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Where are you getting 12% appreciation from? Paragon (https://www.paragon-re.com/trend/san-francisco-home-prices-market-trends-news https://www.paragon-re.com/t
by usaar333 9y ago
Where are you getting 12% appreciation from? Paragon (https://www.paragon-re.com/trend/san-francisco-home-prices-market-trends-news https://www.paragon-re.com/trend/san-francisco-home-prices-m...) shows it at 7% for houses and 5% for condos. That's ~6% after property taxes (assuming recently set cost basis) or $90k/year. Maintenance, HOA fees (if any) further drop this return. (Besides future appreciation isn't something you can bank on..)
A $1.5M home should rent for at least $4.2k (P/R ratio of 30). That's $50k a year, smaller than the appreciation of $90k but still very significant. The only reason I see to not at least hire a rental management company to do the renting for you is if you are subject to rent control and fear not being able to evict the tenant/raise their rents.
- karthikb 9y agohttps://www.zillow.com/san-francisco-ca/home-values/ https://www.zillow.com/san-francisco-ca/home-values/ - 12.8% last year and projected lower this year. The reason I have a lower rent figure is that rents haven't gone up as quickly, as much of the new construction has been focused on rental stock.
- usaar333 9y agoThanks for the citation. I'm a bit skeptical of Zillow's numbers; they look pretty volatile (e.g. they show 2016 with 0% appreciation) Anyway, according to zillow last 2 years is 7% average - and since depth of recession 8 years ago, 8.6%. 12.8% is likely a statistical abnormality. (Of note 10 year average is 5% vs. ~8.5% for SP-500 index funds)