Author Topic: Rent or sell a different Silicon Valley property  (Read 2869 times)

Happy in CA

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Rent or sell a different Silicon Valley property
« on: August 06, 2014, 11:08:57 AM »
Hi all,

first post for me since the intro.  DH and I are both retired and in our 50's.  We own two homes right now - one in San Jose and the other in Santa Cruz - and are living in both of them, but we plan to move to Santa Cruz permanently once the house there is remodeled.  After reading this forum somewhat often over the past several weeks, I concluded that the experts here would recommend we sell the San Jose house rather than rent it out.  But like others, we are reluctant to let go of what has been a gold mine for our NW, so lately are having second thoughts.

Here are the particulars:  SJ house is in Cambrian neighborhood and Union School District.  We are seeing rapid appreciation as our area is popular with tech workers who have been priced out of Cupertino, so our house is worth 900K per Zillow but probably 950K based on comps.  Its a 3BR/2.5BA, 1900 square feet, big yard with mountain view BUT its in a PUD and shares one wall and driveway w/neighbor.  Rent estimate is about 3200 per Zillow but that may be a little high - my estimate closer to 3000.  Our monthly expenses are about 1950 for mortgage, taxes and HOA, and our balance on the 15 yr loan is about 183K, fixed at 2.875%.  So if we sold we could walk away with 650 -700K to invest.  Capital gains are negligible because we have spent so much on remodeling over the years.

Here is the dilemma:  we are pensioners and live very comfortably without dipping into our 457 retirement accounts (about 800K total) but we need about 250K to pay for the addition of a BR and BA and main floor remodel to the Santa Cruz house. (Before delivering a huge face punch for the remodel cost, be aware it was a short sale, worst house in best area; but it definitely needs work, and part of the reason we bought the house in the first place was so we can host our far-flung families for vacations and holidays).  We have 3 options to pay for it: sell 457 assets, in which case we must pay income tax on the proceeds, borrow on a HELOC and repay over the next 3-5 years with savings from badassity, or sell the San Jose house and pay cash for the remodel.

What do you think is best?  Have I provided enough info for an opinion?


Another Reader

  • Walrus Stache
  • *******
  • Posts: 5218
Re: Rent or sell a different Silicon Valley property
« Reply #1 on: August 06, 2014, 11:44:56 AM »
You have a property with a common wall in the Cambrian area that's worth $950k?  Minimal capital gains and a $500k exclusion?  That's a no brainer for me.  In your shoes, I would sell before the Chinese money leaves the building.  If you can't bring yourself to do that, take the HELOC.  Leave those 457 assets alone!

Happy in CA

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: Rent or sell a different Silicon Valley property
« Reply #2 on: August 06, 2014, 08:15:16 PM »
Thanks for the advice, AR.  I think I needed to hear the "leave the 457 alone."  Now I just hope the market stays strong until we're ready to sell.

CanuckExpat

  • Magnum Stache
  • ******
  • Posts: 3001
  • Age: 38
  • Location: North Carolina
    • Freedom35
Re: Rent or sell a different Silicon Valley property
« Reply #3 on: August 10, 2014, 03:55:10 AM »
Seems to be a recurring theme, like there needs to be a "should I sell or rent this Bay Area home" sub-forum :)

waltworks

  • Magnum Stache
  • ******
  • Posts: 4743
Re: Rent or sell a different Silicon Valley property
« Reply #4 on: August 10, 2014, 08:01:04 PM »
Yes, and we could just set up a bot to reply "Your house is worth a fortune and rents for jack squat, sell it." Has anyone ever posted a NorCal sell/rent that came down on the side of rent?

-W

Seems to be a recurring theme, like there needs to be a "should I sell or rent this Bay Area home" sub-forum :)

Happy in CA

  • 5 O'Clock Shadow
  • *
  • Posts: 54
Re: Rent or sell a different Silicon Valley property
« Reply #5 on: August 12, 2014, 10:19:26 AM »
Yes, and we could just set up a bot to reply "Your house is worth a fortune and rents for jack squat, sell it." Has anyone ever posted a NorCal sell/rent that came down on the side of rent?

-W

Seems to be a recurring theme, like there needs to be a "should I sell or rent this Bay Area home" sub-forum :)

Good points.  Maybe the reason people keep asking the same question is because they are hoping for a different answer (but already know that the advice given is probably best).

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28287
  • Age: -998
  • Location: Seattle, WA
Re: Rent or sell a different Silicon Valley property
« Reply #6 on: August 31, 2014, 02:05:12 AM »
Yes, and we could just set up a bot to reply "Your house is worth a fortune and rents for jack squat, sell it." Has anyone ever posted a NorCal sell/rent that came down on the side of rent?

Well honobob railed on the side of "keep it, because California appreciated a lot over the last few decades and will continue to do so in my opinion," but he was eventually banned for not being able to express himself within the limits of the forum rules.

I do think there is some merit in considering keeping expensive properties that don't match rental "rules" but only for a small subset of investors (based on their particular situation and goals).  For the vast majority in the Bay Area, including the OP, your bot would be a boon.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.