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Started by nmalik, August 17, 2019, 06:31:14 PM
Quote from: couchfi on September 19, 2019, 11:36:43 PMThanks for the idea, it's a little too late actually as I'm about to close on a new primary residence 2.5% 10/1 ARM and half way there working with an agent to list my current home. Maybe I'm too risk averse, but I just can't make the numbers work without unrealistic expectations about SF real estate growth over the next few decades. Surely it will revert back to the mean at some point?The new place costs nearly 2x the one I'm selling, so I'm already heavily levered in bay area real estate. If I count principle payment as cashflow, then I'm cashflow positive, but straight line depreciation eats most of it back to break even, and it's before considering any rental vacancies or repairs, property managers (8-10%) making it negative.I can't assume the bay area will increase in value more than other parts of the country over the next decade or two, it's already the most expensive city. Long term, equity appreciation will track inflation, let's say 2 - 3%. I'm probably looking at 10 - 15% IRR while slowly deleveraging from an initial 70-80% LTV which is pretty high imo. Real estate syndicates and crowdfunding can hit that with lower risk through diversification.
Quote from: nmalik on August 19, 2019, 04:24:18 PMInteresting. But what are your thoughts on taking out the home equity and putting it in the stock market instead. Shouldn't the return on the market beat or equate the rise in appreciation/increase in home equity from renter over a 2 year period? (Mortgage rate is 3.625%)?
Quote from: Eric on September 29, 2019, 06:18:26 PMI would suggest selling. SF has had a great run, but what's the probability weighted return up or down. Cap rates are horrible so you need appreciation to break even vs another investment. Foreign investment is down and unlikely to return in the near term (low oil prices for middle eastern investors, slowdown in China). The tech bubble is showing signs of popping. No suckers willing to buy we work. Recent ipo performance is pretty bad across tech. There is already a real estate reprising. Seattle is down. New York has a huge surplus of luxury real estate. The heartland where cap rates are reasonable and people can afford to buy is doing well. How tied to you to the bay area? If some magical inflation happens and you are priced out is that a life ending scenario? There is more likely a downturn than upside, but it's worth keeping is an upside is problem. If all your friends and family are in the bay area, that's different than if you are a transplant to the area. I would be a seller unless you have strong ties to the area.
Quote from: nmalik on October 05, 2019, 02:40:03 PMThanks for all the suggestions.I've decided to sell in 1H'20 (That timing works out with other factors). Aiming for March or so to avoid the "(?)winter slowdown."My plan is to sell and then buy another property later in 2020/early 21, so wont be out of housing for too long but would just make things easier logistically than renting it out. Aim is to put some of it into stocks and perhaps look into syndicated deals...
Quote from: nmalik on October 12, 2019, 04:59:58 PMSam,Also saw your other post on Bay area real estate possibly going down over the next 2-3 years. Its clear that the market is cooling already...However, do you think prices in the peninsula are likely to go down significantly or plateau, given the high level of demand in the next 6 months or so..also all the ipos...
Quote from: Kendall on October 28, 2019, 10:26:28 AMThe cap rates for SF Bay Area property are soooo low. I tried to rent my previous condo in San Jose to earn income. After the mortgage, management fees, wear and tear and the headaches of HOA boards, I could not keep being a landlord. I barely broke even on cashflow. But I was able to hold on to the property until there was an upswing in the market and sell out. That seems to me to be the only reason to own a rental with a mortgage payment on it. I will surely come to regret the choice. I sold a condo in Mountain View for $200k and it now priced at $900k. At the same time, not owning that condo freed me to do other things with my money and diversify my risks. If my properties had all been completely paid for, then, in a sense, switching it to a rental property is like playing with the house money.