All Forum Posts by: Samuel Gardener

@Keong Kam Thanks for the advice, but from the S&P vs SFBayArea index, selling seems to be better? This is why I am confused on the next step ...

@Kevin Dang My rate is 2.75, current rate would be 4.5, so I might be paying about the same per month. So I cannot reduce my monthly payments ...

@Account Closed, thanks for your replies and feedback. 

Just some additional info - we bought the home 7-8 years ago. The calculator shows the numbers based on the current Zillow estimate, and the downpayment is based on my remaining mortgage. Based on a very cursory online search, our Campbell/WestSanJose area has 3-bed/2-bath rentals for around $3500-$3600. However, given we are already at the end of summer when schools have already started, I assumed I would be ~ $200 cheaper. However, I will be cash flow negative regardless even if I get $3700.

Another comparison I checked out is the Case-Schiller SF Home price index vs the S&P over a the longest period I could find, the comparison is shown below:

This is why I am concerned about letting it for rent.

Separately, pver the weekend, I spoke to a few realtors and it seems like the market has been pretty sluggish, and most buyers are making offers at/below the asking price, or with contingencies. Most realtors I spoke to suggested that I wait till early spring next year to sell.

This decision is too confusing :(

Aaron, many thanks for the input. 

1. In my mind, the home appreciation should be about the same as the S&P. So I am trying to compare renting the home, vs. selling and moving the money into an index fund. So I am considering a 0% appreciation in the calculation below.
2. Other costs are the maintenance costs (we have a 10k lot and lot of yard maintenance) - $100 a month, so $1200 a year. 
3. Since the rental income cannot be offset by the home depreciation, I will need to add an additional 7k to the "Other costs" (have not done this below)
4. As you suggested, I did make changes to the management costs in the calculator. 

Updated changes below, the rental income itself is generating about 0.5%:

I have to be missing something here, please help!

We are moving out of our primary SFH (bought 6 years ago) in the Campbell area, and are deciding between selling it or letting it out for rent (fully managed by a third party ~ 7% fee). Given that the we have had double digit appreciation the past few years, I thnk it is very unlikely that this will continue. Putting some numbers into the rental calculator, it seems that almost all of the IRR is from the expected property appreciation:

I will not be cash flow positive till the property is sold. If I compare the Schiller SFBayArea median home price vs S&P500/NASDAQ, the percentage increase since 2000 seems to be about the same. This makes it even more confusing on how to proceed.

I am a newbie, and would really appreciate some pointers here if I am missing anything. 

Thanks,

Sam