Home Buying in Danville>Question Details

Brandon Lecl…, Home Buyer in Danville, CA

Long distance renting? Pros/Cons?

Asked by Brandon Leclere, Danville, CA Thu Oct 24, 2013

I'm originally from Danville, CA and have lived in Franklin, Tennessee (very similar to Danville in many ways) for 5 years now . I plan on moving back to the Bay Area by possibly next Summer. I purchased my home in TN March 2011 and have already about $35,000 equity in it. I see it continuing to go up in value considering the area is booming economically in every way possible. My choice is 1.) Sell the home before we move to California and rent for a while until my wife and I can gain enough money to add to our home profit for a larger down payment to purchase in Concord or something "affordable" or 2.) Use a full service property management company (for a fee) and continue gaining equity in the home from long distance. I am not sure what to do. Please advise me! Thanks.

Help the community by answering this question:

Answers

6
Are you planning to return to Franklin TN to live there again?

If not, but if you want to keep the property as an investment and source of savings for you, your interests and your property are best served if you contract with a property management company to manage the rental for you. And yes, there's a fee for that, but that is the cost of peace of mind. Question is, will the income you derive from renting it out be enough to cover your mortgage and property management fee, AND have more you can apply to your savings?

However, if you need additional cash to buy another property when you come back to the Bay area, the equity you have earned on your Tennessee property will certainly help with your costs to buy here.

You may have noticed the prices are starting to go back to where they were in 2004-2005....so who knows where they will be next year and beyond? Do you think you can save AS MUCH and AS FAST as the prices are rising?

Take a look at DQNews' report on prices.....http://dqnews.com/Charts/Monthly-Charts/SF-Chronicle-Charts/…
1 vote Thank Flag Link Thu Oct 24, 2013
If you are convinced that the property is going up and it pays for itself I see no reason to sell unless you need the money for the new place in CA.
1 vote Thank Flag Link Thu Oct 24, 2013
The full service rental property will take care of everything. So, the only con is there fee. And another thought is you could use the sale of your old property as a downpayment on your new one if you need it.

Alex Greer
Loan Officer
NMLS #1056079
http://www.TheMortgageOutlet.com

408-352-5147
AGreer@TheMortgageOutlet.com
1 vote Thank Flag Link Thu Oct 24, 2013
Can you cover the mortgage with the current rental rates in Franklin, after paying for full service property management, and continue to save money to add to the $35,000 while paying about $2,000 to $3,000 per month for rent in the Bay Area? If yes, and your income will keep up with rising Bay Area home prices in the short term, then renting here in California short-term might be right for you. Question is can you afford to buy something in Concord that you would say affords the same Franklin/Danville quality of life you are accustomed to? I think that might be a challenge.
1 vote Thank Flag Link Thu Oct 24, 2013
Hi Brandon

That is a great question.

My first question to you is, would you and your wife ever plan to move back to Franklin TN?
Second question is, relative to your home price, how strong is the rental market vs home sales? I would assess what your ROI is on renting vs the appreciation percentage over this current year.
Lastly, what is it about Franklin or the local infrastructure that may influence you, that the economy in the area will continue to increase over the years to follow.

If you could let me know, I may be able to provide you with some suitable guidance. Thanks
1 vote Thank Flag Link Thu Oct 24, 2013
The possibility of moving back to Tennessee will always be there. But I have no idea what the future may hold. The home sales here is booming. Tons of inventory. From what I see rentals go pretty quick. There is to many things about Franklin to count when it comes to how well the economy is growing here. Everything from new neighborhoods being built constantly to new shopping centers popping up left and right. The population has grown thousands in the past year. So much so that they are doing a "special census" currently to see how much the city pop. has really grown. I just want to make sure I make the best decision.
Flag Thu Oct 24, 2013
Brandon, I hope you contacted a property Management firm by now and had them run "hard" numbers for you so you know the anticipated rental income for your home, the fee's for management and monthly reserve set aside for maintenance so you can evaluate if you will have a positive cash flow every month or not. Also, contact a good accountant to check the impact on your Federal and California Income Taxes. You should also have a clear idea of the anticipated increase of prices for homes in your neighborhood in Franklin for the next year AND the next 5 years. Having a local agent do a Comparative Market Analysis (CMA) will give you valuable information. Only then can you make an informed financial decision whether it is best to rent or sell your home in Franklin.

With this information in hand your next step would be to evaluate the "affordable" areas in the Bay Area, including Concord (with careful consideration of work/commute variables) and do a Rent vs Buy evaluations. A experienced local Realtor will help you with these calculations.

The important element to keep in mind is your ability to get a new loan. Lending guidelines are continually changing and currently the focus is on debt ratios rather than credit scores. Keeping your house in Franklin would impact this ratio. Interest rates are creeping up which also impacts your ability to purchase a new home in the Bay Area.

If you really want to own a home in the Bay Area waiting could make it harder or impossible in the future. Something to think about.

Please feel free to contact me to discuss these points in depth if you are still undecided on what is the best decision to meet your goals.

Tracy Parker | 925 389 0645
Prudential California Realty
0 votes Thank Flag Link Fri Dec 6, 2013
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer