Rent our place or sell and invest the money?

[Jennie Carolan]

Hi all! 

My fiance and I have been listening A LOT to the podcast. One of the main takeaways we learned is "owning a home to live in is not an investment, it is a luxury." A little background... we live in Orange Country and both work in LA. I am a teacher and my fiance is a firefighter. 

We want to achieve FIRE at a young age! If we sold, we could profit $400,000 and since we are getting married this year, we would not have to pay capital gains.

Our thoughts are to rent for awhile, invest the money in the Vanguard Mutual Fund, and buy some smaller investment properties. The smaller investment properties would allow us cash flow each month.

If we were to move out of our place, we could be rent for approx $3,500 a month. $1,600 a month would go to the mortgage (P&I), $500 a month would go to HOA, and $500 for property taxes (we live in CA). So in total we would be profiting approximately $900 a month.

Sorry this is a lot of information and very confusing! Main question... rent our place or sell and invest the money?

[Jenifer Levini]

Hi @Jennie Carolan, Congratualtions on owning real estate in a beautiful place at such a young age. Many people never get into the California market because it is so expensive.

As a longtime California investor, I want to give you a perspective that is different from the non-Californians above.

1st-there are two types of income: monthly cash flow and long-term appreciation. With prices always rising in the long run, your property will probably appreciate $100K every year or three, depending on the size and location. Who else gives you $100K for doing nothing? Only California real estate! So, If youre just able to break even or a little more on the monthly, it's smart to keep your property.

Realistically, unless you come into a lot of money, if you sell and dont reinvest in California, you will never be able to get back into the market to buy a home when youre ready to start a family. The market will keep rising, but your money will not be working and earning as much as California appreciation, if you invest somewhere else.

If you invest out of state and earn an additional $1000 or $2000 per month, that's $12K per year before taxes. it isnt enough to make a down payment on a burned out garage, in the worst neighborhood in So. Cal.

Rather than sell, youre better off leveraging by taking out a line of credit on the equity and investing it.That money can be invested out of state for low-cost-high-rent to cover both properties (the equity line and mortgage on new property).

Just my two cents.