Help us weigh pros/cons of selling vs. renting out our home

Hi BPN, My family is considering a move to Madison to be near family and we need help deciding whether or not to sell our Berkeley home prior to our relocation.  We bought in 2015 and have about 400,000 in equity due to the crazy ridiculous market. (I'm sorry- I hate posts where people say stuff like this but it is relevant to the decision-making process so I had to share.) We could possibly take some of this equity from our home to purchase in Madison although we aren't sure our income will allow us to take very much equity. Based on calculations online it seems rents are high enough that we could rent the house to cover the mortgage payment and taxes, but it is highly tempting to sell and take the equity to invest in the stock market and have a very small mortgage payment on a home in Madison.  Part of my heart is breaking leaving here, so I think emotionally I like the idea of keeping the house to be able to return to the Bay Area if/when we would be able to. Have you moved away and maintained a rental property here? Pros/cons? Any advice is appreciated. 

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This is a great problem to have! Just wanted to say kudos for this investment, it's hard living here totally get it. My husband and I think about this move all the time.

I would consider how you plan to manage the place as a big factor. There are some great companies out there like Belong (we considered them to manage our house if we rent it out) because the laws are changing so rapidly here and you don't want a squatter situation while being far away. Not sure how much maintenance your home will need, but you just don't want to deal with that hassle is my only guess. If you really want to move on and don't want any ties to the Bay Area anymore and are sure you will never move back, I would say sell. 

Good luck! 

If you haven’t already done so, be sure to read up very carefully on tenant rights in Berkeley as that may be a factor in your decision. It can be very hard to get a tenant to move without cause and selling the house is not cause for eviction. Selling a tenant-occupied house can affect the market value of the house. I’m not saying you shouldn’t rent out your house because of this, but you should probably factor it into your decision. If it were me, I would sell, but I have no stomach for managing a property and tenants from a distance, not to mention the legal issues if your tenants refuse to leave when the day comes to sell. 

Hi! So sorry for your heartbreak. I empathize. Can you rent for a year or so, until you are sure and settled in your location? Having an option for retreat in case you have "sellers remorse". The issues to consider on renting are the effect of the Berkeley Rent Law on your rental, and your potential inability to move back in.(Good cause for eviction) Please get some good legal advice on this issue, from St. John and Associates, or an attorney listed on the Berkeley Property Owners Association website.

Issues to consider on selling are: capital gains tax, all due for the tax year that you sell. One option here would be an installment sale, so the sellers do not leap into a astronomical tax bracket or the year of sale.

We literally weighed this exact move this time last year. I had a job offer in-hand for Madison at a decent salary and benefits, and we were confident my husband could work remotely until he found a local job, or potentially long-term. But like you we had a ton of equity in our home, approx $500k and a very comfortable mortgage payment. Our jobs are high paying with great benefits and retirement. And we did the math with a good financial planner and we would literally have to retire...5 years later in Madison!! While we wouldn't have a mortgage (theoretically we could buy up to $600k without a payment), the other costs of living are not that much lower. Property taxes are higher than here, income tax is high, groceries for the way we eat after a decade in California (fresh fruits and veggies, limited processed stuff) are quite expensive, even at Woodman's in the 9mo off-season. And benefits/retirement are nowhere near the norms established here. Ex: If we wanted another child I was looking at a 12 week unpaid mat leave and my husband might be able to use accumulated vacation. No cell phone, learning or wellness reimbursements. Retirement at maybe 2-3% match after 3-4 years of waiting vs 5-6% immediately here. And huge $400-500 premiums for healthcare and 20% copays vs employer fully-paid premium and $10-20 Kaiser copays... So we would essentially save the $2500 mortgage but come out way behind that on benefits, lower salary, etc. So it became about proximity to family, and that was huge but we had more serious conversations with friends who had moved back to family and while all loved the proximity they said they spent time together like 2, maybe 3 times per month, and while parents helped in some "emergency" situations, half the time they couldn't. So while we miss our families terribly, the big tradeoffs in lifestyle (we love being outdoors in moderate weather year-round; love fresh food stocked year round; love the Kaiser HMO for our kiddo with a medical condition) and huge financial hit weren't worth it. Instead we fly grandparents out 4x per year and put it in the budget which had been great.

Also - if you are married, you take up to $500k in equity tax-free. This does not include your down payment. And you can deduct renovations too. Ex:. You paid $600k; you did $100k in foundation work and new windows; you sell for $1M. You have $100k that isn't taxed due to amount spent on reno and an ADDITIONAL $500k not taxed due to the tax rule ($250k/person if filing jointly). So you could sell as high as $1.2M without a tax bill on equity profit. Make sense? Work with a planner to assess options on this!

Two thoughts about what you've written.

(1) You may be discounting the hassle of managing a rental property in Berkeley from Madison, Wisconsin. If you've got ideal tenants who pay on time and take good care of the house, if there are no major repairs needed, if, if, if, then it sounds like an ideal investment. But those are big concerns, and it's the "IF'S" that you can't even anticipate that would worry me.

(2) On the other hand ... taking your equity out of a relatively safe investment (Berkeley real estate) and putting it into a less safe investment (the stock market) would give me pause. In my view, the stock market is long due for a major correction ... and the only reason it's so high is that interest rates are artificially low.

Thus, the safest path forward, in my view, would be to transfer the equity from your Berkeley home and re-invest it in a Madison home. And dress warm!

Hi there, and congratulations on your move and having lots of equity in your home. You are certainly in a great position having invested in this booming market. As a realtor I have helped my clients, friends and family make decisions like the one you are making many times. Some decide to rent and others decide to sell, it really depends on what your short vs long term goals are and whether you are comfortable to let go of the house or become a landlord (with rent control and just cause eviction as considerations as well). For example, selling the home may make your mortgage lower in Madison, and allow you to invest the rest of the proceeds, but if you want to come back to the Bay Area it may be difficult to buy back in. Depending on the rent you can get for the house, you may be able to cover your current mortgage here with rent and keep the house in case you want to return, but you will have responsibilities like upkeep and replacing tenants when they leave, or you will need a property manager to help with that. You would also be heavily invested in the Bay Area housing market which could be a factor if you end up wanting to sell during a future dip in the market.

We rented out our Albany Home on three different occasions when we were away for a year at a time.  Two of those times, we were certain we were coming back after a year, and the other time, we were considering moving, but really wanted to keep our options open (upon the wise advice of a friend) in case we decided to return — which we did.

We only considered tenants who were themselves planning to be here for a limited time; most recently, using, since that caters to people in short-term situations such as sabbatical visits. We never had any issues since everyone involved was on the same page, but there is always a risk that things won't go as expected.

(Disclaimer - since Berkeley has strong tenant protections, I know your experience in BERKELEY MAY VARY!! Be sure you fully understand your rights and those of any tenant , and have a very clear lease, before you rent if you decide to go that route.)

Hi as a life long bay area native 50+ years, I have known dozens or more friends or acquaintances who have sold their home and moved out of the area and the most common comment is that they regret selling their house. I don't know a single one who doesn't wish they could go back in time and keep the home and rent it instead.

The difference with the bay area compared to other locations is that once you sell that's it, few can ever think of coming back and buying (or even renting) here again. They always think it's a good time, they'll cash in on the equity they have made, often they think the market is at the peak (I remember hearing this as long ago as a child in Palo Alto when little ranch homes reached $45,000 and no one could believe they would go higher and one family sold! And the same when they hit 100k, 200k, 600k, 1million, 2 million etc), while others around 1989,1995, 2001, or 2010 thought the Bay Area was finished and wouldn't come back and sold, in some cases at a real loss.

The cycles can cause panic for those who don't just want to live in their house and raise their family but need to rent it out instead. If one could predict the future, it would then make sense to sell at a high, and buy at the bottom of the next crash. But that's not possible so the next best thing is to hold through those cycles, about 1-2 a decade.

Unlike other markets, the prohibitive cost of the bay area and the plethora of well off buyers who make the buying competitive makes this market unique. If you sell your place in Florida or Wisconsin, it's not the same finality. One can usually always consider buying there again without too much pain.

So I would really recommend you explore the possibility of renting it, do everything you can to see if that is possible before you sell your house. If you know for sure that you will never ever want to live here again, even if you move from WI it would not be on your list to live than okay, it may make sense to sell just to avoid the hassle factor BUT if there is any way you can hold on to it, then really consider it.


My family and I are also considering moving to be closer to family and decided the best option for us is to rent out the home. If we sell we would almost certainly never be able to afford to come back which was a major factor for us as we wanted to keep our options open. We feel confident that the rent would cover the mortgage and taxes so it made sense to hang on to it and keep our options open. If you're on the fence maybe rent it out for a couple years. If after that you're happy where you're at and don't see yourself moving back then you could sell the house and take the profits to invest or purchase out there. If you decide to rent it out and the rent can cover it I would also consider a property management company. They would cover all the demands of finding suitable tenants and also handling repairs as they come up. Typical costs I saw are about 7-10% of the rent. Also remember that homeowners insurance will increase slightly if you rent it out (homeowners are more likely to take care of the property vs renters). Just some things to consider if you decide to rent.

We left San Francisco several years ago and moved to the East Bay to be closer to family but kept our place in the city. We are renting it out on our own but since we are an hour away it's not quite the same thing as doing it from another state. But here's some additional reasons to keep your place if you even think for a moment that you'll come back. This is particularly true if you like your house and its location.

- Besides our fear of being priced out of the city if/when we wanted to return, another reason we kept our place was property taxes. If you bought in 2015, your house probably appreciated 50%+, but because of Prop 13, your property taxes stayed about the same. If you sold your house today and then returned a year later and bought the same house, your property taxes would be 50%+ higher. The increase will probably only get worse the longer you are away.

- A third reason we kept our house is the cost to sell it, about 5% (or $50,000 if your house sells for $1mm, $75,000 if it sells for $1.5mm, etc...). That will take a bite out of your equity. If we chose to return then we'd have that much less money.

- It's such a pain to to purchase a house here. We went through the process in the East Bay recently and the amount of time and emotional energy we expended was exhausting.

Good luck on your decision. I think Madison is wonderful and much of Wisconsin is very beautiful but if it's breaking your heart to leave, maybe listen to you heart.