Historically, we net roughly 65K Californians annually. 

The expectation here is more income, assuming that your property is in an area where furnished rentals are in demand.

I work mostly with bank & credit unions lenders, who tend to be much more conservative, and most of them use a 35% operating expense margin.Also, the operating expense is calculated off the EGI (Effective Gross Income), which is the Gross Rent x the Occupancy Rate (i.e.

Hard money lenders focus more on the property’s value rather than your personal debt to income ratio (which traditional banks use) allowing for quicker approval and funding.

I’m an investor and student of the game when it comes to building passive income and a solid portfolio.

Depending on your debt to income, you might have to sell or have an executed lease to secure financing to buy the second home.

@Charles Perkins is absolutely correct about "collecting all receipts, properly tracking all income and expenses and your basis for all assets properly documented and recorded."

The property is $400k and brings in about $40k in rental income without the residential unit. 

I  Income:  The amount of property you can buy will be dependent on your Debt to Income ratio.  

@Ben CallahanRecommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?