Home Selling in Fremont>Question Details

Fremontschoo…, Home Buyer in Fremont, CA

Rent or Sell my Fremont House near Bart

Asked by Fremontschools, Fremont, CA Tue Feb 26, 2013

We own a 1988 built 3 bed/3 bath 1500 sq ft single family home near Guardino /Fremont Bart area. We may not be living in the area longer. Our current expenses on the house is about $2100/m and rent expected is anywhere from 2300 to 2500 per month.

Current expenses of 2100 include mortgage payments, tax, insurance and a maintenance expense of $100/month. I have adjusted this for tax benefits due to mortgage.

I need property management and if I pay 6 to 10%, then I will break even.

What are the pro/con on keeping this house and renting vs. selling right now, based on the financials, future appreciation etc.,

Thank you!

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Answers

17
I believe it would be in your interest to hold onto the property and take in rent for a couple of reasons.

First - property values are just beginning to rise. There is no doubt that you could sell the home now and quickly - but values should continue to rise as the economy recovers. You have a prime location being near to BART, Central Park and shopping. The City of Fremont just approved a new Downtown plan that looks to completely renovate the downtown area providing for a possible Cultural Arts center and an "Art Walk" that would snake through the downtown area as well. Plans for new, pedestrian friendly shops and restaurants as well as improved higher density housing -- not to mention Whole Foods will be great attactors for years to come.

Secondly - you did not indicate why or where you are leaving. If there is even the remote possibility that you may return sometime in the future (I have seen this too many times to count and in fact I am working with someone who moved to Texas many years back and is returning now to retire), hold on to the home. You may not be able to afford it years from now. And with a renter covering the payment - you would be increasing equity in the home over the years as well - and have additional write offs for your taxes.

I hope that this helps you my friend. Should you have further questions, please feel free to call on me.

Best always,

John
1 vote Thank Flag Link Tue Feb 26, 2013
If your house shows well and is upgraded you can probably maximize your gains by selling the property now. CA market shifts really fast and at any point of the year it becomes either a sellers market or a buyers market. Right now it is a sellers market but last year there was a shift in the interest rates, we saw an influx of inventory in the market. Also, home prices have gone up so much in Fremont that many buyers can no longer afford the monthly payments and looking for cheaper alternatives. Also, values, in most part, have exceed pre-recession prices in Fremont. I would advice you if you can maximize your gains from the sale of the house then selling is the best option. Use the proceeds to buy investment properties in emerging areas, closer to the bay, that have not yet hit the pre-recession values. Your cash flow will almost be the same as your house in Fremont but the growth in appreciation rate will be a lot higher. Good Luck!
0 votes Thank Flag Link Mon Feb 17, 2014
I own a home in Fremont and facing the same dilemma. The only difference is that I have a second home in California so I know I will never return to the home in Fremont. I have to sell within the next two years to be certain of the capital gains exclusion. So the question is sell now or rent for 2 years. One of the things that I just discovered today is that when you rent the depreciation you take cannot be recaptured by moving back into the house. It has to be excluded from the amount that you can protect from capital gains when you eventually sell the house. After many years of renting that can be a substantial amount.

I have been on landlord in the past and frankly it's not all that difficult. Chances are you'll get a pretty good renter in Fremont. However things can happen sometimes tenants don't pay sometimes they do damage.I think house prices are probably going to continue to rise in Fremont for the next couple of years but nobody can predict that for sure. Houses are really at a historical high now in Fremont so the likelihood isthat they will increase that much lower rates over the next few years than they have the last couple.
0 votes Thank Flag Link Tue Feb 11, 2014
I'm a professional property manager! :)

You may want to interview a couple management companies to see which one is the right fit for you. Just as there are several good management companies, there are also bad ones.

Feel free to visit my website to view my product offering, presentation
and video at http://www.cpbpm.com

Or just give me a call on my cell at 510-681-3499 to arrange for a free in-home consultation.

Thanks,

Michael Koenig
Michael@cpbpm.com
Web Reference: http://www.cpbpm.com
0 votes Thank Flag Link Thu Feb 28, 2013
I have a good friend Sandra Shaw 510-882-9800 and she manages several properties for my clients and I have been told over and over again by many other agents that if they need a professional property manager for a home they owned they would hire Sandra Shaw as their manager. Give her a call and tell her I suggested you call her. Good luck, Michael Tessaeo
0 votes Thank Flag Link Wed Feb 27, 2013
I am a good (sometimes called great) property manager.
I take an active role in managing properties.

I manage 50 properties, great marketing and great results.
licensed since 1985.

Feel free to contact me.
510-710-4905 cell
Brian
0 votes Thank Flag Link Wed Feb 27, 2013
Thank you all! you have added great insights. I appreciate it

Quick question : How does one go about getting a good property manager? Almost all of them have similar services and contracts to ensure the owner has all the liability.
0 votes Thank Flag Link Wed Feb 27, 2013
When I sit down with owners to discuss property management and whether they should keep the home or sell it - I always tell them about what Michael K mentioned, if you keep the home as a rental after the third year the profits become 'capital gains' taxed when you sell.

It might be easier to explain in person, but you can rent the home for 2.5 years and sell the home and sell retain the profit (up to 500K married). If you sell after three years the profit on the home is now taxes as capital gains and approx. 1/3 of your equity could be gone.

There are other options as well.

I manage many properties in that area and I would be happy to share with you what I do.
(sample ad: http://www.postlets.com/rts/5485243 )

Brian Ripp
0 votes Thank Flag Link Tue Feb 26, 2013
One thing I have learned after selling real estate here in Fremont for 29 years is that if you can afford to keep it and move then keep it. As others have stated many of my clients have moved in and out of California some as many as 5 or 6 times thinking they would never come back and each time they can kick themselves for not keeping their home here in the Bay Area if you dont need the equity from the Fremont home you need to hold onto it and rent it I dont believe you will ever be sorry you did just make sure you hire a GOOD property manager. Good Luck
0 votes Thank Flag Link Tue Feb 26, 2013
Hi there,
Great answers here...and I'll chime in as well.

Your home is in an excellent area, close to the city center, BART and Lake Elizabeth.
Home values, after being depressed for several years, are really now seeing an upward trajectory.

It's all about risk/reward heading into the future.

Taxes:
Current tax law states that you can exclude up to $250k of profit from the sale of your primary residence ($500k if married), but only if you've lived in the home 2 out of the past 5 years. So you can sell/cash-out now, or within 3 years of moving out and still have no tax liability (there are details, so check with your accountant on this)

If you decide to rent out the property, it seems to me that you should be able to rent the home out closer to $2,600 (I do property management and have a pretty good idea as to market rents). If you factor in a prop mgmt fee of 7%, this leaves you with a net $3,816 year income from rents.

If your long term plan is to move back to the bay area to retire, sounds like you'll need to a place to live! :)

Depending on how long your stay in Texas is, just factor in an average of 3.5% annual appreciation to real estate prices over that time period. From the details you provided, your home's current value is in the $575k range. Over 10 years, it seems logical that value would increase to about $775k. That's quite allot! More than likely you won't be able to get that kind of return on your other investments during that time period, which may make the home that much more expensive to buy when you return back to the bay.

Additionally, rents are also on an upward trend of at least 2% or more per year. Which means, that at a minimum, the approximate rent on your home at the end of 10 years will probably be closer to $3,200/mo. Not too shabby, especially if your PITI is still only $2,100.

Of course, I've made a number of assumptions here, but I think the rough numbers and percentages used are relatively conservative. For example, most of Fremont has experienced a 10+% increase in value in just the last 12 months.

That's my 2 cents ;)

If you'd like to review scenarios and setup a plan that is more tailored to your absolutely specifics, don't hesitate to ask.

Cheers!
Web Reference: http://www.cpbpm.com/
0 votes Thank Flag Link Tue Feb 26, 2013
That is very funny - you moving to Texas and me helping someone planning to return here from Texas and retire exacatly as you plan to. She also was a former CA resident returning home.
I know that if she had her preference, she wishes she had a home to come back to here. Home prices in Texas are much lower and going from high to low (CA to Texas) is fine, but coming back with no home in the area can be quite the shock.
I have read some of the other comments coming from some good people and friends saying that now is a good time to sell and I would agree with that - to an extent.
Now is a good time to sell due to inventory being so low - your home is sure to sell quick and you will get a good price.
But that is only 1/2 of the equation and exactlly why I posed my questions to you.
I can tell you - I would never be able to buy the home I bought 15 years ago - my value has nearly doubled since I purchased it then and if you look at typical historical values you will see that that is not abnormal. Inevitably - even after a recession such as this, you will see values move cyclically to the positive side. This does not even take into account that someone will be paying down the principal on your home while away (creating equity)- or that rents are sure to increase in the future by about 3% per year at the low.
Please do what makes you feel comfortable, but given you don't need the funds now, I believe you would be selling short - especially with an extended time away.
If you are thinking of holding on to it, please call Richard Hand at 510-579-1018. He is someone I completely trust and who has been doing property management for years. He is exceptional and perhaps a little bit of a perfectionist when it comes to taking care of property - exactly what you may want. Interview him and others and again, if I can be of assistance, please feel free to call/email.

Best always,

John
0 votes Thank Flag Link Tue Feb 26, 2013
My takeaway from your advice so far:

Dutra, Juarez,, Bagwell : Rent

Larry, Joe : Neutral (Sell or rent)

Thank you for your great analysis and thought provoking questions as well! this is helping me a lot.

Samantha : I have 3.25% on 30 year fixed. Don't think I will be able to do any better
0 votes Thank Flag Link Tue Feb 26, 2013
If you qualify you might be able to refinance and get a better interest rate. That may knock of some of your monthly payment making it more comfortable to rent.

Just a thought.

I wish you well in whichever path you choose to take.

Samantha
0 votes Thank Flag Link Tue Feb 26, 2013
my 2 Cents about your scenario whether you should keep home for rental or to sell.Nobody can predict the future but from past historical data for the housing market shows that it's good time to sell.If you do decide to rent and need help with property management,below is Vikki's contact and she may be charging 6% for the property management fee which is lowest in the industry.But do confirm with her the current fee.I am actively working in guardino area and you may have my flyer.Good Luck!!!
Contact for the property mangement.
Vikki L Vincenzi

Regional Manager, CCRM

Bay Property Group

39465 Paseo Padre Parkway Suite 1500

Fremont, CA 94538

Office 510-505-5545

Mobile 510-459-2010

vikki@baypropertygroup.com

http://baypropertygroup.com

Lic # 01461386
0 votes Thank Flag Link Tue Feb 26, 2013
Thank you, John, John and Larry


Additional data point :

1. We are moving to Texas. Our intent as you said, John is to retire back in the bay area.
The company I will work for, is willing to pay 15K post tax allowance if we sell our home. This is not available if we keep/rent it. So, the long term appreciation needs to cover this 15K.

2. Don't need to take the capital right now for anything

3. We are currently living here and there are minimal tax implications.
If we sell later, I am sure we will pay capital gains.

4. Never been a land lord and need professionals to manage. what are some good managers, if we decide to keep the house.

I do not have an overall financial plan (didn't think I was rich enough to warrant one)



Additional thoughts gratefully appreciated
0 votes Thank Flag Link Tue Feb 26, 2013
Send me an email and I will give you the property manager I have known for over a decade.
Flag Tue Feb 26, 2013
First, let me say that John Dutra’s advice is excellent. Real estate is a great long-term investment and California real estate has generally been an excellent long-term investment.

Also, it is clear that this is a strong sellers’ market and your house would sell strongly in the current market with proper marketing.

Have you ever been a landlord? Not everyone is cut out to be a landlord.

What would you do if you sold? Where would you do with the proceeds of the sale? Would you need the cash in the near future? Would you invest in securities? Would you buy a home in your new location? Would you opt for investment real estate elsewhere than that home you now own?

Would there be any tax implications if you sold now? Would holding ownership now and revisiting your sell/hold decision at a later date be a better way to go? Can you take advantage of the ability to sell now and avoid some of all of capital gains tax or sell within the next few years and still avoid capital gains tax?

Do you have an overall financial plan into which ownership or sale of this house must fit?

There is not a simple answer to your question.
0 votes Thank Flag Link Tue Feb 26, 2013
Pro/keeping house/renting- Values are going up but as you know that can change anytime depending on market conditions and the economy.
Con- Renters can damage your home but on the bright side I know a great local property manager.

Pro/selling- In the 13 years I have been in the business I have never seen a better time for selling because of the low inventory, we are getting multiple offers on everything, of course it has to be priced right and I can help figure that out.

Con/selling- Values could go up for for a while.


Best Regards,

Larry F. Gallegos
Real Estate Collaborative Specialist-Divorce
Broker Consultant, e-PRO Certified
CRS-Certified Residential Specialist
Luxury Home Specialist
ASR-Accredited Seller Representative
GRI-Graduate of Realtor Institute
SRES-Seniors Real Estate Specialist
ABR-Accredited Buyer Representative
ASP-Accredited Staging Professional

Better Homes and Gardens, Mason-McDuffie
43430 Mission Blvd.Suite 100, Fremont,Ca.,94539
Direct-510-492-4872, Fax-510-217-4249
Visit my Website at http://CustomBayHomes.com
Email- Larry@LarryGallegos.com
DRE license # 01253795
0 votes Thank Flag Link Tue Feb 26, 2013
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