Time to sell my SFH in East Oakland, CA?

Question

Hi all, looking for your advice.

I bought a partially-renovated 3bdrm/1ba SFH near the BART (subway) in 2015 in the Fruitvale neighborhood. I house-hacked for 4 years, fixed up the house, and while I still keep my bedroom there, I now live at my partner's rented apt in San Fran because of the pandemic. At the house there are drug dealers out in front, at all hours w/ their loud music, partying and leaving trash. There seem to be more and more guys hanging out overnight as the pandemic continues. I am considering selling this spring, and here is my pro/con list. Looking for any and all advice.

PROs to Selling

- If I sell I will get ~200K in profit- No more living w/ my tenants- No more fixing the house and worrying about it.- Still qualify for the owner-occupied tax break when sellingCONS to Selling

- Won't have my own place if I break up w/ my partner.
- Potentially will lose appreciation and equity in what was gonna be an awesome house right near BART and a new rapid transit stop.
- Feels impossible to buy in the Bay Area again. Not just b/c it's expensive but because the process is a nightmare.

Your thoughts? I'm really stuck. Thanks.

Brian Garlington · Answer

@Shannon Allaire

In your heart, what do YOU think is your best move?

You're focusing on some "what if" scenarios that are perhaps having you to have limiting beliefs.

What is it that you Want To Happen? When you focus more on what you want to happen then you'll start gravitating more towards what is best.

Cory Thorbeck · Answer

Might be a good idea to hold on to it until the COVID pandemic lets up. If there are people causing problems that affect your quality of life, report it. Are you active on nextdoor? If so, see if there is anyone else that is being bothered. If so, maybe have a meeting on how to resolve the matter. If it's paid for, hold onto it for as long as the value outweighs the dynamic problems and use the rent from your tenants as a passive income. If you are able to put that aside, do so > sell > find a more comforting investment. Or sell -- use profit and start over with a more equitable opportunity. just suggestions --my thoughts.

Kathleen Brady · Answer

How long have you owned it? Can you just keep it as a rental? The 250k tax exemption is good as long as you’ve lived in the house for 2 out of the last 5 years so you likely have lots of time left to rent it. And if you keep it as a rental for longer than that and then decide to sell, you can indefinitely defer capital gains taxes by buying another rental somewhere else and doing a 1031 exchange. Can you get a cash flow from renting? By sticking it out through years of gangs and drug dealers in north oakland and then south Berkeley, the two houses I house hacked became very valuable. I’d say it was all worth it... as long as your tenants are paying rent through the pandemic and the rent is enough to pay for the house. I don’t know what the Bay Area appreciation and specifically fruitvale will do over the next few years but I do know that sticking it out even through the housing crash when my house was under water ended up being a very good thing for me.

Kathleen Brady · Answer

Also want to make sure you know that the 250k tax exemption is for any 2 years out of the most recent 5. You can move out and rent it for 3 years before you’d lose the exemption.

Brian Garlington · Answer

TLT

Think    Long Term

Shannon Allaire · Answer

@Brian Garlington Thanks for your reply. I get where you're going by asking "what do I want." It's taking me a lot of hard thinking to figure out the answer when the pseudo-promise of long-term appreciation hangs over my head; meanwhile,  my house sits in hell-zone of constant noise and "visitor" traffic.

50% of people I ask about this say I should hold the house because the Bay is so hard to get into, and prices will go up over the long-term. The other 50% say I should sell because home prices are very high now in the East Bay, and that I should get out before the neighborhood gets even worse. And you're right, it's all about where I want things to go.

Shannon Allaire · Answer

@Kathleen Brady Thanks for your thoughts. To answer your Qs: I've owned the house since late 2015. And no, the house isn't cash-flowing since I only rent out 2 of the 3 rooms. I pay ~$300/month to keep my bedroom there.

I have heard of people like yourself who've held on to Bay Area properties in rough neighborhoods and come out on top.  I just don't know I can handle the stress of lowering the rent and interviewing/leasing to sub-par tenants for another year or longer. It used to be that young professionals wanted to live there because it made the commute to SF easy. Now half of the people answering my for-rent ads are unemployed or make only about double the rent. Ugh. Thanks again for your advice.

DG A. · Answer

I'd suggest holding on to that property. Ask the folks who bought in the 90's what their bay area property has done for them.  Some folks bought their homes in San Francisco for $50,000 back in the early 90's ... how's that working out now? You won't be sorry if you hold for the LONG term.

Time to sell my SFH in East Oakland, CA?

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