I have a townhouse in Campbell, rented out to a tenant for $3600/mo. The TH is valued around $1,150,000 (380k loan remaining) now and projected to go up. The tenant missed a few rents lately and it burdens my finances and I can’t invest/remodel my current house in SoCal. I feel like I am supporting someone else to live in my house. Since the equity/rent ratio is not favorable, I am thinking of selling and buying another rental as a 1031 exchange in SoCal where I live. I can get a townhome all cash for 750k and rent it out for ~$4000/mo here. The only issue is, if I want a tech job back in the bay area, I will be priced out. Any suggestions? Maybe heloc to free up some money? Its a good problem to solve! Looking for genuine advice. No BS please !
I would start the eviction procedures, effective immediately. Get the marshalls involved if you need to.
Marshals don’t do evictions
I thought it was them? Or is it the sheriff? My in-laws had to forcibly remove someone once but that was in a different state.
Missed a few rents? If the tenant is multiple months behind on rent, you should have served an eviction notice by now. And if you have, go over the tenant agreement carefully and start the eviction process. Get an attorney if you have to. Regardless of tenant situation, you need to make a decision about your investment strategy. Which one of the following is your first priority. A) Renovating primary residence B) buying a second small rental in soCal while keeping first. C) selling first property and buying a similar/bigger rental unit in soCal. My suggestion is to do A and B both in that order. Now if you wanna do A only while you sort out your landlordly struggles, then the best way to fund your renovation is heloc. It's a huge relief knowing that a large cash withdrawal type of credit card is approved and available for you. If you want to do both A and B, then look into a cash out refi. With such low LTV (and a consistent full time job I presume) you can have upto 550k cashed out. Then use some of it as down for your next purchase. Look up BRRRR strategy. Few things to keep in mind though. Lenders will ask you for your signed lease agreement with this tenant and proof of deposited rent payments showing up on your statements. So be mindful of that. Interviewing a few mortgage brokers over the phone should help, a good broker will ask you all the questions and let you know what path you should take based on your goals. Good luck
First signs of the over stretched market. Sell and dump it! Don't worry about being priced out... If you come back just rent and let someone else subsizidize you at a poor investment return.
I keep thinking this too. What other signs do you see?
This idea of another bubble has been around for the past 5 years. We're still underbuilt and bank inventory of foreclosures has been drying out. Therev should be at least 2 more years of uptrend in prices.
Sell
if Revenue(rent) >= Cost(mortgage installment + property taxes + misc), keep the place. That’s because it will continue to appreciate at the higher rates than the rest of the country. According to Zillow, Campbell has gone up 28.0% over the past year and is predicted to rise another 11.4% within the next year. How about SouthCal?
Yes
What is 1031 exchange?
YouTube videos best explain it
How much did you buy the house? Is the rent close to 1% of the purchase price? If so, then you have cash flow, keep the house. Evict tenants now.
If your tenant missed payment eviction is the solution. Whether you want to sell or not is an orthogonal question.
If you like to keep your options open you should keep the townhouse in Campbell, but follow through with trying to evict the tenants for missing rent. Did you state any late charges for not paying rent on time?
They’ve been good tenants and I did not exercise the late fees. I am mainly interested in keeping the property rather than making money on rent. My pain threshold is when the amount of rent they owe exceeds the security deposit.
Ummm good tenants pay rent...