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How I built a portfolio of 35 rentals and $10k+ monthly cash flow
Hey Everyone!
BiggerPockets has been invaluable to my success as a real estate investor, so I just wanted to share what's possible with real estate if you set goals and follow through with your plan.
A Little Backstory
I am currently 31, married, no kids, living in San Diego and working as a senior front-end engineer + running a real estate startup on the side.
My portfolio consists of 35 total units, mostly 4-plexes, with a duplex and some SFRs sprinkled here and there. 3 units in San Diego, 1 in Atlanta, 3 in Birmingham, 28 in Kansas City.
My units cash flow between $250-$350/door and the total cash flow of the portfolio is about $10-11k/month (accounting for vacancies as well). My average COC return at purchase is about 15% and long-term IRR is 20%+.
All properties are financed. The only financing I have ever used was VA loans, conventional loans (as many as they would let me) and later commercial financing on multi-family properties. Never had any partners (besides my wife), never did syndicate deals, no seller financing, no other creative financing.
How did I get here? Here are the important parts:
- Joined the US Navy out of high school, active duty (Fire Controlman). Served most of the time in Japan.
- Both parents passed away in 2008-2010. I was left with a single condo where they lived. At first, I was going to sell it, but decided to rent it out through a local property manager (I was in Japan at the time). Cash flow was terrible, so that didn't really give me much encouragement to pursue real estate at the time..
- 2013: Left the Navy, moved back to San Diego, got a regular job (electronics technician at first). Decided to give real estate another shot. After about 6 months of searching, found a duplex that needed a good amount of work in a B- area. Moved in one of the units with my wife, rented out the other. She was not very happy, but this turned out a great investment over time and we eventually moved out. Used a VA loan with an 8% down payment.
- 2014 - 2015: Ready to buy more properties, but real estate in San Diego is too expensive and cash flow almost non-existent. Started looking out of state. Decided it was too risky to try to buy/rehab myself, so ended up buying 4 turnkey SFRs in Atlanta and Birmingham. Cash flow was good and prices started appreciating over the years, so still happy with these homes.
- 2016: Felt more confident with managing out of state rentals and owning properties in general, so decided that I could make more money by buying value-add properties off MLS or private sellers. After extensive research, decided on Kansas City, flew out there, built a local network, started looking at 2-4 unit properties. Ended up buying three 4-plexes in a private sale because my agent tipped me off.
- 2017: Feeling more comfortable in Kansas City, but was having a hard time finding new deals on the MLS (spent about 10 months looking). Decided to do a direct mail campaign to a very select group of multi-family property owners (about 90 total). Hand wrote the letters, added photos of their exact houses, sent out myself. Ended up landing 4 sales for more 4-plexes.
- 2018: Taking a little break for the first 6 months, focusing on doing rolling rehabs on all units I picked up in 2017, raising rents to market, improving general operations. Will start looking for more in the summer (already have some possible leads from the mail campaign).
Future Plans
My original goal was to get to 50 units before turning 40, so I'm quite a bit ahead of schedule. Barring anything crazy, I anticipate to get there within the next 1-2 years (15 more units to go).
This will put my passive income somewhere in the neighborhood of $15k/month or $180k/year. I'm not sure I want to retire quite yet, so I will most likely continue with the same strategy, buying more units up to 65-75 total.
I'm also planning to do a full review of my entire portfolio (now that there are a few years of operational history), sell the underperforming properties (and probably most SFRs) and re-invest into better performing multi-family buildings. I'm also considering focusing on larger apartment complexes, but we'll see.
Key Takeaways
It's hard to pin point a single thing that helped me the most. Some may say I was fortunate or "lucky" at several points in my life, but I think a steady, consistent growth strategy is what played the biggest role.
Here are some other things:
Maximizing My Income
Since I didn't rely on any "creative" financing strategies, all of the deals I've done required some cash from me to close. Now that I buy value-add properties, I also pay for the rehabs myself.
What really helped is maximizing my income from my full-time job and side-business. I went from being active duty in the Navy (around $40k/year) to senior front-end engineer (around $150k/year) and running a profitable startup (another $150k/year) in a few years.
Everybody's situation is different, but I think most of us can do at least something to increase their income.
Having a ~70% Savings Rate
Throughout my adult life I have consistently maintained a savings rate of around 70%. Combined with the point above, this was really the key to saving money for the next property quickly. Especially in the last few years, as my income increased substantially, this really helped.
Along the same lines, I've never touched any of my income from rental properties or other investments. 100% of that is re-invested.
Again, I think this is something that can be done by anyone, regardless of their income level. I meet far too many people who make six figures and have almost no savings, because of their lifestyle choices.
Focusing on the Right Markets
There isn't such a thing as "the best market". Macro and micro economic conditions are also always changing, so the markets that may be "good" for rental properties today will not be the same a year from now.
I wouldn't consider myself an all-around expert of picking rental markets, but I have talked to a lot of people who are a lot smarter than me and have developed a set of criteria that help me focus on where to invest next.
Since where I live is so expensive, and I originally had limited funds (and wanted higher cash flow), I primarily focused on larger metropolitan areas with good economic and population projections, but which have strong cash flow and average property prices around $55-85k per door (for multi-family properties).
Last time I did my "analysis" a few years ago, there were several promising candidates, including Atlanta, Dallas, Charlotte, Kansas City, Nashville. I ultimately settled on Kansas City and that's where I'm planning to buy in the next few years.
Being Very Conservative with Cash Flow Projections
I'm an analytical person by nature, so the whole process of analyzing potential cash flow from a rental property always appealed to me.
I've always been extremely conservative when estimating cash flow projections. This probably caused me to pass on some "ok or good" deals, but ultimately got me "great" deals, which is what you obviously want.
I never use rough estimates or the so-called "50% rule" (I think it's actually extremely misleading). I look up exact rental comps to estimate rents, I look up what insurance, management, utilities, and property taxes (after sale, NOT current) will be for each property.
On top of that, I use high vacancy and maintenance estimates, basically accounting for the worst possible scenario. I've gotten into plenty of arguments with sellers over "my numbers", but this strategy has only done wonders for my returns.
Running My Rental Portfolio Like a Business
I've figured out pretty early on that owning 1-2 properties isn't going to make me rich or allow me to retire early. After I set a goal to get 50 units, my brain started thinking about what I need to start doing NOW to make this possible at the end.
And what I came up with is a realization that I should treat this whole operation as a business, instead of just passive investing. So I focused on 2 things - building a network and a team of professionals to help me (property managers, agents, lenders, mortgage brokers, insurance guys, etc.); and training/teaching them to basically do most of the work for me.
The biggest challenge of owning this many units, especially all over the country is management. I never self-managed a single property. I have always used property managers and over time developed a set of criteria for picking them, and a system for keeping them accountable.
I don't get into day-to-day operations, but I basically groom each of my property managers to do the job for me in a way where I'm satisfied. It takes some work up front, but overtime pays off big time, as mutual trust and understand develops.
Thanks again to this community to providing so much support and wisdom throughout the years! I hope my story will serve as motivation for some who are just starting out.
Sure, I'll send you a message.
I don't manage any of my own properties. I use professional property management companies for all of them and I just make sure things are running smoothly across the board.
What I do it travel infrequently and maximize the value of each visit. For example, I may fly out to look at some new properties and then also inspect the old ones, do some driving around, network, etc. I don't visit each property every year, so it's not been a big deal for me so far.
Wow...That's impressive!! Congrats to you and your wife!
I'm also a Vet and want to utilize my VA benefits to start building a portfolio. I do need to be more aggressive and get going with it though...as my hubby and I just purchase our first rental only a few Months ago with hard money.
Our goal is to retire within the next 5 years with at least 50 cash flowing properties.
How did you find financing and do you have any recommendations?
Thanks!
This is a long thread. Well worth the time reading through them all though. Big achievement. Congrats.
Conventional (30-year fixed loans) are easy to find - most banks will do them, just ask if they offer them on investment properties. Local credit unions or banks where you have other accounts may give you better rates.
Commercial financing is a little harder to find, but there are still tons of banks that do them. You can ask other investors you know for recommendations.
Thanks! Great to hear your story, as my approach seems to be the same with respect to management and deal analysis (though I'm just starting out with multi-family after retiring from the Air Force).
Excellent Post, thank you for sharing the success and I wish you more of it.
I have a quick question- You said: " I have always used property managers and over time developed a set of criteria for picking them, and a system for keeping them accountable."
I'm curious to know about the 'system that you have to keep the Property Managers accountable'. Could you please share your best practices in that area.
Once again, Thank you,
Ashish
Awesome.... Congratulations.
I've replied to this question several times in this tread, I don't think my system is anything special. I write down checklists and procedures for various aspects of property management like leasing, make-ready repairs, lease renewals, evictions, etc., go over them with my PMs and make sure we're on the same page.
Then I follow-up with them at least once a month to see how things are going, to check if we need to make adjustments to anything. And obviously the basics like review monthly owner's statements, maintenance receipts, etc.
@Vamsi Boddu Congrats on joining the Columbus market! and Congrats to @Anton Ivanov on the success you've had! It's inspiring to us newbie investors!
Originally posted by @Anton Ivanov:
Hey Everyone!
BiggerPockets has been invaluable to my success as a real estate investor, so I just wanted to share what's possible with real estate if you set goals and follow through with your plan.
A Little Backstory
I am currently 31, married, no kids, living in San Diego and working as a senior front-end engineer + running a real estate startup on the side.
My portfolio consists of 35 total units, mostly 4-plexes, with a duplex and some SFRs sprinkled here and there. 3 units in San Diego, 1 in Atlanta, 3 in Birmingham, 28 in Kansas City.
My units cash flow between $250-$350/door and the total cash flow of the portfolio is about $10-11k/month (accounting for vacancies as well). My average COC return at purchase is about 15% and long-term IRR is 20%+.
All properties are financed. The only financing I have ever used was VA loans, conventional loans (as many as they would let me) and later commercial financing on multi-family properties. Never had any partners (besides my wife), never did syndicate deals, no seller financing, no other creative financing.
How did I get here? Here are the important parts:
- Joined the US Navy out of high school, active duty (Fire Controlman). Served most of the time in Japan.
- Both parents passed away in 2008-2010. I was left with a single condo where they lived. At first, I was going to sell it, but decided to rent it out through a local property manager (I was in Japan at the time). Cash flow was terrible, so that didn't really give me much encouragement to pursue real estate at the time..
- 2013: Left the Navy, moved back to San Diego, got a regular job (electronics technician at first). Decided to give real estate another shot. After about 6 months of searching, found a duplex that needed a good amount of work in a B- area. Moved in one of the units with my wife, rented out the other. She was not very happy, but this turned out a great investment over time and we eventually moved out. Used a VA loan with an 8% down payment.
- 2014 - 2015: Ready to buy more properties, but real estate in San Diego is too expensive and cash flow almost non-existent. Started looking out of state. Decided it was too risky to try to buy/rehab myself, so ended up buying 4 turnkey SFRs in Atlanta and Birmingham. Cash flow was good and prices started appreciating over the years, so still happy with these homes.
- 2016: Felt more confident with managing out of state rentals and owning properties in general, so decided that I could make more money by buying value-add properties off MLS or private sellers. After extensive research, decided on Kansas City, flew out there, built a local network, started looking at 2-4 unit properties. Ended up buying three 4-plexes in a private sale because my agent tipped me off.
- 2017: Feeling more comfortable in Kansas City, but was having a hard time finding new deals on the MLS (spent about 10 months looking). Decided to do a direct mail campaign to a very select group of multi-family property owners (about 90 total). Hand wrote the letters, added photos of their exact houses, sent out myself. Ended up landing 4 sales for more 4-plexes.
- 2018: Taking a little break for the first 6 months, focusing on doing rolling rehabs on all units I picked up in 2017, raising rents to market, improving general operations. Will start looking for more in the summer (already have some possible leads from the mail campaign).
Future Plans
My original goal was to get to 50 units before turning 40, so I'm quite a bit ahead of schedule. Barring anything crazy, I anticipate to get there within the next 1-2 years (15 more units to go).
This will put my passive income somewhere in the neighborhood of $15k/month or $180k/year. I'm not sure I want to retire quite yet, so I will most likely continue with the same strategy, buying more units up to 65-75 total.
I'm also planning to do a full review of my entire portfolio (now that there are a few years of operational history), sell the underperforming properties (and probably most SFRs) and re-invest into better performing multi-family buildings. I'm also considering focusing on larger apartment complexes, but we'll see.
Key Takeaways
It's hard to pin point a single thing that helped me the most. Some may say I was fortunate or "lucky" at several points in my life, but I think a steady, consistent growth strategy is what played the biggest role.
Here are some other things:
Maximizing My Income
Since I didn't rely on any "creative" financing strategies, all of the deals I've done required some cash from me to close. Now that I buy value-add properties, I also pay for the rehabs myself.
What really helped is maximizing my income from my full-time job and side-business. I went from being active duty in the Navy (around $40k/year) to senior front-end engineer (around $150k/year) and running a profitable startup (another $150k/year) in a few years.
Everybody's situation is different, but I think most of us can do at least something to increase their income.
Having a ~70% Savings Rate
Throughout my adult life I have consistently maintained a savings rate of around 70%. Combined with the point above, this was really the key to saving money for the next property quickly. Especially in the last few years, as my income increased substantially, this really helped.
Along the same lines, I've never touched any of my income from rental properties or other investments. 100% of that is re-invested.
Again, I think this is something that can be done by anyone, regardless of their income level. I meet far too many people who make six figures and have almost no savings, because of their lifestyle choices.
Focusing on the Right Markets
There isn't such a thing as "the best market". Macro and micro economic conditions are also always changing, so the markets that may be "good" for rental properties today will not be the same a year from now.
I wouldn't consider myself an all-around expert of picking rental markets, but I have talked to a lot of people who are a lot smarter than me and have developed a set of criteria that help me focus on where to invest next.
Since where I live is so expensive, and I originally had limited funds (and wanted higher cash flow), I primarily focused on larger metropolitan areas with good economic and population projections, but which have strong cash flow and average property prices around $55-85k per door (for multi-family properties).
Last time I did my "analysis" a few years ago, there were several promising candidates, including Atlanta, Dallas, Charlotte, Kansas City, Nashville. I ultimately settled on Kansas City and that's where I'm planning to buy in the next few years.
Being Very Conservative with Cash Flow Projections
I'm an analytical person by nature, so the whole process of analyzing potential cash flow from a rental property always appealed to me.
I've always been extremely conservative when estimating cash flow projections. This probably caused me to pass on some "ok or good" deals, but ultimately got me "great" deals, which is what you obviously want.
I never use rough estimates or the so-called "50% rule" (I think it's actually extremely misleading). I look up exact rental comps to estimate rents, I look up what insurance, management, utilities, and property taxes (after sale, NOT current) will be for each property.
On top of that, I use high vacancy and maintenance estimates, basically accounting for the worst possible scenario. I've gotten into plenty of arguments with sellers over "my numbers", but this strategy has only done wonders for my returns.
Running My Rental Portfolio Like a Business
I've figured out pretty early on that owning 1-2 properties isn't going to make me rich or allow me to retire early. After I set a goal to get 50 units, my brain started thinking about what I need to start doing NOW to make this possible at the end.
And what I came up with is a realization that I should treat this whole operation as a business, instead of just passive investing. So I focused on 2 things - building a network and a team of professionals to help me (property managers, agents, lenders, mortgage brokers, insurance guys, etc.); and training/teaching them to basically do most of the work for me.
The biggest challenge of owning this many units, especially all over the country is management. I never self-managed a single property. I have always used property managers and over time developed a set of criteria for picking them, and a system for keeping them accountable.
I don't get into day-to-day operations, but I basically groom each of my property managers to do the job for me in a way where I'm satisfied. It takes some work up front, but overtime pays off big time, as mutual trust and understand develops.
Thanks again to this community to providing so much support and wisdom throughout the years! I hope my story will serve as motivation for some who are just starting out.
Love this story Anton! Goes to show it doesn't take some magic bullet to make success on your level REAL. Cheers to you!
Originally posted by @Randa Lake:
@Vamsi Boddu Congrats on joining the Columbus market! and Congrats to @Anton Ivanov on the success you've had! It's inspiring to us newbie investors!
thanks @Randa Lake my brother who is also my partner lives in Dublin..this is why we are able to inspect the homes and areas we are investing in. Huge benefits to have someone locally.
@Vamsi Boddu With so many out of state investors trying to get into this market, it is a huge benefit to have your brother's help here! Good luck!
Anton,
Good post--thanks for the detail in your story. btw--I signed up recently for Dealcheck after reading about it first on this thread. Really liking the tool! would love a way to be able to include a target neighborhood or zip code in the search criteria section. Then the tool could send me email alerts after scanning the local MLS for listings that meet my investment criteria. That would be cool!
Marc Littmann
Longmont, CO
Glad to hear you like it so far. Yes, we've been getting a lot of requests to allow a full-out MLS/property search based on criteria. It would be a big undertaking for us, but we do plan on working on it in the near future. We'll keep you posted on the progress!
@Anton Ivanov Thank you so much for sharing your story. It is greatly inspiring as we are starting out. I like it that you obtained all yours with conservative financing if I may say based on your saving strategy. It is very close to what we’ve aimed as we are also full time professional at day and want to get on real estate as a way to invest and preserve wealth
Congratulations! Your story is certainly inspiring! I found myself in a similar situation like you were back in 2014-2015. I'm 30, also went from a less than $40K call center job in 2014 to a data scientist position currently, tripling my salary, meanwhile my wife has a job contributing good W2 income. We also try to keep 5-6 months reserve in all units, all traditional, fixed rate financing with W2 income. I love your story, and felt a connected when you mentioned you went from a technician to SE.
But we have kid, so saving money is a little hard (compare to before), but finding time to do business is the hardest part, my last deal was done on the day when my son was born 18 months ago, and I haven't done a deal since. I recently got back to the market and started looking again.
We had bad experience with property management companies - not many companies to choose from to begin with, we used one that checked all checklist with glorious reviews, but still didn't work out, so I want to pick up your brain on that - do you always tryout a few property managers to start with? I know you mentioned in previous post about having a checklist on PMs and networking are the keys. I'd like to hear specific stories how you found yours if you don't mind sharing.
I've been avoiding property managers, so I invest locally and manage personally. With a full time W2 job and limited time, I've been focusing on higher end SFR, dealing with better quality tenants, and fewer tenants (as compared to multi-family).
Also, I want to pick your brain about just personal finance - why 50 units? I know you mentioned $180K as a goal - but I'd think with your 70% saving rule, you would be financially free with only 35 units that you currently have (or even 25-30 units). Is there a deeper reason for your number 50?
Our family can't save 70%, but we currently save about 50% of take home pay (Cleveland is a cheap place to live). We have enough doors to quit our W2 job to make budget work comfortably, but not half enough doors to replace our salaries and benefits (pension, healthcare coverage, stock options, cash bonus and tuition reimbursement etc.). Due to our conservative nature, we kept going back and forth on the right timing to quit, and right number of doors needed. I certainly don't want to quit one W2 job just so I can over-work myself in another real estate job, and if there is another 2008-2009 coming, I want to keep my W2 job to finance more properties. Also, I'm in the same boat, I don't want to retire, if it was up to me, I'd like to start a company working on some big data analysis on housing markets and doing some predictive analysis, projecting how a REI deal can look in the future etc. I see you already started your own company utilizing your software engineering skill, thoughts about timing to leave your W2 job?
No problem and good luck to you guys as well!
No, I don't typically try out several PMs before finding one that I like (although I don't think there is anything wrong with that). All of the PMs I currently use I found through referrals from other investors. This has been the key for me. If you can find a company that is highly recommended by 2-3 other local investors, I think you're much more likely to find one that will work out. Feel free to send me a message and I can send you my "interview questions" as well.
The 50 unit goal originally came from a passive income target. My wife and I wanted around $150-200k in yearly passive income. Assuming around $250-$350 cash flow per unit/month, that's around 50 units that we'll need to get there. Since we got to 35 so quickly, we'll probably keep going to 65-75 units before retiring at this point.
We're on the same page as far as retirement goes - I want to keep working until I'm sure I won't have to get another job again. I also don't plan to do "real estate full time" after retirement - just live off the passive income from the rentals we bought.
My "W-2" job is actually another startup that I'm #2 employee in with considerable equity. They are likely to get bought out in the next few years and I don't want to leave before that.
Great job Anton! Thanks for sharing your success story.
Nice work and thanks for sharing. "live like nobody else now, so later you can live and give like no one else" - Dave Ramsey
Great inspiration to all of us, keep posting updates!
This is awesome and inspiring. My husband and I are just starting out, but have a short-term goal to purchase 3 properties this year, and a long-term goal to own 30 (properties or units) in the next 10 years!!!
what made you pick Birmingham and Kansas City?
Hey Anton, I am just getting into investing and I came across your post. Very inspiring! I noticed many investors us VA loans, is it worth serving in an institution just to gain the ability to use a VA loan? How much advantage do you gain?
Great post @Anton Ivanov
One of my main concerns with out-of-state has been management. How would you describe your criteria, your faith and trust in them, and your assurance of their accountability?
Thank you,
Robert