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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.
Finally got through all seven pages - very inspiring! You mentioned something about your extensive list of questions you use for vetting property managers, mind sharing that list of questions? Thanks!
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Sure, I'll send you a PM.
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Originally posted by @Anton Ivanov:
Sure, I'll send you a PM.
Thank you!
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What an inspiring ,informational recount. It is much appreciated.
I have invested in SFH but I think you have nudged me closer to the MF. After all, the more the merrier and time is money, so I guess I should get on with it. Best wishes
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I don't necessarily think MF are better than SFR in terms of returns, but it does help you scale a little faster and make management more efficient if you have a goal to own 50+ units.
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Congrats. Keep it up
Loved this post and thread. Just soaking in the info.
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For anyone following this and interested in the direct mail campaign I did to source off-market multi-family deals, I just posted a detailed write-up on my strategy:
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This is a great and inspiring story. Congratulations and keep the flag going.
I also invest in KCMO but this year has been extremely disappointing so far....
Thanks for sharing.
@Anton Ivanov Again - great information and thanks for sharing. I would love to have your list of PM questions if possible. Thanks.
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There are few good deals in KC on the MLS from what I've seen. You'll have to source off-market properties.
@Account Closed
Sure, I'll send you a pm.
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Definitely an inspiring story. Outstanding job shipmate.
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@Anton Ivanov Would you mind sending me a PM as well with your list of questions you use for vetting property managers please sir? Thanks in advance. KJ
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@Anton Ivanov Thank you very Much!!! KJ
@Anton Ivanov Thanks for sharing Anton. Would also love to get recommendations for PMs
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What a successful story. Congrats. It is really ROI and cash flow that counts. Suggest you look at high income and high income neighborhoods.
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@Anton Ivanov thanks for sharing your story! As a newbie just starting out, it's tremendously motivating and inspiring.
Would you mind sharing with me...
1) Your questionnaire for PM's? and
2) A link to your Reddit post? I searched Reddit and couldn't find it...
Your course on turnkey rentals also looks like a great value! I'll be signing up for it and working my way through the modules.
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I'll PM you both of those links.
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This was really good to hear and read about. Inspiring!
I'm also located in North County, San Diego and just closed on our first multi-family 6plex complex in Michigan and plan on growing our rental properties to maintain a 10K or more passive income. Could you possibly send me the list of questions you use for vetting property managers, as you sent to Kendrick? We do have a Property Management company for the 6plex, but we also plan on spreading out into Indiana and Georgia and a list of questions would be great.
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I found this thread due to Georgia being one of my keywords and have been reading through it for the last couple of days as time allowed. It is a great thread, with tons of good info. I appreciate how you took the time to answer each question.
Congratulations on your current success and I wish you much more in the future!
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Thanks so much for sharing Anton ... great work!
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Congrats on all your success @Anton Ivanov! It's really inspiring to me as I am just getting off the ground (3 doors so far). If you have the time (and don't mind sharing), I'd be interested to know what some of your criteria is for property managers. I've been working full time in the corporate world by day and self managing at night. I've been too nervous to try property managers because I usually only hear horror stories and that it would eat into my profit. I'm also living in the same city as the rentals, so it's not as big of a deal for me right now as it would be if I was a remote landlord, but eventually as it grows I will run out of time. Appreciate your story and all the great advice!
Becca
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Hey Anton. Again, great post and continued success. Can you send me your list for vetting Property Managers?