How I built a portfolio of 35 rentals and $10k+ monthly cash flow

[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.

[Amy Hu]

@Anton Ivanov Thanks for sharing and taking time to answer questions.

I also live in SOCAL and invest out of state.  I have challenges with property management.

Could you kindly share your criteria for picking PM, and a system for keeping them accountable?

Personally I feel comfortable with leverage, especially when 1.you can get great terms with VA loan, 2 you're still very young, 3 earning high salary with side income 4.Properties cash flow well

Everyone has different tolerance of risk. It's critical to choose a strategy that works for him.

[Mary Jay]

@Olu Sanya That is very impressive! How do you do it? I struggle to pay one house off, and you have 10...

How?

[Steve Franco]

Very inspiring! I'm just getting started, haven't even bought my first rental yet but in the market.  Trying to figure out WHERE.  I'm in Chicago market and have limited capital, so I can't buy here right now.  

[Sean Lambert]

Thanks for sharing your story, which is very inspiring!  Please keep us updated on your progress.  Do you plan on continuing the expansion in the same market, or are you going to branch out to other cities?  

[Jason C.]

Great story, thank you for sharing. You mentioned you did analysis in the markets out of state and picked Kansas City as opposed to Dallas, Atlanta, Charlotte etc... I’d like to know how you analyzed these markets? I’m currently looking for a new market myself and any guidance would be appreciated.

[Nelson Mendes]

Thanks! for sharing this great story.. what a couple words can do for a person chasing a dream.. life can always throw you a curveball but as long we have great minds stand aside investors just starting on a real estate journey makes this the greatest country..

[Brad Chandler]

Anton - congrats on your success and thank you for your service to our country. What you’ve accomplished is impressive. I wanted to say that once you own the properties for say 5 years you are likely going to find your returns are not as strong as you think. Doesn’t mean you can’t retire on it just that most people think single family returns are higher than they actually are. Once you figure in repairs and vacancies it brings down the return numbers. Take care and keep kicking ***!
Brad Chandler

[Brian Garrett]

Originally posted by @Brad Chandler:

Anton - congrats on your success and thank you for your service to our country. What you’ve accomplished is impressive. I wanted to say that once you own the properties for say 5 years you are likely going to find your returns are not as strong as you think. Doesn’t mean you can’t retire on it just that most people think single family returns are higher than they actually are. Once you figure in repairs and vacancies it brings down the return numbers. Take care and keep kicking ***!
Brad Chandler

Repairs and vacancies shouldn't bring down the numbers assuming they were calculated into the deal during analysis.

[Jim Sestito]

@Anton Ivanov Nice post and congratulation.  Quick question and sorry if I missed answer in post - do you still own your parents house?

[Kurt Traynor]

Great Testimony of getting it done!!

[Dan Albrecht]

How did you get the contact information of the owners for your first direct mail campaign?  Great story, thanks for sharing!

[Jennifer Zierlein]

Very inspiring post. Thanks for sharing. As a new investor with little knowledge about rehabbing, I’ve been thinking about starting off with a few turn key properties just as a way to take that first big step. It’s nice to see that you started that way and were then able to transition and scale with more multi-family units.

[Nixon Davis]

. Great post and very inspiring. I purchased my first investment property last year (SF 3,1) nad is now looking at getting a couple MF this year which I can BRRR. I agree with your analysis methodology and does the same in looking at deals. I am also curious in how you analyze potential areas initially and how you narrow your search given the information you previously shared.

@Olu Sanya. I totally agree with what you have shared and one day hope to own all my investments free and clear.

Thanks everyone for sharing and providing your input. This has been a great read.

[Account Closed]

@Anton Ivanov

Good story.  This site has a deluge of posts about people who haven't done a deal or have done one.  And there's a decent number of super experienced folks who answer questions.  What it could use more of are people posting who are beyond the "I'm just figuring out how to start" mode, but not at the "I don't have to work" mode.  Basically the 10-50 deal people.  The insights are much appreciated.

[Erik Sherburne]

Awesome story thanks for sharing!

[Tou Her]

Awesome work Anton and thanks for sharing your inspiring story. Thanks for your service! Gotta love those corpman :) USMC myself. Any tools you used to help assist with potential market analysis to invest in? Looking to invest out of state as well.

[Lauren Bishop]

@Anton Ivanov - Thanks for sharing - your story is great!  Echoing the others with desire for more information on how you put together your direct mail campaign.  

[Nicholas Sheridan, Jr.]

@Anton Ivanov Great read! Your mentality goes hand in hand from what I learned in the E-myth book

"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."

[Chris Christensen]

That's awesome Anton! Congrats on your success

[Mike Lauer]

Congrats and thanks for sharing your story. This is very inspiring!

[Matt Moreland]

Thank you for your service, and thank you for contributing such an insightful post!

I couldn't agree more with your point on savings. Not enough people think about how much they're actually spending each month until they realize their bank account is at the same point as before. Saving a little bit early on can go a long ways, especially when it comes time to make a down payment.

What attributes do you look for in a property manager/how do you weed out the ones you know won't mesh with your business model?

[Melissa Gittens]

Wow this is awesome! I especially like what you said at the end, about treating real estate investing as not just passive income but as a business. In my own portfolio I am really focusing on my goal this year on the amount of units that I need to have in order to retire. So to create a plan and have it visible is really important 

[Christy Browning]

Congratulations on your success!! Thank you for this post, and all of your detail and information! I have done my first SFR and have a goal of acquiring 50 doors - reading your post is inspiring, and particularly helpful that you organized it on a timeline. Thanks again!

[Tony Le Claire]

@Anton Ivanov

Congratulations on your success! Thank you for your service in the Navy and thanks for sharing your story and what helped lead you to success.

I’m very interested in discussing (Via PM if you’d prefer) what lead you toward pursuing software engineering? I’m currently learning the basics (HTML/ CSS/ Etc) and would love to find out more about how you transitioned from the Navy into a career in software development.

Your goals are outstanding and I’m sure many would agree that your 70% savings rule is a great accomplishment in itself!

Thank you again for contributing to BP by sharing your story!

Thanks,
Tony

[Catherine Coy]

I like this part: 

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.

I'm gonna do it!  Thanks.