San Jose to Rent or Sell / Monterey to Buy or Rent

[Dmitry Kisselev]

I'm a newbie looking for seasoned RE advise. I faced a situation that will require our family to live in Monterey. I been learning about RE on the sidelines for some time and felt that this might be an opportunity which pushes us to actively participate.

We own a condo in San Jose / Good Samaritan Hospital Area (95124). The condo appreciated from our initial purchase in '07 over 30% and has over $150K equity built in now. The same condo will rent out at ~$2.5K a month, which will produce a negative cash flow. That said with a negative cash flow it will be still much less (30%) of our actual today expenses of paying for it monthly (PITI+HOA).

Life happened and we need to spend next 2-3 years in Monterey. At first, I thought to rent San Jose condo out and buy sfr/duplex/triplex in Monterey and live hack by renting a portion of it out. It seems that If I buy a property there using HELOC from SJ property as downpayment we will likely cashflow negative in Monterey as well. Yet putting two negative cashflows together we likely be less out of pocket then the expense of paying monthly for property in SJ. In this scenario, both properties appreciate and potentially bring tax benefits of write-offs.

The alternative to that would be to just rent out SJ and rent in Monterey, but that seems to be more expensive rent+negative cashflow from the rental in SJ and no appreciation in Monterey.

Am I missing something? Do my eyes are covered in the veil of ignorance? How would you deal with this situation? Please speak up. Any suggestions are appreciated.

[Sam Shueh]

I was looking at Monterey, Oceanside, even Sand City homes under $900K recently, the used  SFHs are fairly old(~60 years). New ones with a Ocean View are all close to $1M.  Rent is certainly lower in Monterey may be $2K or less than central SJ.  If you try double negative cash flow you can be in a real bind.  

The rental market in SFBA has not been that good since late 2015.  I have 2 rentals in 95008, 95128 that have been on the mls for >1+ months with price reductions.  There are only people leaving not coming for jobs. Housing is too costly. Techies do not come here for jobs. Point is what do you do when your SJ 95124 condo is vacant?  What you really need to do is quantitatively work out bother scenarios with tax consequence.  

Monterey housing prices are not much lower than South Bay. Many are owned by out of the area home owners. There is more demand near the University by old Fort Ord.  

Your Cambrian Park unit probably will not have much more equity gain as over-valuation will soon be felt. Even those who bought at last peak 2006-2007 are unloading if they don't live there.

My office is not far from you on Hamilton/ Bascom.  Needing help contact me. 

Good luck

Sam Shueh Realtor

Realty One Group