Market Conditions in 94502>Question Details

Chess Player, Home Buyer in San Francisco, CA

I have a nice home in Bay Farm (Harbor Bay). Have owned it for 10 years. Should I rent it, or sell it?

Asked by Chess Player, San Francisco, CA Tue Jul 29, 2008

We have relocated, but are still weighing the pros and cons of selling vs renting our Harbor Bay home. Any advice?

Help the community by answering this question:


Chess Player,

I'd like to weigh in with a more analytical approach.

First, the median price of detached homes in Harbor Bay (94502) has declined a mere 2% from 2007 peak to 2008. The median was $820,000 and is now $803,000.

Thanks to excellent schools Harbor Bay detached homes have been holding their value.

The same can't be said of townhomes and condominiums. Median sales price has declined from a 2006 peak of $575,000 to $508,000 a 13% decline. Many of these were recent buyers with adjustable loans. Also, there are many late '60s and early '70s condominiums with original owners who passed. Many of these were smaller and dated.


Have you calculated your likely return-on-equity and cash-on-cash returns should you rent the property?

Many people look at their down payment, call this their "investment" and then calculate a "return on investment." Let's say you bought it for $100,000, put 20% down ($20,000) and today it's worth $500,000.*

You would actually have more than $400,000 in equity. So all calculations for income should be done as a ratio of your $400,000 equity, not your original $20,000 investment.

Additionally, calculate the cost of vacancy rate, cost of HOA, owner's insurance, other maintenance or cost of repairs when re-renting, and outside property management. Don't forget property taxes in your cost of ownership.

My general rule of thumb is that only 60% of your gross rents will be left for your Net Operating Income (NOI) - the money you'll use to pay your loan. If you have a condo with large HOA your NOI might be as low as 40%.

Finally we get to the good numbers. Depreciation of rental property is your best friend in a flat to down market. If you are still paying on an amortized loan, the principal reduction is increasing your equity. The market is not appreciating, but instead is declining, so you should not estimate any increases in appreciation equity.

My quick analysis is that a median Harbor Bay 3br 2ba townhome purchased 10 years ago for $261,000 might rent for $2,100 a month. If current market value is median $508,000, you have about $322,000 in equity. Your return-on-equity is 2.59%, cash-on-equity is negative 0.29%. You'd lose about $3,300 a year OUT of your pocket before income tax.

I didn't assume any further decline in property value, but that would further deplete your equity and return on equity.


If you sold the property and reinvested your $267,000 equity after cost of sales, with a tax-deferred 1031 exchange, could you do better than 2.63% return and lose $3,300 a year in cash-on-equity?

The answer is YES! With a NNN property with a tax-deferred 1031 exchange you could probably get 8.35% return on equity and put $15,700 in your pocket before taxes and have no management responsibility.

If that's the kind of analytical approach you want, I invite your call.
2 votes Thank Flag Link Mon Feb 9, 2009
Lots of good advise here, you did not say if this was still your primary residence if it is you have a 250,000 capital gains exclusion if your single or 500,000 if your married. If you convert this to rental property you could loose that. Before you decide anything get to your tax attorney, enrolled agent or CPA and get this clarified. I usually find that a person is going to spend a lot more than they think for managing a piece of rental property especially if they are doing it long distance. Good luck and feel free to contact me if you have any questions.

Web Reference:
0 votes Thank Flag Link Wed Oct 21, 2009
Hello Chess Player,

It's been a while and I wondered if you had made a decision to rent or sell your home. The rental market is really hot. I manage a few rentals in the area, and thought you might want to know more about the possibility of renting your home. Do you know if you will receive a positive cash flow or negative cash flow from renting it out? Do you have a mortgage on the home? Are you considering a 1031 exchange? I have no doubts that your home would sell, if priced correctly.
Let me know how you are progressing with your decision, or if you have more questions. Take care. Serena
0 votes Thank Flag Link Thu Nov 6, 2008
After 10 years, the sales price you can get for your home will be nearly double what it was, factoring inflation, replacement value, etc. It's easy enough to find out how much it would sell for today to prove that point.

But as you already know, as attractive as Alameda is, we are also seeing an approximate decrease in value of approximately 15% from a year ago (source: Of course, since real estate is cyclical, we expect the market to rebound, perhaps by the time you come back.

Was your Bay Farm home your primary residence 2 out of the last 5 years? Have you already bought a replacement property? If not, where are you planning to buy, and how much will you need to acquire that new home?

If you don't have to sell....don't. Hang in there.
0 votes Thank Flag Link Sat Sep 27, 2008
You should make yourself a list Sell versus Rent. good points versus bad. No one can really predict what
may happen in 10 yrs. Selling prices are down somewhat now, but Alameda still commands a good sales price for good property. The money gained from the sale could be invested in a safe harbor for whatever. Rental property can be a good investment, but does require that excellent references must be obtained and sometimes that doesn't even guaranty that you will get a good renter, You will need to probably have someone take care of your property and that can also subtract from the rental income. A list of the pluses and minuses will possibly assist you in making the right decision. Good luck in whatever you do decide.
0 votes Thank Flag Link Wed Jul 30, 2008
Good Morning,
With the info you gave, I would say rent it. Alameda's market has held strong. Prices have gone down a bit but we still receive multiple offers on properties that are priced correctly. Hold on to your home. Alameda property has always in the long run gone up in value. You are very lucky to be in the position to keep your home and rent it!!! You may even come back and enjoy our growing community. Much happiness to you for the future.
0 votes Thank Flag Link Wed Jul 30, 2008
Chess Player,
It sounds like you may have answered your own question. It is not a financial constraint, you bought the home well and you enjoy the home and would consider coming back to it in around 10 years. I would say keep it Odds are what you paid in the mid 90s will be untouchable around 2020.
0 votes Thank Flag Link Wed Jul 30, 2008
Thanks for the input so far. Some more relevant facts...single family home in Harbor Bay, built in 1989; ample equity. Mortgage, taxes, and insurance $$ are not issues as I bought the house in the mid-1990's. Am trying to see if I could 'hang on' to a nice home in a choice neighborhood that I *might* like to come back to after 10 years or so. Rent and wait? Sell now and buy (if the allure is still there) later?
0 votes Thank Flag Link Tue Jul 29, 2008
Not even a question in my mind. Rent that sucker. Grew up in Alameda, AHS class of 1980. The rental market has always been strong there and continues to be today. The prices are at 1990's levels and will be for a while. But that town will rebound and rebound well. hold on! best of Luck! The Coach
Web Reference:
0 votes Thank Flag Link Tue Jul 29, 2008
Good Evening,
This a difficult question to answer as I do not know your circumstances. I grew up on Bay Farm Island and Harbor Bay was the bay when I was young. I still live here and have been a broker here for over 24 years.Do you live on Bay Farm or Harbor Bay? There is a big difference. Does your home have equity? If you rent will the rent cover your loan payment plus taxes and insurance or will you have a negative cash flow? Do you think you will come back to this home? Would you like to keep it as investment property? Until you speak with a Realtor to help you with these answers and more, it is very difficult to answer your question. If you need help, I would be happy to help you. My email is
Have a great week!!
Web Reference:
0 votes Thank Flag Link Tue Jul 29, 2008
Most dont enjoy becoming a landlord hassle of tenants not paying, property mgmt. Do you have a clear understanding of all the expenses involved in leasing a property? Realtors fees, property management, reparis, contractors when a tenant moves out, tenant watering the foundation, insurance, taxes. evictions.

I own rental property if I were not an real estate agent know the State laws I would "be stuck with problems"...
Web Reference:
0 votes Thank Flag Link Tue Jul 29, 2008
Good Evening Chess Player,
I will tell you that the activity in Alameda is at a steady click right now. In fact I am taking a relocation buyer out shopping in Alameda tomorrow morning. It depends what you have, if it is a townhouse on Bay Farm it will be difficult but if it is a single family home priced correctly, the are moving rapidly. A big reason is the ferry commute for many city employees. What you really need to do is send your address out to an agent who can give you recent comps in your direct area. I was raised most of my life on Bayfarm on Island Drive and I loved it and many other home buyers just starting families are just now really getting turned on to the island. If you would like me to put together a quick CMA (comparative market analysis) you can send me an email at with your address and I can help give you a sense of your homes value.
Have a great evening,
AJ Cohen
The Bleier Team
Alain Pinel Realtors
0 votes Thank Flag Link Tue Jul 29, 2008
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