see how far or close to a FIREd life before we move up to Portland.   

Will post a case study soon.......

nsmall

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Re: Relocating and downsizing from CA to OR
« Reply #8 on: November 05, 2018, 09:35:58 PM »
I want to leave CA for WA in the next 3-5 years. Yeah!!!

 I am no expert, but tax free big gains and no stress of earthquakes or a tenant wrecking a place or having to manage a place when you live in another state, I am on the sell team.  Good luck with whatever you do.

rothwem

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Re: Relocating and downsizing from CA to OR
« Reply #9 on: November 06, 2018, 04:38:19 AM »
If you move, yeah, I’d sell the condo. I think you’ll find though, that your income is probably not going to be anywhere near your SF income. Supposedly Portland leads the nation in unemployment for college educated white people, ie, there’s no professional jobs there.

I’d get something lined up before you move, particularly for your husband, as I’d imagine teaching jobs would be at an especially high premium there.

Jon Bon

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Re: Relocating and downsizing from CA to OR
« Reply #10 on: November 06, 2018, 05:41:47 AM »
Gah! @Dream168 , I feel I am just hanging out on these boards making the same comments over and over again.

So

FVM: 700,000
Mortgage Balance: 200,000?

Rent:$3,500
PMT: $1,900
HOA: $250
Management @10% $350
Maintenance/Vacancy $200
Taxes: ?????

Revenue: $3,500
Expenses: $2,700

So you make $800 a month, which does not sound terrible. I felt I was pretty conservative so you likely would make a little less with more than $200 a month in maintain. So lets call it $500 a month for simplicity or $6,000 a year ignoring depreciation and taxation.   Expect I ignored one major, glaring 800 pound gorilla fact. OPPORTUNITY COST.  You have $500,000 in equity in this hose, or half a million dollars! So you are earning $6,000 on a 500k investment does that sound like a good return? Because it is not!

6,000/500,000 = 1.2% return!

So that is terrible, the factors that are harder to quantify are being long distance landlords is never fun. I know tenant laws in Cali can be an absolute nightmare as well as the house is just going to get run down by renters. So in closing.

Congratulations you bought when prices were low, you have made your money it is time to sell high! Take the money to Portland and enjoy life. Nice work Dream168!

I realize this is overly simple and a few facts have been removed to keep it that way, if I am missing any major maths please chime in folks!

Oh and go find a flat fee realtor, save yourself another 20 grand or so!


Dream168

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Re: Relocating and downsizing from CA to OR
« Reply #11 on: November 06, 2018, 12:28:08 PM »
Hi Jon Bon and all,

Thanks so much for the thorough analysis!  The 1.2% return is not attractive for me to keep the condo. Time to sell then!  My husband is happy with the idea to sell.  I was the one who was resisting the most.  Until you guys' comments about the taxes and rental issues--things start making sense!!!!!!

Still want to move out of CA.  As for finding a job at Portland...might be a bit challenge for me.  I am thinking of finding a biotech position that I can work remotely or become a science teacher/instructor at a high school or community college.   

Trying to put this in motion...as for now the living situation is taken care.

clarkfan1979

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Re: Relocating and downsizing from CA to OR
« Reply #12 on: November 08, 2018, 05:48:53 PM »
I would sell, mostly for avoiding capital gains. As stated, you are currently long distance landlords. However, it seems like you visit Portland for two reasons. (1) visit family (2) visit rental house. Once you move to Portland it seems like it makes less sense to travel back to CA to check on the rental, if you didn't sell.

Keeping it as a rental isn't a horrible option. No, it doesn't meet the 1% rule, but that doesn't really matter because you don't need the cash flow to pay your bills. If you like your day job and your day job pays the bills you have the option to gamble within the appreciation market. Yes, there will be some ups and downs, but those don't matter as long as you are never forced to sell in a down market.







jpdx

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Re: Relocating and downsizing from CA to OR
« Reply #13 on: November 27, 2018, 01:58:43 AM »
I like your idea of converting the detached garage to living space. Which neighborhood in Portland, if I may ask?