All Forum Posts by: Adam Grant

My sister wants to outright sell the house in Huntington Beach and purchase the home in Phoenix to be "debt free". I feel this would be a bad investment as the HB house is a PERFECT house to rent out as an income property. Same floor plan in the same development rents for $3k-$4k/mo.

Help me convince her that selling the house in HB to be "debt free" is a mistake?

Prop 13 tax basis. No capital gain. Biggest no-brainer I've ever seen.

Help me help her?

Hi Adam,

It's tough to say whether or not keeping the house is a "no-brainer" for your sister without looking at the whole picture and her needs.

Firstly, does she have any experience or interest in being a landlord? It's not for everyone!

I love living in Huntington Beach and the price appreciation has been amazing, but whether or not that continues in the short term is anyone's guess. From a purely rental income standpoint, getting $3-4k per month on an asset that's worth ~$820k is NOT very appealing for most investors. Using the "1% rule" that's touted on this site, many landlords would expect to be making $8200+ per month from the $820k. She could likely increase her monthly cash flow 2+ times by buying in another area vs. keeping the house in HB. Downside to going somewhere else is that she likely isn't going to get the long term appreciation that HB will hopefully have.

I have some local rentals that continue to appreciate nicely, but for pure rental income, I'm not buying in Orange County. For my current needs, I prefer having some out of area rentals for cash flow and some nicer local properties that I intend to hold long term and continue to pull cash out of as they appreciate.

Depending on your sisters life stage and what she's trying to accomplish, keeping the property may or may not be a "no-brainer". I would be curious to hear what she ends up deciding and please feel free to send me a PM if I can be of assistance.

Scott Williams
CalBRE# 01919848

Thank you for your input Scott! She is currently a landlord and enjoys it. I also own a second property that I rent out in OC and enjoy the landlord responsibilities and the cash flow thus far. She also has a smaller property in Anaheim that she is looking to sell off in preparation for the move. The total amount THEY have paid towards the HB property is about $200k. She and my BIL are 40 and 42 and have small children. I'm my mind, if they pulled money out of the HB house, put that into her Phoenix house, she could hold for 10 years while renting and sell it then to pay for college or what have you. Value to rent is hazardously low concidering she could put $800k in the bank/into a new home. She is thinking about cash flow right now and I am thinking further in the future. It is worth noting that being a landlord locally and being a landlord 8 hours away are two different things.

0 Votes

Hi bigger pockets, back again,

My sister owns a home in Huntington Beach California, about a mile from the sand. Recently appraised at ~$820k that she inherited from our grandfather. Her and her family have lived in this house and been paying the mortgage for as long as I can remember. They initially were renting from my grandfather and then he decided that he was going to give it to them and just had them pay the mortgage amount.

Household income ~$100k/yr. $40k in debt (2 cars and one credit card that I've convinced them to get a loan through their credit union in order to save nearly 20% on interest).

She wants to move to Phoenix to buy a bigger home for their large family. A friend of theirs built a home in a development that would be perfect for their family for just about $700k, new construction, turn key.

Help me convince her that selling the house in HB to be "debt free" is a mistake?

Prop 13 tax basis. No capital gain. Biggest no-brainer I've ever seen.

Help me help her?

2 Votes

All Forum Posts by: Adam Grant

Adam Grant has started 1 posts and replied 2 times.

Post: $100k left on mortgage, help me save my sister?

Post: $100k left on mortgage, help me save my sister?