AT&T Park (San Francisco) Condo: I should sell, right?

[Annelyse Finley]

Two years ago I bought a condo next to AT&T Park (San Francisco). I did not buy this unit as an investment. I bought it to live in. Because…

…every morning I get to go for a jog on the Embarcadero and see the sun rise over the Bay Bridge and--on really long runs--the Golden Gate bridge too.

…I get to watch World Series baseball in my front yard every even year.

…Public House has a rotating draft beer menu that rivals what’s on tap at any other bar in the city.

…and my commute is a 20 minute walk every day to the financial district. No Bart, no muni, no toll plazas. Priceless!

But my priorities have changed and I’ll be moving to a house with a yard in the burbs. So, should I sell the condo or rent it out?

Relevant facts include:

*Market value of the condo has gone up $100K in 2 years--but selling costs would wipe out most of the gain

*Rent would cover PITI, but not the monthly HOA (very expensive), parking, maintenance and capex.

*I’d be paying $1K/month out of pocket to hold and rent. I could stomach this, but it would definitely put a dent in my ability to acquire other investment properties.

*The Golden State Warriors basketball arena is being built nearby—-which makes two pro sports stadiums within walking distance.

*There’s a bunch of shiny new condos being built across the channel in Mission Bay—mine will look pretty old and dull in comparison.

I'm assuming any rational person would say Sell Sell Sell! based on the negative cash flow of $12K/yr.  But would anyone argue in favor of holding?  

[Arlen Chou]

@Bob E. I thought I would take a minute and highlight what I perceive as the benefits of an appreciation loaded strategy. Firstly, I believe that many people get caught up in the face value of the "appreciation vs cash flow" debate.  In my opinion it is wrong to think of this as a black and white issue.  A good investor should be looking for BOTH appreciation AND cash flow.  In the coastal markets the equation is a high barrier to entry, POTENTIAL high appreciation and low cash flow (which gets better over time).  In the flyover areas the barrier to entry is low, the potential for a appreciation is low and cash flow is RELATIVELY high. Any investor not getting both, appreciation and cash flow, is doing something seriously wrong...

The difference to me is the amount of headaches and the infrastructure needed to support the different types of markets. In a high cash flow strategy, a large number of units must be owned.  By definition that means a high number of deals must be made with associated buying/selling/renovations costs.  Also the logistical costs go up exponentially: more toilets, more appliances, more roofs, more yards to maintain, etc.  I do acknowledge that labor rates in the flyover areas are substantially lower, but base material costs are really not that different.  

Additionally, at some point with the compounding model of adding low cost units, an investor stops being and investor and goes back to becoming a worker bee: a team must be created and actively managed, analysis on dozens if not hundreds of units must be done on an ongoing basis, additional deals must be found and closed, etc.

I prefer the appreciation model because there are substantially fewer moving parts in the investment machine.  Properties that I have purchased 3 years ago are worth nearly double the purchase price and average rents are over double what they were at the time of purchase.  I have pulled my initial cash back out and bought more units in the Bay Area that also have positive cash flow.  As time moves forward, I HOPE (I think it is a good bet) appreciation will continue to rise on all of my properties and I will enjoy positive cash flow from my re-positioned units.  I hope that clarifies why the appreciation loaded strategy might be of interest to some people.