To hold and rent or sell in this market?

[Daniel Kahler]

Currently live in San Diego county, bought a house with my VA home loan. My wife and I will be moving next year out of country for 3 years. Our initial plan was to rent the property but now I am not sure that's the best choice.

My question is, with the housing market being the way it is, should we sell, and make a 25-30% profit, or hold and rent?

[Dan H.]

Originally posted by @Daniel Kahler:

Currently live in San Diego county, bought a house with my VA home loan. My wife and I will be moving next year out of country for 3 years. Our initial plan was to rent the property but now I am not sure that's the best choice.

My question is, with the housing market being the way it is, should we sell, and make a 25-30% profit, or hold and rent?

 My view is only you can make the decision, but here are some things you should consider in the decision (some are pro keeping and some are pro selling):

• 2 of 5 years rule protects your gains.  This will only be true for 3 years after you move out.  
  
  Ca is unique in its property tax rate due to prop 13.   Your prop tax rate is significantly less than it would be if you purchased today.  Our most extreme case has us saving ~$1500/month on the property tax versus having purchased recently.  
  
  
• San Diego cash flow is horrendous as a function of value.  
  
  San Diego long term cash flow is good to outstanding as a function of purchase price.  
  
  
• neighbor hood scout ranks San Diego appreciation as 10/10.  There are few markets that have experienced better appreciation.  Our worst appreciating property has appreciated over $1900/month over the hold period.  We have 3 properties that have appreciated over $4k/month over the hold period.  I suggest you calculate this number for your property as I expect it will be enlightening.  
  
  San Diego climate is near top in nation. 
  
• 
  San Diego is employment diverse with many high paying jobs.  
  
  
• San Diego development is constrained like few other places.  South is Mexico, west is the pacific, north is Pendleton and after Pendleton is OC with similar price to San Diego, East quickly gets very harsh. 
  
  Ca Tenant laws are LL unfriendly, but the low vacancy rates result in near low in nation deliquency and eviction rates.  
  
  
• buy and hold is not passive.  This is true with the use of a PM but even more true if self managing.
  

If you were planing on selling any time soon, the 2 of 5 years has to be considered and my recommendation would be to sell now.  However, if your intent is a long term hold, few investments can compete with the historical returns of a San Diego leveraged long term buy n hold property. 

Good luck