Real estate interested From Orange County CA

[Kyle S.]

Hello BP my name is Kyle and I am possibly maybe could be interested in getting into Real Estate.  Currently Live and work in Orange County Ca with a relatively successful career in finance.  My only actual background in Real estate is the house I currently live in that I bought when I was 25,  I am currently 31 and sitting on somewhere between 300-350k in equity currently.  I have been looking into real estate to get out of being successful and being wealthy, most likely keep current job and do on the side, but not sure what area I should pursue however the two areas that stick out to me are Vacation rentals and flips, neither of which I have figured out how to get the numbers to work exactly on.  

I am mainly making the leap on here to figure out if I should pursue, what if anything and what my next step would be.

Thanks in advance.

Kyle

[Terry Lao]

Hello Kyle

@Kyle S. Let's look at your situation from an reverse analysis, meaning not find property first, but what you can afford. If you know what you can afford then you can look for specific area. No point in looking at a Mercedes when you can only afford a Yugo. You mentioned you have 300-350 in equity, but banks/lenders will always low ball your home value and maybe you get 100k based upon your loan to value and debt to income ratios. I'm being conservative when I say you will be lucky to get 100k heloc or cash out. Next, you are in finance in OC, and 31 years old now. I would estimate W2 position making about 60-65k annual. Normal is getting loan 3-4 times your annual, which means 180-240k max loan. Let's assume you have a FICO of 740, minimum to get the best rates. Also, you need to be at total debt to income ratio of 45% or below, meaning taking your current home PITI and other debt, and buying new property, you need to be at 45% or below.

Now, with all the above said, do you think you can afford anything in OC/LA county?

Answer: No, but there is an answer...........LAS VEGAS baby.

How do I know? I live in Anaheim, work in accounting/finance, and own two four plexes in Las Vegas, generating cashflows of 600 and 800 net per month.

Terrence