Sell Or Keep Renting Out Home In San Francisco 2017

[Sam Dogen]

Howdy Folks!

I'm new to the BP community and I'm excited to be here!  I'm a real estate fanatic. But now that I'm middle-aged (40), I'd like to simplify life. San Francisco has had a great rocket ship like run and I'm strongly thinking about de-risking since I have two SFHs and one paid of 2/2 condo in SF.

Situation:

* Single family home bought in the Marina for $1.52M in early 2005.

* Have a written offer for $2.732M. Hasn't released financing contingency yet, but said bank is set to close and fund by June 20. This gives me an OUT to cancel the deal if I find something better b/c I did not give him a financing contingency extension. I accepted their offer which removed their inspection contingency after inspection was given. 

* 4 years left on a 5/1 ARM at only 2.375%. I haggled the crap out of my bank to get this rate in 2016.

* Was renting the home for $9,000 a month. Now, after one month of searching, I haven't found anybody suitable to pay that price. The conclusion: rent has gone down, and I can likely only get $8,000 - $8,500 due to a large surge in new construction luxury condos. 

* The 1% rule or the 100X rule says that I should buy a $9,000/month rental property for $900,000 or less, or sell a $9,000/month property if under 1%. I'm at 303X monthly rent, or 0.33%, which seems absurdly expensive. But that's if I can get $9,000/month, which I can't.

* At $9,000/month, I cash flow after all expenses about $4,500 a month. If the mortgage is paid off, then the property will cash flow about $7,000/month because property taxes are $21,888 / year!

Why I'm Reluctant To Sell:

* Commissions. I got the level down to 4.5%. But that's still $123,000!

* Transfer Tax = ~$25,000

* LTGT = Six figures. Haven't figured it out exactly, but will have the $250K/$500K tax free gains.

* A property for my son to live in in 23 years. Can you imagine how expensive SF will be by then? Holy hell!

* Capital appreciate. I believe San Francisco is one of the cheapest international cities in the world. 

* Uber, Airbnb, Pinterest, Dropbox will all go public in the next 3-5 years, creating a tidal wave of billions of liquidity into the ecosystem looking to buy real estate.

I'd love to get everybody's thoughts!

Thanks,

Sam