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]

@Derrek H.

To answer your question about weather - I don't buy in markets that have extreme weather conditions, like severe snowfall, heat, hurricanes, flooding, etc. This eliminates a lot of the markets around the US by itself. I don't think regular snow classifies as "an extreme weather" condition. Yes, it will affect things like roof longevity and could add things like snow removal in the winter, so you need to account for that.

[Anton Ivanov]

@Stephen Burnette

I've written about this in several places in this thread.

@Alex Olmo

If you're referring to the direct mail campaign write-up, it's here on BP: https://www.biggerpockets.com/forums/223/topics/56...

@Lee Ripma

Great write-up, spot-on on everything and I agree.

@Husain Khan

Look in my signature.

@Alvaro Soto

Market selection is a complex question - I've written about it in a few places in this thread already. I tend to favor markets that have strong economic/population/job growth projections, have relatively low prices and strong cash flow.

@Kevin Lefeuvre

I financed the 4 turnkey properties I bought in 2014-2015 with conventional loans, 20% down payment, most through Flagstar Bank (no specific reason, they just had good rates at the time). The properties were around $50k in price, so the down payment requirements were not that high and since both me and my wife had good jobs, we didn't have any problems qualifying or saving the down payment money ourselves.

As far as the first commercial loan, not sure what type of answer you're looking for. I started building relationships with commercial lenders way ahead of time, I found a good lender that I liked, found a property that met their requirements, formed an LLC, put down 30% of the money I saved up over the years prior.

@Fernando E.

Sure, send me a pm.

[Anton Ivanov]

@Frank Wolter

Curios - why not just retire? 120 doors, no financing, I'm assuming your cash flow is at least $300-500 per door. That's about $500k a year, maybe more. I would be very happy with that.

[Joseph T.]

@Anton Ivanov 

Thank you for sharing your amazing success story. It's been truly inspiring as an investor to keep at it and continue to build my portfolio. I currently have a SFR in KCMO and I'd like to know if you can recommend any PM in the area. I also plan on visiting KCMO in September to meet up with some local investors there too.

[Account Closed]

This is a great success story, inspirational.  

[Ryan D.]

Originally posted by @Anton Ivanov:

@Kristopher Gomez

Average purchase prices on the multi-family I've been buying have been around $50k-55k per door in KC. Rent is around $700 at market for units in good condition.

Thanks Anton, great post, but I'm having a hard time seeing how the numbers work out. You say you are buying 4-plexes for ~$200k ($50k/door as you mention), that rent for $700/unit, and making ~$300/m/door profit. Most of my buildings are identical to this, but make apx $160/m/door profit, so I'm having difficulty seeing how you are getting ~2x the profit from effectively the same buildings. 

Can you please help me understand this:

• +$2800/m income for the building ($700/m/unit)
• -$280 in management (10%)
• -$1200 for profit ($300/m/door on average)
• =$1320 leftover to cover all your operating expenses

I just don't see how $1320 can cover all your expenses: mortgage, taxes, insurance, maintenance, ground-keeping, CapEx, vacancy, placement fees, etc. Do you own these properties without any debt (mortgage) - I assume not since you stated a 15%CCR? Maybe I'm missing something, can you please shed some light on this, I'd really like to understand how your 4-plexes are that profitable (and what I'm doing wrong with mine)!

Thanks in advance Anton, and thanks for your service!

[Alicia H.]

Great story, thank you for sharing!

[Troy Biggs]

That's awesome keep the great work and advice flowing, I am over here with my notepad soaking it in. Thank you for sharing your story.

[Roy Ben]

@Peter Cung where can I find it?

[Mark Wood]

That is awesome!  Congratultions and thank you so much for sharing!

I was wondering how much time do you spend managing your real estate portfolio per week.  

[Mark Doty]

@Anton Ivanovundefined, great story and thanks for sharing!  I live in your neck of the woods and have interest in the KC market.  I've got a bit less experience but would love to grab a coffee or a beer at the next meetup in San Diego.

[Dmitriy Fomichenko]

@Anton Ivanov, congratulations, great success story!

[Jennifer Ly]

This is amazing. Thank you for the inspiration!

[Anandakumar Elumalai]

@Anton Ivanov : congratulations. Very inspiring.

[Frank Wolter]

I grew up loving the game of Monopoly.  I never lost a game. In this live game I'm playing the game and it never ends. It constantly keeps going. So its not as much a monetary thing its a game. I want to see how big I can make this. I could make 5m a year and id keep going. In addition helping other is also a key ingredient in success. That's when you become the mastermind. 

[Brandon Jeanmarie]

That is awesome Anton. I really needed to read this!

[Anton Ivanov]

@Jason Small

I'm not sure what you mean by "property management model". I have professional property managers for all of my properties. Most I work with charge 8% of gross rents, one a little less because I have a lot of units with them. That's pretty standard, although some areas may go up to 10%. Make sure you ask them about all other fees like leasing, tenant placement, etc. You can negotiate some of these down, especially if you're brining several units to them.

@Nile Reavis

I touched on this in the original post - I bought a duplex as my first property with a VA loan, lived in one of the units for a few years, rented out the other. It's now full rented. I used the VA loan a second time to buy my current primary residence (single family). VA administration has a great website with a lot of details about the program: https://www.benefits.va.gov/homeloans/

@Alan Reza

Not 100% what checklist you're talking about, but send me a message.

@Ricardo Navarro

Look through this thread - I covered this a bunch of times.

[Anton Ivanov]

@Joseph T.

The PM I work with in KC primarily manages commercial and multi-family properties, but send me a message and I'll give you the details in case they want to work with you.

@Ryan D.

I posted an example of the cash flow numbers earlier in this thread somewhere. Just to clarify, the numbers in my original post are average for my portfolio. Some properties cash flow/cost more, some less. Here is a recent example:

Property: 4-plex, $190k purchase price, about $12k in rehab.

Loan: Commercial, 30% down, 25 year amortization, 5.15% rate

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

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

Expenses: -$895/mo ($1,100/year tax, $950/year insurance, 8% management, $200/month maintenance, $100/month cap ex, $150/month water/trash, $50/month landscaping/snow)

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

Loan Payments: -$789/mo

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

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.

@Mark Wood

If we're just talking about management, it's not much on average, probably about 1-2 hours a week. Most of that time is spent catching up/talking to property managers, reviewing PM statements and accounting, and handling miscellaneous things like taxes and insurance.

@Mark Doty

You can send me a message, but unfortunately my schedule is very busy. I don't go to local meetups either - never found them that useful.

[Vamsi Boddu]

Awesome @Anton Ivanov..very nice to read your story,gives us hope that we could also get there at some point in life..we started the wrong way, went into C/C- areas instead of starting at B/B- areas like you did. We are no longer going to buy anything in the C areas because its too much work even after using a Property Management company. We will stick with B areas and are focussing ion Multi family homes instead of SFR. We were able to close on a Duplex in Columbus,OH in June and it is decent, not a great deal but we bought it for 160k and rents are 1600$/month from both sides..we are using this experience to analyze the numbers better and factor in these costs when we buy the next deal. Very Happy for you and all the best.

[David Gwilt]

@Anton Ivanov such an inspirational post, and thank you for accepting my colleague request.  Would you mind PMing me your checklist of what you look at when selecting a property and your checklist/questions for interviewing PMs?  Thanks!

[Rob Gillespie]

Thanks for sharing your story!! I wanrt to print this and share it with my out of town Cleveland buyers. 

Very REAL! 

Thanks again!

[Rabih El-Khoury]

Good on you, this is a solid story! Quick one: as you said you're doing it yourself, how are you managing the out-of-state rehab work? Seems like a daunting thing. 

[Alan DeRossett]

have a friend with a development project in Joplin Missouri ,who has bought a car to leave near an airport to save on car rentals. but on other properties id need to plan for airfare and car rentals hotel etc. Travel to conference cost me $5k per week so always assumed id need a lot to purchase abroad and own for minimum of 5 years.

[Adrian Chu]

Congrats!

[Brian Mcmenamin]

@Anton Ivanov Great Work. Appreciate your sharing your market analysis insight. That San Diego market is pricey especially recently.