Transition From Home Owner to Real Estate Investor in So Cal

[Hunter Peterson]

Hello BP! First time poster over here. 

There was a point in the most recent BP pod where Michael "Swanny" Swan described my life almost exactly when he talked about his $500k condo in San Diego that he didn't sell before the last crash, and how he learned his lesson. So I thought I'd reach out to those more experienced for advice and see if I can avoid making a similar mistake in the upcoming years. 

In 2014, I purchased a townhouse in Orange County before discovering BP in 2017. I could have bought a lot worse, but I could have bought a lot better. Using the information I've gathered from the BP universe and beyond, I'm looking to pivot my current living situation and lifestyle to one that is better suited for REI success.

Here are the basic stats on my current home...

Purchase price: $492k

Mortgage: 80% LTV 30-yr fixed loan @ 4.125%

Property tax: $7,698/yr

HOA: $340/mo

Sq. Ft.: 1,557

BR/BA: 2br / 2.5ba

Principal owed today: $371K

Zestimate: $542k

*Need to get an actual appraisal. Average $/sq. ft in my city is $373 which would put me at $580,761. While my neighborhood has exact floor plans like mine, my home has a number of upgrades and an excellent view where all others face another front door 20 feet away.

While I'm not living beyond my means and only have a modest car payment and Netflix & Hulu (sorry its worth it) as my other fixed expenses outside of utilities, I'm definitely aware that I could be living leaner and cashing in my current living situation for one that is more beneficial to my newly-formed REI goals in the long-term.

While I could pull money out of my current home, get another place, and turn my current place into a rental property, I feel it isn't a great candidate for that. Comps for rents in the area have me barely breaking event if at all. I'm at a point in my life where I can't sustain losses now to gain appreciation later. My initial thoughts are to sell and cash out on the appreciation of my current home, lose the HOA, mello-roos tax, etc., and aim for a triplex/fourplex that I can house hack or a 2br w/ "bonus room" situation that I can live in and convert to a 3br long term rental.

As someone who's still fairly new to this, I'm excited to hear any and all opinions and suggestions. Hopefully this serves as a worthwhile case study for a few of you out there!

-Hunter