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.

[N'Teasha Brownlee]

This is a really great and motivating post! I am working on doing something similar in Baltimore I am in the process purchasing my first triplex using my VA loan. So I am very excited to read about your experience. Thanks so much for sharing!

[Anton Ivanov]

@John Acheson

All of the financing I've done so far has been fixed rate. I'm not a big fan of adjustable rate loans. "What is the rule of thumb for cash reserves in real estate investments?" - I'm not sure if there is one? I have my 5-6 months of expenses target, but I know other investors who keep very little reserves because they want to invest their cash as much as possible. I guess it comes down to personal risk tolerance.

I agree with @Gregory H. that downfalls in the market will only affect you if you have to sell during the time and basically "realize your losses". If you're keeping the properties all through the downturn and collecting cash flow, the prices will eventually bounce back up and your ROI will go back into positive territory. I'm not sure what you can do to "hedge" this beyond having positively cash flowing properties and cash reserves.

@Caleb Heimsoth

I self-taught myself software development, built a few side-projects and wrote my first resume around that when I was applying to my first software dev positions.

@Andrew Sanders

Not a dumb question at all - all my properties have been on the MO side.

[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.

@Brugu Sirimalla

I don't buy turnkey properties in KC, so I can't comment on the turnkey inventory there. I look through a variety of channels - MLS feeds, LoopNet, tips from brokers/agents, reaching out to PMs, asking if their owners want to sell and finally direct mail.

@Amit Kumar

Ya, I'm up for coffee. Send me a pm please.

@Joe Ansley

Pm me for recommendations on property managers.

[Anton Ivanov]

@Marcello Oliveri

I don't think there is anything wrong with buying outside of the 435. I like Grandview and Lee's Summit especially down south. 64110 is ok, but property there would probably be too expensive to cash flow. I would never buy in 64128 or in 29/30. Hyde park can be OK, as long it's the North/West side. As you start going closer to to the 71, the areas get really sketchy.

There is a pretty good post here on BP that goes over many zip codes in KC. It's pretty spot-on: https://www.biggerpockets.com/forums/48/topics/276...

But it's hard to say which ones are the "best areas" because it depends on what properties and tenants you're looking for. There are C/D class areas, like around Independence that may cash flow well, but I would never buy property there out of personal preferences.

[Oliver J fryer]

Great story and great information.... I'm avoiding analysis paralysis by taking ALL of my research and essentially consolidating it into a checklist type of document...... there will still be gaps and learning points but I think it will be effective! Has anyone done something similar and/or would you like me to share it when its complete? Definitely open to feedback as well

[Kristopher Orr]

Super inspiring story Anton! I too am in KC and your first couple steps looked a lot like mine.  I'm at a crossroads for regarding the next move strategically though with a couple bridges in sure you've crossed before. I'd love to buy you a cup of coffee and talk shop whenever you're in KC next!

[Jeff Kehl]

@Anton Ivanov this all sounds great. I have acquired a portfolio of 200 units in my town with similar numbers. 

My question for you is, are you finding anything comparable for sale recently? If so please provide a link to a 4-plex in a good area of KC or Atlanta that I can purchase for $50k/unit that will rent for $750/month?

If not, I'm not sure what purpose it serves to get people all excited about investment opportunities that don't exist anymore.

I will be in San Diego April 16-19 and would welcome the opportunity to discuss in person so please pm me if we can work that out.

[Mike Minor]

Amazing! This article lead me to joining BP. Thanks for sharing!

[Aman A.]

Amazing story and thread. Thanks for sharing.

[Darnell J.]

@Anton Ivanov Congrats on your success and thanks for sharing. You seem to have scaled up pretty quickly. In the beginning phases, was there ever a time when you used some of the reserves from your existing rentals to purchase a new property? What is the general consensus on doing such? I'm not a proponent of it, but I'm curious to know what other investors are doing to scale up faster.

[Ola Dantis]

I believe investors do get very creative when they are starting to scale up. Whatever approach one takes, there always a risk of deploying reserve capital to acquire. 

[Jenelle H.]

@Anton Ivanov  this is very very inspiring but how would you recommend someone go about doing the same thing if they don't have a high income, nor a large savings/inheritance to jump start things and are just getting started in today's high market rather than in a low market?  Do you recommend those folks wait until the market goes down or just take a reeeeeeally long time to save and leverage lower value homes?

[Sebastien Hitier]

Originally posted by @Jenelle H.:

@Anton Ivanov  this is very very inspiring but how would you recommend someone go about doing the same thing if they don't have a high income, nor a large savings/inheritance to jump start things and are just getting started in today's high market rather than in a low market?  Do you recommend those folks wait until the market goes down or just take a reeeeeeally long time to save and leverage lower value homes?

I would recommend getting a high income first, and controlling one’s spending next. Saving rate of 70% seems remarkable to me considering the level of income tax, social contributions and health insurance in the US. 

[Amanda Fabian]

Great story! Thank you for sharing your experience. It is very motivating! We wish you continued success!

[Anton Ivanov]

@Oliver J fryer

I think what you're doing is smart - most investors, including myself have a checklist of things they run through for each prospective property. Whether it's written down or not, it just gives you a quick refresher to "check all of the boxes" before pulling the tigger.

@Kristopher Orr

You just missed me - I was there a few days ago, but I'll try to remember to hit you up next time I'm in town.

@Jeff Kehl

Congrats on the 200 unit portfolio - it sounds like you should be sharing your story instead of me!

If you're referring to the numbers on a building I posted earlier in this thread - yes, this was purchased recently, in the last year. I've bout many similar buildings at about the same prices in KC in the last 18 months. I only have a single property in Atlanta that I bought a few years ago and have not been active in that market since.

There are definitely great opportunities to be found, although it is getting harder due to rising prices. I don't really think I'm that great at finding or putting together deals. I've just had lunch with an investor in KC, who bought 20 units at around $25k/door. After about $10k rehab, the rent for $650/each. These were 2 buildings in pretty bad shape and mostly vacant. The current owner didn't want to deal with them. That is what I would consider a great deal - mine are ok.

I'd love to meet up - I'll send you a pm.

[Anton Ivanov]

@Darnell J.

I'm not going to lie and say I didn't dip into the reserves a few times when I was short on cash to close. I don't like doing it and always replenish the reserves right after closing, but it has happened. I've never completely used them all up and I wouldn't recommend that. I think as long as all of your properties are cash flow positive and you have a personal emergency fund and good income from other sources, you will be ok if this happens sometimes.

@Jenelle H.

I don't believe in market timing, so no I would not recommend waiting. You don't know how long you're going to wait for. It could be 6 months, it could be 6 years. It could be forever. I'm a big believer in starting now, even though you may think it's not the best time (it never really is). In the perspective of 10-20+ years it will not matter much where the market was when you started, but every year you delay, you're missing out on huge returns down the line.

As far as income/savings - I think there are two possibilities here. One would be to focus on switching career paths and increasing your savings rate. I went from earning about $40k as enlisted in the US Navy to $150k+ in about 5 years time. Not saying everybody should do it, but it's just an example of what's possible.

Another option is to really educate yourself and embrace creative financing. I'm not an expert on this, so I can't really tell you which "method" works best, but there are creative ways you can buy properties with very little or no cash of your own. This can help you get started while your income/savings are low.

@Sebastien Hitier

I think our high savings rate can more be contributed to having no kids and no expensive hobbies. We pay very low percentage of income tax (because of real estate, businesses, and other deductions) and have mostly 100% employer-paid health insurance.

[Brad Chandler]

@Anton Ivanov - sorry - I thought most were single families.

[Lauren Bishop]

@Anton Ivanov - Thanks for pointing me to your reddit post.  I was able to find it.  Looking forward to diving in and reading it!

[Anton Ivanov]

@Lauren Bishop

No problem!

[Ingrid Pinilla]

Originally posted by @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. 

Olu, I completely agree with you. I'm a huge fan of financial peace. It sounds like you have had great success with 10 units and making the same amount of cash flow. Pretty impressive! I own one rental property and am currently looking to purchase a second one. Any pointers and advice is appreciated; I would love to take you out for coffee or lunch if you're available.

[Ruel K.]

@Anton Ivanov Congrats Anton! Your post has motivated more to get focused on investing. Let's have coffee sometime and talk real estate. I am in OC and used to live in Mira Mesa. I'd like to build my own rental portfolio too. 

[Dan Albrecht]

Thanks Anton about letting me know about the tax assessor website for various counties.  Perhaps I wasn't too clear about my original question.  How did you get your list for your direct mail campaign?

From the original post: "Decided to do a direct mail campaign to a very select group of multi-family property owners (about 90 total)."

[Anton Ivanov]

@Dan Albrecht

I drove around the city and the areas I liked and identified several developments of multi-family buildings. I then put together a list of their addresses from Google Maps. So basically it was a manual process.

I wrote a detailed post on Reddit about exactly how I ran this - pm me and I'll send you a link.

[Marie S.]

DANG. That is very encouraging, awesome to hear stories like this.

[Folashadé Shelton]

Thank you so much for this post of inspiration and essentially a template for those who are beginning their journey. This is absolutely phenomenal and I want to wish you all the best. 

Best Regards,

Fola