The advantages of owning real estate...

[cube_rat]

... in California. The San Francisco Bay Area in particular. Someone please describe the advantages of owning (newly purchased that is) real estate in the SF Bay Area? We've owned our place for over 2 years in one of the most overpriced markets on the planet. I'm saddled with an obese mortgage (380k) at 44 years old and a property tax bill that runs ~5.5K per year. I also dislike our place for a myriad of reasons all of which seem to point to three things: asthestics, location and noise.

I've toyed with the idea of renting, but I really don't want to deal with tenants. So the only other option is to sell and SELL NOW. I'd like to sit on the proceeds and build upon it, but I know that I will a) lose a significant annual write-off b) land up paying taxes on the money earned from the proceeds that I'd invest. The pros are that I'd get out from under this mortgage for a place that I really dislike living in.

I don't know what else to do at this point. I hate being frozen with fear because I can't move forward and/or become so indecisive, I go into a tailspin.

This is not about what I could afford. We are quite comfortable with our mortgage, taxes, and other living expenses. It's just that I really hate dislike where I live! (Did I say I disliked where I live??) Also, facing paying off a 380K mortgage at my age scares me.

Can I hear some objective advice? Thanks

 

[bpp]

Were I you, I'd sell as soon as possible. Sell, because you hate the place, and it can't be fun to be paying a mortgage on a place you hate. As soon as possible, because you're on the downhill side of a housing bubble right now (and make sure it is priced low enough to sell right away -- don't follow the market down).

 

[yakers]

IMHO real estate will pay out with enough time. It took me 10 years to recover once, but I like where I live. If you don't really like it then see how much it will cost to bail out. Renting may be cheaper, more mobile and (to me, most importantly) less time spent in maintenance.

 

[wabmester]

When I lived in the bay area for about 2 years, I rented. When I first moved there, the company I worked for offered to pay relocation and closing costs, but I let the offer lapse. There was no place I wanted to own that didn't have a nasty commute, so I just rented a place that was biking distance to work.

 

[mb]

C_R,

It's not worth being unhappy about where you live.

Do a decision analysis/trade where you write down and weigh the good and bads of staying, selling and renting, selling and buying elsewhere, renting elsewhere and retaining your place.  Include the goods and bads of other locations where you might want to live.

Remember a $380k mortgage isn't bad for SF.  That could certainly be alot worse.  Would you take a financial hit to move to a place that you like more?

Where would you like to live? Why would it be better?

Would you consider Oakland or the east bay?  I used to live in north Oakland a few blocks from the Rockridge BART station.  I thought it was a great place, lots of restaurants, theaters, books stores and easy access to SF (via BART) and Berkeley.

Also what does your significant other think.  If I was single and without kids I would consider selling my house and renting similar to what WAB did but with kids it would be to disruptive and DW is the type that needs to OWN and hates to move. There is a good chance that I would become single if I suggested that at this point.

If it still looks like you might want to move then do the experiment?  Try renting for a while in a place where you think you might want to live and see how you like it?  If you do rent out your place make sure you understand the law with respect to the rights of the tennant if you think that you may want to move back.  I'm sure that you have heard all the horror stories about that sort of thing in SF.

Not sure how you feel about the timing of selling RE now versus sometime in the future.  My opinion is that we will have a dip in N. CA. but I think that it will be shallower but take longer to develop and then longer to recover than most so I think that you have time to make a decision on selling.

MB

 

[riskadverse]

I would go ahead and sell.  The nice thing about a real estate investment (primary residence) is you can live in it and enjoy it.  Since you aren't enjoying it, get rid of it.  This also looks like the right time to be dumping California real estate.  If the real estate market was rising, it would be a tougher decision.  You should have avoided hugh capital gains because you held it 2 years, and with some luck, you may be able to get more value when you purchase another.   I know a guy who buys and sells every two years.  He started with 100K house and is up to a multi million beach house now.   Not many investments could have produced that return without paying tax on the capital gains.   

 

[PsyopRanger]

Sell and 1031 Exchange to defer capital gains.

 

[cube_rat]

C_R,

It's not worth being unhappy about where you live.

Do a decision analysis/trade where you write down and weigh the good and bads of staying, selling and renting, selling and buying elsewhere, renting elsewhere and retaining your place.  Include the goods and bads of other locations where you might want to live.

Remember a $380k mortgage isn't bad for SF.  That could certainly be alot worse.  Would you take a financial hit to move to a place that you like more?

Where would you like to live?  Why would it be better?

Would you consider Oakland or the east bay?  I used to live in north Oakland a few blocks from the Rockridge BART station.  I thought it was a great place, lots of restaurants, theaters, books stores and easy access to SF (via BART) and Berkeley.

Also what does your significant other think.  If I was single and without kids I would consider selling my house and renting similar to what WAB did but with kids it would be to disruptive and DW is the type that needs to OWN and hates to move.  There is a good chance that I would become single if I suggested that at this point.

If it still looks like you might want to move then do the experiment?  Try renting for a while in a place where you think you might want to live and see how you like it?  If you do rent out your place make sure you understand the law with respect to the rights of the tennant if you think that you may want to move back.  I'm sure that you have heard all the horror stories about that sort of thing in SF.

Not sure how you feel about the timing of selling RE now versus sometime in the future.  My opinion is that we will have a dip in N. CA. but I think that it will be shallower but take longer to develop and then longer to recover than most so I think that you have time to make a decision on selling.

MB

Thanks to all who have replied. I needed a sanity check.

MB: My SO is very supportive of whatever decision is made that benefits our portfolio in the long term. I just want to make sure our decision doesn't bite us in the behind later on.

You are correct that the tide is turning slowly in North California and the will not revert back to the highs for quite a while. I remember back in 1989, when my best friend's sister tried to sell her newly built house in a very nice area called Emerald Hills. Her house stayed on the market for 1 year and suffered through 3 price reductions. 1989 was not a pretty year for real estate in California. Great for the bargain hunters, terrible for ones who wanted to profit or just get out.

 

[Zoocat]

California is in for some really bad times, if you look at the numbers of people who had ARMs slated to adjust in the next two years. I vote to sell! Especially because you have no kids/or dogs to uproot. Seriously,the difficulty of finding a good rental that allows dogs is the biggest reason I decided to buy own an expensive townhome with $234K mortgage. I don't like the big mortgage at my age and am seriously thinking of selling next spring and downsizing to a little house with yard. Then I can get another dog!

 

[uncledrz]

CR, I'll put my two cents in as well. Sell. Not because of the market, not because of the mortgage, not because of any reason other than that you don't like living there.

If there's anything that the collective wisdom of this board demonstrates it is that life is about choices. Choose to live you life in a place and in a manner that is solid, contributes to society and you enjoy.

 

[TromboneAl]

Are you planning on moving out of the rat's nest Bay Area?

I remember that once we decided to move out of the Oakland Hills, the crowding, traffic, and noise bothered us even more than before.

Perhaps one strategy would be to choose a price for your home. If it doesn't sell at that price, stay. I didn't say that was a good strategy.

 

[cube_rat]

Are you planning on moving out of the rat's nest Bay Area?

No, we plan on sitting on the proceeds and hopefully build upon it. I really don't want to be > 50 years old with a fat mortgage. I'd rather move to a low cost area or buy a RV to live in Just kidding.

 

[tryan]

Sounds like the decision to sell is unanimous ... would just add that capitol gains are a good thing to pay (gains will be less if you wait ). Also the tax rates are the lowest in decades (15% federal!).

Have a good laugh all the way to the bank!

 

[saluki9]

Sell and 1031 Exchange to defer capital gains.

Not necessary or possible

This is her primary residence.