To keep my California property or sell

[Jacob Laman]

Hello all,

Looking for some advise here.  I currently own a home in San Diego under a va loan. I would like to possibly turn this property into a rental when I leave.  I’d like to then buy a property in va using a conventional loan.  
contributing factors; current home loan is roughly 500k. 
being my first home it feels like a lot and I’m a little nervous to hang on to it.  My mortgage would be comparable with other rental properties in my area.  
how would holding onto this property effect a conventional loan when I move to VA? Would it hinder my ability for another decent loan?.

Or..  

selling it seems like an easy way out. 
many advise would be appreciated. 

[Dan H.]

Originally posted by @Jacob Laman:

Hello all,

Looking for some advise here.  I currently own a home in San Diego under a va loan. I would like to possibly turn this property into a rental when I leave.  I’d like to then buy a property in va using a conventional loan.  
contributing factors; current home loan is roughly 500k. 
being my first home it feels like a lot and I’m a little nervous to hang on to it.  My mortgage would be comparable with other rental properties in my area.  
how would holding onto this property effect a conventional loan when I move to VA? Would it hinder my ability for another decent loan?.

Or..  

selling it seems like an easy way out. 
many advise would be appreciated. 

 I invest in San Diego properties, so I have positive long term outlook.  

However, for you I think it makes sense to sell. Here are some thoughts: 1) frees up your VA loan 2) 2 of 5 years implies no tax on the value appreciation. This vanishes 3 years after move out 3) for the same reason I do not recommend San Diego newbies start OOS applies to those investing in San Diego. It will be an OOS RE investment for you with all of the challenges that come with OOS RE investments. 4) our worst performing property is our ex-home. This is because it was purchased to be a nice starter home for my family. It was not purchased to be an outstanding rental with great rent to value ratios. I suspect your property may be similar. The implication is that it will not be hard to find an investment RE that is likely to do better. Do you know what the rent to value ratio is? In San Diego 0.75% is good and with most loan terms easily cash positive at 80% LTV. Most SFH are far worse than this. Without knowing the financials on your property, I suspect it is far closer to 0.5% than 0.75%. this implies if you were at 80% LTV, it would be large negative cash flow.

Note, if you were staying in San Diego, one of the reason for selling would not apply.  

As indicated, I believe in 15 years, even with a correction in that span, the property will be worth substantially more than today in inflation adjusted dollars.  But buy n hold is not passive.  OOS has challenges.  I believe your RE is either cash flow negative or, if it is not, it is due to a high equity position. It would be nice to not have any tax on the gains.  It would be nice to free up the VA loan.  

 good luck