2 key strategies that helped me build a 35 unit rental portfolio

[Anton Ivanov]

I meet a lot of people who think 2-3 rental properties are going to be their ticket to getting "rich" or "retiring early". In my experience and through talking to dozens of other investors, usually that's just not the case.

Average monthly cash flow from rental properties is typically around $200-$400, after all expenses, financing, vacancies, cap-ex, taxes, etc. So to build any "meaningful" passive income, you'll need 10, 20 or 30+ units (depending on how much income you want).

I realized this a while ago when I first started buying rental properties and set a goal to build a portfolio of 50 units by the time I'm 40. My wife and I are at 35 right now, way ahead of schedule.

There 2 main "strategies", if you will, that helped us get there and I wanted to share them with the community that helped me a lot along the way. They may sound obvious to some, but if you ask me "How can I buy 10+ properties in the next 5 or 10 years?", this is what I would tell you:

1. Maximize Your Available Cash

Yes, I know there are ways to do creative financing, with $0 money down. If you want to go that route - more power to you. All of the deals I've done were financed either with conventional or commercial financing, so I always needed some of my own cash to finance them.

So the first part of my plan revolved around getting my hands on as much cash as possible so I can buy more and more rentals. Here is what helped specifically:

• I focused on growing my W-2 income and side-business income. I started in an average paying career (electronics technician), but moved to a high paying career (software development), which really helped. I also founded a startup and channeled 100% of profits into real estate
• I had a strict budget and saved over 70% of my take-home pay consistently for 10+ years
• I didn't touch any of my investment/rental income - it all went toward buying more properties
• I focused on markets where you can buy properties for around $55-85k/unit
• As soon as I built up enough equity in my existing properties, I immediately refinanced them to withdraw cash

The takeaway here is that investing in real estate (or stocks, or anything else) is like a snowball. Once it gets going, it gets bigger and bigger very quickly. But it always needs to start with something. For most people, that will be their savings. If you maximize them and continue "feeding" the snowball, it will grow that much quicker.

2. Always Have Financing Lined Up

The vast majority of investors will be financing their properties (and I don't see a reason not to while you're growing your portfolio). So effectively, your ability to acquire additional loans will hinder your growth.

Here is what I did to help me with this:

• I first focused on using conventional financing (traditional 30 year fixed mortgages) as much as I could, because they will always have the best terms and rates
• My wife and I bought properties separately in our own names, without putting the other on the title/loan. This allowed us to increase our overall conventional loan limit, as opposed to if we bought properties jointly
• After maxing out on conventional loans, I switched to buying multi-family properties with commercial loans. I found a nation-wide lender that can finance even 2-4 units buildings with 25 year amortization, 10 year terms and very good interest rates. There are many, many commercial lenders out there and they are much more "relationship-based" than conventional lenders - so look around

These "strategies" may seem obvious to some, but I think that if you really focus on these 2 things, you'll be able to grow your rental portfolio quickly. There are other factors (like your salary or credit score), that will come to play and will affect your growth, but I think any of them can be overcome.

I hope this helps someone!

[Thomas Garcia]

Great post Anton. I am struggling to come up with a down payment for my next property. I have increased my savings rate though and should be able to close on a deal by the end of the year. I am also prepping my fiance for her first purchase. Looking into commercial property financing will be essential after we hit 20 units or so. Thanks for the article!