Should we sell or rent out our Berkeley home?

We're considering a move to the Sierras to be closer to nature and my partner and I disagree on whether or not to sell our small Berkeley home. We bought about 5 years ago and my stance is that the price will only go up and we could rent it for what the mortgage and taxes are. His stance is that we could sell and buy a nicer home in the town we relocate to and have less debt and better quality of life. I think my tendency to hold onto the house here in the East Bay is because I'm scared about never being able to come back. I'm not sure if I'll want to, but I want to keep the option open. We are not high income but I want to keep the house as an investment, but have also heard horror stories about being landlords in Berkeley. Any advice? And who should we even talk to to help us make a good decision? A financial advisor maybe? Recommendations welcomed. Thanks BPN Community!

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I would keep it if you anticipate wanting to come back to Berkeley in the future, and sell it if you don't, unless you are interested in being a landlord. I had to laugh at "the price will only go up"--no, it won't! There are no guarantees. We bought our house at the peak of the mid-2000s market boom and it dropped in value by half in the first two years we owned it. Now it's worth twice what we paid. Real estate--and especially California real estate--is fickle. And being a landlord takes time and money; only do it if you really want to hang onto the house (or if you think it's a good path for your family to have an investment property). If you do decide to rent it, know that you need to be able to rent it for more than the mortgage plus insurance and taxes--you also need to be able to cover any maintenance costs and have a buffer for months that it may be vacant. Your insurance and taxes will go up slightly once it is no longer owner-occupied, too. Not to say that you shouldn't go that route, but be sure you have truly costed everything out. You might reach out to local property management companies to find out what they charge if you won't be a local landlord; they should also be able to give you a sense of what it will rent for. Good luck with the move!

There are a lot of folks, hundreds, who I’ve been in contact with seeking a coop home. Of course it would be great for them to co own the home but if you are willing to negotiate a down payment for them and some low income prices I think you’ll have a happy home extension for some community minded ppls. 
I’d suggest to post in the POCSHN Facebook group to reach out.

Best!

We were in a similar situation (but Albany, not Berkeley, so considerations may be a bit different), considering moving to a new location.  My spouse had a job in the new place, but we weren't 100% sure what to do with our house here. A friend suggested we rent our house out just for just one year while we got a feel for the new place, and I consider it among the best advice we ever got. We rented to a visiting faculty member (try sabbaticalhomes.com), which reduced (but can't eliminate) the risk that the tenant would decide not to leave. We rented a house in the new place, too (though we did consider buying).  Being a long-distance landlord does have some risks, but we made sure everything here was in good working order, and luckily we never had an issue.

As it turned out, we decided to return, and with the spike in prices that year, we could never have afforded our house when we got back.  No guarantee that will happen, of course, but it's worth thinking about.  My spouse's work here had also granted a leave-of-absence, so I guess we had it pretty easy.  If you look at the decision not as a potential long-term investment, but more as a trial period, perhaps the two of you could agree to try a short-term rental for now (even one semester?).  

I’m considering a relocation, too. My concern is investing and settling into a new home before knowing more what it’s like to actually live there. I might discover the perfect neighborhood only after living there for 6 months. (And what if the grass was greener, and I want to return?) I’ve decided I’ll rent out my house here and rent a house for the first year, at least, in my new town. I’ll probably hire a property manager if I need to really unplug from my Berkeley house. I’m thinking I’ll rent a house at first on the less-expensive side so I don’t get used to a fancier home. Then if I decide to keep the Berkeley house for an investment I could buy a house in my new town without a drop in lifestyle. If after a year or two I do decide to sell my Berkeley house, I can decide how much to put into a new house and how much to earmark for other investments. I’m getting older and would like to be mortgage-free by age 65, unless being a property owner is too lucrative. Yes, long-term financial planning is involved for the move. AND be sure about your new town before you cut ties here. It’s hard to afford to move back! Good Luck.
 

I own a rental property in Oakland and one in Richmond.  In both cases, the rent covers my monthly costs and the houses have continued to go up in value.  The houses are in good condition, and I deal with my tenants - who are really great people and enjoy their homes - maybe twice a year, if that.  For me, it's definitely a positive situation.  Tenants turn over every few years, and you have to find new ones or pay someone to handle that for you. Of course, the longer the houses are mine, there is more likelihood that larger-scale maintenance will need to be done, but I have that expectation and save 10% reserves from the rent to put toward future issues.  But mostly, it's something that runs in the background of my life without much thought.  

I also have a business where I handle rentals, and get asked this question from potential clients many times - "Should we rent or sell?!  How hard is it?"  My answer is : everything requires some work and there is always some risk, but overwhelmingly in both my personal and professional experience, maintaining a rental property is worth the effort.  It will likely give you passive income now or in the future, and gives you a fallback if you'd like to return to the Bay Area some (non-pandemic) day.  It also becomes an asset you could borrow against later, as you build up equity in your home.  I'd recommend talking to a local real estate agent for more decision-making strategies.  If you DM me I'm happy to give you some names.

If you are still paying a mortgage on the home it will be non trivial staying in the black for the early years of the rental. More so if the home is older and if you're paying a property manager and if tenant turnover is higher. That said, we used a property management company and they definitely made up for their fees by pricing the property very well and helping us to find good long term tenants. As a side note, property values need to rise by 9% to offset sales commissions, transfer taxes, marketing etc. Then you need to consider what that money could have done for you in another investment. We bought a home 5 years ago in a tight market. If we had invested that cash, we would have been able to buy that same home now, if it were available. If there is something special about the Berkeley home that you'd like to return to, then that might be an important consideration too. Think about your future needs (kids? no stairs? Employment opportunities? Location of friends and family?).

Berkeley is one of the worst cities for being a landlord.  Not only does the city charge a lot in fees, you have to register your home with the rest stabilization board. When you want to move back or sell there are fees you will have to pay to have your tenant move out.  There are situations in Berkeley where owners have paid $75,000 to get a tenant to move out.  And others have offered $125,000 only to have the tenant decline.  Berkeley is has been bouncing around some new laws to protect tenants.

This is probably the worst time to put a rental on the market.  Rent's prices have declined about 20% since COVID.  If you rent your home now you are setting the rental price at a time when prices are low.  With the rent control laws you will never be able to get fair market rent in the future. 

It's not easy being a remote landlord either.  Should you tenant have an issue will have to drive to Berkeley to take care of it.  You will find for simple repairs that you might fix, tenants will just call you.  You could hire someone, but it might cost you a month's mortgage payment.

Housing prices are anyone's guess right now.  We are in unprecedented times.  There are no expects who will know if housing prices will increase, decrease or remain the same.  It's a gamble. You are correct, if you sell there is a chance you won't be able to afford to buy in Berkeley again.  Give this a lot of thought and do a lot of research on being landlord.  You could hire a prop manager, but they are expensive.

I own and have rental property in Berkeley and in other cities.  If I were in your situation I would not do it.
Finding tenants now is difficult due to COVID.  If you rent now, the baseline rental price will be artificially low.  When rent's bounce back Rent Control caps what you can raise the rent.  And Berkeley just passed a new property tax which exceeds the rent increase cap.  Prop taxes will increase more than you can raise the rent.  Every year you will be making less off the rental.  Should you move back or sell, expect to do a lot of work to get your home in the condition it is right now.  And lastly, Berkeley with COVID allows tenants not to pay rent.  And you can't evict.  Can you afford to have someone live rent free while you pay mortgage and taxes?

This is the worst time to try and do this.  

Good luck

Before you make a decision to rent or sell your home, I would do your research on your rights as a landlord in Berkeley.  We have a friend who went abroad for a year and rented her house to people who sued her when she returned for relocation fees, despite their agreement.  We have a rental suite in our basement that we have taken off the market when our recent tenant left given the ways the winds are blowing with the Berkeley Rent Board these days - while the income from the suite helped with our mortgage, the risks have become too much for us.  While you're likely right that once you sell it's unlikely you'll be able to return, I would be very very careful before deciding to become a landlord in this city.