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.

[Anton Ivanov]

@Olu Sanya

Interesting that you're not using financing/leverage. Any particular reason for this? I find that staying leveraged significantly improves my ROI/IRR while I'm still "growing" my portfolio.

@Jay Hinrichs

Thanks for stopping by - love all of your contributions to this site, btw! I did consider paying off all of the loans (or at least starting to) when I basically reached my "unit goal" (50 right now, but could bump that up to 65-75). Since I don't need the cash flow right now, I found that staying leveraged increased my ROI/IRR. But when I'm ready to live off the income, I do plan to spend a few years prior focusing on debt paydown to really boost the cash flow.

@Mark S.

I don't blame you for sticking with turnkeys - I bought 4 myself a few years ago when I was new to the real estate investing world. I basically just reached a point where I felt I could do a lot better sourcing the deals somewhere else. I have met a few investors who have 10+ turnkeys though and they're doing quite well.

[Peter Tverdov]

Congrats on your success. I really appreciate how in depth you went on your success story. This should literally be pinned to explain to people how to write a success story on here. Most folks post vague details and basically just do a drive by posts to get "likes". Congrats again and thanks for the inspiration.

[Anton Ivanov]

@Aaron L.

They look something like this on one of the last properties I bought:

Rent: $3,000/mo ($750/unit)

Vacancy: -$240/mo (about 8%)

Expenses: -$895/mo

NOI: $1,868/mo ($467/unit)

Loan Payments: -$789/mo (30% down, 25 year amortization, 5.15% rate)

Cash Flow: $1,079/mo ($270/uni)

This is post-rehab. I suspect we can maybe raise the rents a bit over the next 1-2 years and stabilize vacancy around 5% to push cash flow to $300+/unit. Building was purchased for $190k, 4-plex.

Keep in mind, these are actual numbers I'm getting, not projections. Again, I would caution against using set/ballpark percentages for every deal you analyze and instead would consider them individually based on property location/type.

@Salvador Arias

See one of my other answers about market selection. I think it's a rather challenging, but a very important step if you're going to buy out of state, because most of your returns will be dictated by the macro-economic conditions of the market you're buying in. I don't want to start throwing cities at you because it's meaningless without knowing your goals, risk tolerance, available capital, etc.

As far as meeting people, you're on the biggest networking site for real estate right now. It's a great place to start. Also pretty much all investors I've ever reached out to are open to a 30 minute phone call or a cup of coffee if they're local. If you spend a few hours a week on networks, you'll eventually have a large network.

[Anton Ivanov]

@Ernesto Hernandez

I did a very targeted, small-scale direct mail campaign. Part of my goal was to personalize the letters to the max and that included putting a phone of their property. It made it much more personal and more likely that they would call me, which I think turned out to be the case. I got the phone by taking a screenshot from Google Street View (drop the little yellow person on a road in Google Maps).

I've done a more in-depth writeup on how I ran this on Reddit if you want to check it out. 

[Ernesto Hernandez]

I would really appreciate that. Can you post a link to the Reddit post?

[Mitchell Litam]

@Anton Ivanov Congrats on your success.

I just read through the whole thread and really appreciate how you answer every single persons question. Thanks for breaking down the numbers. Truly inspired by this. The side hustle you mentioned in the beginning of making about $150k a year was the real estate? Or is that a different start up all together?

[Mark S.]

@Anton Ivanov, do you have a general idea about your friends’ monthly cash flow per unit on their TKs?  I’m sure much depends on when they bought and the particular market, but I’m curious.  

My biggest fear right now is buying TK deals that are too lean, locking up my 10 residential mortgage spots on small SFRs (yes, I know I can always pay these off later as I scale to re-open them back up), and burying myself with houses that are difficult to get out of later.  

I am trying to keep a long term perspective and think about things like rising rents, historically low interest rates on the rise, total return, etc., but sometimes it’s hard to get past the imaginary little person on my shoulder saying, “Are you really going through all this and buying out-of-state rental properties for a measly $125/$200 per month?”

[Jason Clarke]

That's a really inspiring and informative story Anton. Thanks for sharing. 

[Jerry Cinor]

wow very encouraging to hear amazing stories like that.

nice work!

[Amanda Hillard]

I would love to send a colleague request but I haven’t figured out how to do that:( can you send me one. My husband and I do mainly 4plex units as well. We have 13 buildings currently and building our 14th. I would love to ask you a few questions!

[Jackson Sandland]

Dude. This is epic. Congrats on the execution! Looks like you found a sweet spot in Kansas. I've just made on offer on my second property, a Milwaukee duplex with great cash flow. This is inspiring, and I'm looking to take a page out of your book here. I also happen to be a front-end engineer, but in SF. I lived in San Diego for about six years. What a city!
What does your startup do?

[Giannina Biala]

@ Anton Ivanov thanks for sharing. Definitely motivating!

[Anton Ivanov]

@Ernesto Hernandez

I think the mods removed it from here, I'll send you a message with it.

@Mitchell Litam

The "side hustle" is becoming more of a full time thing lately, haha. It's the company in my signature.

@mark 

@Mark S.

I think it was around $150/200 month if my memory serves me right. All of their portfolio was in Indi.

I think if you're buying in good, improving markets, then even with turnkeys you'll see price appreciation and rent increases over time, which will increase your safety margin and profit. The key here is the market though. There are many cities that are "hot turnkey destinations", but looking at macro economic/population/job growth and forecasts they're not really going anywhere. Many of these cities are also in the mid-west coincidentally... 

[Aziz Raji]

Great Post !!

[Mark S.]

@Anton Ivanov, what are your thoughts on SFR in Memphis and multi-family in Indianapolis? That's where I'm currently focusing, with eyes also on Birmingham and Kansas City/St. Louis.

[Antoine Martel]

Thanks for sharing your awesome success story.

[Tracey Vaccarino]

Thank you so much for sharing your story with us Anton. Keep up the great work!

I wish you continued success!

[Jessica Herndon]

This is an awesome post. Thanks so much for sharing and offering great advice. 

[James Perdomo]

Very inspirational. Congrats on all the success

[Gregory H.]

@Anton Ivanov Great post! A few questions for ya. 

1. Is the $10k+ monthly cashflow purely cashflow, or is that amortization as well?

2. How levered is your overall portfolio?

3. Since all properties are mortgaged, whats the debt breakdown, 30-yr fixed, 15-yr fixed, ARMs?

4. How much do you keep in cash/credit lines to maintain a portfolio this size (no need to provide cash figures, but months of expenses would be interesting)?

[Alex Price]

Awesome story! I've worked with investors from all over who have used this same strategy and have had great success with it. Keep going, you'll get to 100 units in no time!

[Jeremy Fiest]

Anton Ivanov awesome story, man! Your story is a perfect example of how to successfully approach REI. You set a goal for yourself, thought about how to actualize it and then you did it. Congratulations!

[Brent Kostner]

Your story is very inspiring. Your goals sound similar to mine, but you're crushing yours! Thanks for sharing.

[Olu Sanya]

@Anton Ivanov I follow a debt free real estate model because in 2008 when the Sh**t hit the Fan and everybody (including me) that had debt against properties lost everything they had work so hard for; I decided to do real estate the boring way and make sure I am not a glorified property manager for the bank. With only 10 units (compared to your 35 units) and less people to deal with I am able to achieve the same $10K a mth cash flow because I owe no Man for the assets I hold. My approach will never make an HGTV show but I have financial peace & can achieve fabulous net-wealth goals with less properties.  I believe this is why @Jay Hinrichs suggested you start paying them off, because you have done such a wonderful job acquiring them, you now want to completely own them. 

[Paul Mesaros]

Thanks for sharing! Very inspiring!!!