Selling vs. Renting Out Your Home
– Jul 18, 2020(8 replies)
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!Jul 18, 2020
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.
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?).
– Dec 27, 2019(10 replies)
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.Dec 27, 2019
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.
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.