New Investor - Positive cash flow

[Brad Rondeau]

Hi, I'm 52 and looking towards retirement. I'm thinking about real estate investment in my area of south Orange County CA. I bought a condo about 3.5 years ago. I met my future wife and we bought a house in the same area. I have been renting the condo for 2.5 years to great tenants. After buying the condo for 365,000 I added about 21,000 in improvements - carpet, paint, new kitchen, new air conditioner/furnace etc. I recently refinanced at 4% 20 year loan. Loan balance is 273,691. I rent this for 2,225 per month. Association dues are 285. The escrow for taxes and insurance is 314 per month. The rent just covers all my payments and repairs.

I've been reading about the 2% rule. I think this is impossible in my area. Investors have been snapping up homes for 420,000 and I know those homes will only rent for 2,500 monthly - maybe they are just flipping them.

Anyway my repairs have been extremely small - about 250 per year. Mostly small plumbing issues that I can resolve myself. Currently my mortgage + escrow + HOA + repairs is about equal to my rent. I see my new 20 year low interest loan is retiring big chunks of principal each month.

I'm no where near the 2% rule as my rent is 0.57% of my purchase price + improvements of my condo (not even 1% rule). But I seem to be doing ok as the rent just barely covers all my expenses and the property is appreciating. Am I crazy for keeping this - should I get out now?

Also I am looking at purchasing a 200,000 rental home that will rent for 1,500. This is 60 minutes inland in Murrieta CA, in a very nice neighborhood. Again not even close to the 1% rule. Should I consider this. I can find single family homes inland that meet the 1% rule but usually in bad neighborhoods and in need of constant repairs. I want rentals with low maint and great tenants and good appreciation like with my condo.

Thanks for your input. Brad