Case Study: Rent or Sell condo in San Diego

[tomfaraway]

We bought a house and are now the new owners of a 500k mortgage, trying to decide if we should sell or rent our old condo and how all of this fits on our FIRE goals

This is San Diego so everyone talks about it being an appreciation market, but we have already experienced some nice appreciation in our condo, wondering how much more we can expect?

Basically So Cal appreciation vs VTSAX ?

Property Details - would you rent or sell this condo ?
Market Value: 400k
Original Purchase price: 250k (2011)
Original Mortgage Amount: 200k
Interest Rate: 3.625% - refi'd twice
Mortgage Term: 360 months
Term remaining: 313 months
Amount remaining on mortgage: 170k
Gross Rents: $2100
Principal and Interest (the P&I of your PITI - should match with the above info): 850
Taxes and Insurance (the T&I of your PITI): 300
HOA costs: 250
Deferred maintenance notes: Newly painted, new dishwasher, old windows, no AC
Anything else special or unique in regards to the numbers of the property (not the property itself; things such as city assessments, back taxes, special costs due to unique features of the property, etc. etc.): HOA has not increased in 5 years, 100% funded

Primary House PITI: 3000 ( 700 to principal, 1700 interest, 500 taxes)
Condo cashflow of 500 + mortgage interest deduction brings that payment down to ~2,200, while paying down $1000 principal on both properties.

FIRE Notes:
NetWorth: 900k but 325k of that is on our primary residence (100k) and the condo(225k). 450k in retirement accounts and 100k in cash.

Option 1: Stick with condo, let renters pay down mortgage, cashflow helps with our house payment
Option 2: Sell Condo, take the 150k appreciation +50k downpayment and make that part of stash.
...
Option 11: Sell everything, invest the full 900k and rent for a couple of years. Keep growing stash until above 1.2M then retire in Mexico with paid off house :)

[$200k]

I don't know what is the best financial option in the strictest sense.  I'm sure someone can run a calculator out there and it will tell you to sell and invest and 20 years down the line you'll come out ahead.

I do know the San Diego market though and I would not sell that condo.  It is extremely difficult to build new units in the entire county.  Nothing gets built anymore or if it does, it takes decades or more.  Look at Lilac Hills.  It is 40 miles from the City of San Diego, in an area that is literally nothing but dirt and in desperate need of housing, and it was overwhelmingly rejected by everyone, enviro groups, public agencies.  Restriction on development will cause increases in prices and rents.

Mexico sounds awesome!  I'm trying to convince DW to spend a significant amount of time in Sayulita if we retire early.

[CalSaver]

I'm interested in this one, it's very similar to my situation, with similar numbers.  I plugged everything into a couple excel calculators and frankly I didn't really understand the results.  Hopefully someone more knowledgeable will chime in.

[del2h1]

I guess it depends on how happy you are with your investment property.  San Diego, like many coastal markets, is very cyclical.  Right now San Diego is very much a sellers market and you'll probably have multiple offers.  Will the real estate market here crash again?  Probably.  When? That's anyones guess.  You could lock in your gains now and do a 1031 exchange into multiple properties in another locale that cash flow better than the condo does.  Then, you'd have multiple tenants paying down multiple mortgages and you'd still get (hopefully better) cashflow to help with the principal pay down on your primary residence or FIRE.  This all assumes you want to continue investing in real estate. 

The above strategy means you'd most likely have to invest out of state.  It's completely possible to do but it does take some legwork and research.

I learned two things back when I (unsuccessfully) tried my hand at day-trading stocks.
1.  Never let a profit turn into a loss.
2.  Always have an exit strategy before you buy.

I'd argue that both of those apply to a real estate investment as well.  Think about those two points and see what you come up with. 

[Car Jack]

If you think renting is easy money, read one of the other threads here.  Don't assume your tenants will pay you a penny.....or leave.

https://forum.mrmoneymustache.com/real-estate-and-landlording/tenants-will-not-leave/

[CalSaver]

If you think renting is easy money, read one of the other threads here.  Don't assume your tenants will pay you a penny.....or leave.

https://forum.mrmoneymustache.com/real-estate-and-landlording/tenants-will-not-leave/

Well, sure, but this is the landlording subforum so I think there is some acceptance of those sorts of risks.  My parents have had 35 years of trouble free land lord experience, and I am now in my 4th year of zero hassle land lording.  Not saying it'll always be that way, just that it's not ALL horror stories.