Irvine, CA question of what to do - Need some help figuring the best option

[John Carlo Gallo]

Ok, so this is a property that a family member owns and I am trying to help them make the best decision.  

They bought a condo in Irvine in a very nice area in 2001 for around $200k. Its a two bedroom 1.5 bath. HOA fees are 325 per month. They have it completely paid off, so all rent is coming in their pocket right now. Its an awesome neighborhood that has its own little lake, play areas for kids, green space, etc. Irvine has amazing schools, high quality tenants, etc.

Their tenants are moving out soon.  Rents in the area for this type of home can be around 1800 to 1900 per month.  So great cash flow right now.

The kitchen does need remodeled, so we would probably put some money into that if we kept it.

Now the home according to Zillow is worth around $460k.  

Does it make sense to deal the home and purchase a 4-plex say in Corona or another area?  Does it make sense to buy more in other areas?  Say turn this 1 home into 5homes around the $80k out of state.  Or leverage all and have downpayments for multiple ones all over the place.  

Either way its a great situation to be in, but just wanted to get some people's thoughts on what the best strategy could be to maximize returns. 

[Amit M.]

Simple IMO ;)

1- keep the irvine condo- quality tenants/easy to manage; very good long term appreciation. Plus you have low property taxes locked in (thanks prop 13.)

2- if you want to invest more, refi/pull cash, and use that to buy another SoCal property. Is the owner of the irvine condo RELYING on that income for daily expenses?  If so, you are much more limited. If it's gravy/extra spending money, than do the refi. 

I do not recommend buying out of state- so many CA investors get ripped off that way, plus most of of state investments offers zero appreciation.  Look at decent, up and coming SoCal areas. 2-4 units is probably a good strategy, as rent to price ratio is usually better. Expect you global cash flow to go down somewhat, but if you buy in a good location, those rents will increase and you will gain in equity build up/appreciation. Make sure the location/property/tenant quality is reasonable to manage. And if you can buy something that can be improved/optimized with some renovations, all the better. 

Bottom line: it's hard to go wrong with well located SoCal real estate, if you can effectively manage it and hold if for a market cycle or two. You're in the enviable position to have your cake and eat it too, since you can tap the equity of the irvine condo for the next purchase.