Advice on selling or renting my San Diego area condo when I relocate to Denver

[Jacob Munson]

I purchased my 2Bed/1Bath condo in Encinitas (North San Diego) in early 2021 for 435k (40k down) and with the market going crazy the past couple years it is realistically now worth approx 620k. I am looking to relocate to Denver in the next year or two and have been planning on turning the place into a long term rental. 

I'd like to hold onto the property long term as it's in a high appreciation area near the beach and rents in the area are high however cash flow would be minimal because of the mortage/HOA. I am building a savings to go out and buy future deals but would love to be able use some of that equity as well to help jump start my investing.

Wanted some thoughts on if it's best to hold on and hope to refinance/get cash out when rates go down or if in the long run it makes the most sense to sell and put all that equity to work elsewhere. Thanks in advance!

- Jake

[Dan H.]

Some thoughts

- You have the 2 of 5 years occupancy so if you sell you will be exempt for tax on the gains.

- Historically San Diego has had great RE appreciation, but we just had 10 years of crazy appreciation.  Will it continue?  Can it continue?

- Many home purchased as homes for you and family are not optimal rental units. This could be the case if the HOA is costly (more than is reflected in the rent for the amenities). My worse performing property is my ex-home. While it is my worse performing property, it has performed fairly well.

- You have prop 13 savings of close to $2K annualy.  This will help with your cash flow if you keep it as a rental.

- Owning from afar will likely necessitate the use of PM.  That will cost 8% and it is a rare PM that manages as well as you desire.

- Owning residential RE is not passive even with the use of a PM.

My view is there is no "right" answer here, there is only a best answer for you and your goals,  I seldom sell local RE because per the long term local RE has produced good return.  I will add however that my worse performing RE is my ex home and that other properties may make better investments.

Good luck