Sell or rent my primary residence

[Derrick Lind]

I'm trying to decide whether to see or rent my current primary residence.  I'm planning on buying a larger home, and have access to some other funding for my new down payment if I need to.

Current house - Castro Valley, CA  (SF Bay Area - East Bay)  

950 SF  2 bd / 1ba  good school district.

Zillow value = $680k    Loan = $400k at about 4.25%.  Rents are likely about $2,500, maybe, possibly $3,000 

Options being considered:

1.  Sell - Get about $280k out, minus taxes/costs.  Use for bigger house & fund other real estate purchases.

2.  Cash-out Refi & Rent - Could get about $135k out at 5.25% on a 540k loan; then rent.

3.  Just rent w/ std refi - mortgage is about $2,200 or so.  Could possibly lower some with a lower current rate, but I'm into that sweet, sweet principal paydown now.

I'm new to real estate.  I currently don't have rentals, but am actively pursuing.  Looking OOS.  

I'm wondering how the cash-out refi option can ever work for you guys, vs a more standard loan down around 3.6% or so. That's a big difference in the PITI.

The rental option just doesn't look good at all.  I'm wondering how anyone can make CA rentals work.  I'm thinking that I'm better off packing up and looking elsewhere.  Bay Area market is pretty crazy right now.  Long term I'm looking for long-term growth, so I'm willing to sacrifice some cash flow in the short term, but it's not even close.

Am I not seeing something here?

[Nathan Gesner]

Sell it while the market is hot. Take your money to a state that has reasonable Landlord-Tenant laws and with properties that cash flow.