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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.
Originally posted by @Frank Wolter:
How were you able to pay them all off?
@Anton Ivanov Sorry if this has already been asked, but with the commercial loans how much of a down payment did you use?
On average how much were the purchase prices compared to the comps?
Absolutely love the idea of physically searching, I'm going to try that next!
Commercial loans typically require a 25-30% down payment, in my experience, depending on the lender/property.
For your second question - I'm not sure which specific properties you're referring to. I generally try to get at least a 15-20% discount off ARV when buying off-marker properties, but it has varied over the years.
Hope you are staying healthy and safe during these crazy times!
Interesting! You are the founder of DealCheck, and I am using it.
Very inspiring story. I am going to read it one more time
@Anton Ivanov Hey Anton. Great post and thanks for sharing. Question on the 8% you were putting down in 2013. How were you getting investment loans for less than 20% down (80 LTV)? I've only been in the market for last 2 years but that's the requirement i've seen and maybe it was different than 2013. Just wondering. Thanks again!
@Slaiman Atayee
I've put 8% down when I was using the house-hacking strategy to buy multi-family with a VA loan. If you're not in the military or are not a veteran, the FHA program is similar and can be used for that purpose as well.
For non-owner-occupied properties, I put down 20-30%.
Hello @Anton Ivanov,
I know this is an older post but I was wondering what has changed since then! Any more buys in KC?
We've overall slowed down our acquisitions partly because of market conditions and partly because I've been focusing more on my business ventures.
We've bought a couple more 4-plexes in KC and sold some of our SFRs in other states and are at 40 total rental units right now.
Anton Ivanov
Awesome thanks for the update! I've been in the KC area now for almost two years but have recently started looking for a house hack so hopefully gut something under contract soon!
Great insight, thanks for sharing. I am currently in contract for investment property #2, and am absorbing as much information as I can. Investing in NYC where I'm located isn't feasible, but I am currently splitting my focus between the Jersey Shore summer rentals and Upstate NY student rentals. Again, thanks for sharing your story with us.
Great article. I am a front end engineer too!
I am in a dilemma of where and how to start looking for properties and start asking questions. I have zero knowledge of how to approach any properties and what things I should be looking at, realtors I should get in touch with? Any insights from you might be really helpful. I am wanting to start investing this year as a side hustle. Any help would be appreciated.
thanks!
Very Inspired!!!!!!!!! Thanks for sharing
Sorry for the late reply, I didn't see your post earlier.
Instead of focusing on properties right away, I can suggest to first:
1. Work on your investment goals - what you want to accomplish, when is your deadline for accomplishing this, how much time/effort/money you're willing to dedicate to this, etc.
2. Pick a market to focus on.
3. Build a network of professionals in your target market - real estate agents, lenders, property managers, contractors, insurance agents, etc. I would recommend always working with people you find from a referral from other investors, but also interviewing them yourself over the phone or in person.
In the process of doing the above I suspect you'll learn a good deal about real estate investing in general and be ready to start looking at actual properties.
Thank you so much for your posts!
I came across these while exploring my 1031 exchange options and thought of exploring apartments and multi-dwelling units after reading that small future plan item you had mentioned :)
I posted this question on the main thread, and here's the recap. Would appreciate if you could share any thoughts you have on this.
https://www.biggerpockets.com/...
I am selling my rental property with a 300,000 mortgage, and expecting to sell it in the range of 1,000,000, i.e. 30% LTV (simplified numbers with similar ratio).
I am planning to reinvest in with 1031 exchange and have a bunch of questions on that. This post is about alternatives to SFR turnkey investments.
I have only self-managed a couple of SFO Bay Area SFR rentals, and looking to explore alternatives after my 1031 exchange of one of those properties.
I have looked at a few turnkey or rental SFR investment sites such as roofstock (not sure if they are turnkey or just facilitate investments by providing rental estimates and guarantees based on as-is properties), doorvest, renttoretirement, and turnkeyinvestproperties.
Are there popular and/or convenient options to look for, buy and manage larger complexes (apartments, commercial etc.) similar to the above list of options for SFRs? I posted another question about leverage. Assuming that I can increase the leverage in my 1031 exchange, I want to explore options of one or two large purchase(s) with similar returns instead of buying 5 to 10 SFRs, but have no idea where to look for those, and how to analyze the deals and management.
If you're asking whether I know of any turnkey providers or websites that streamline larger multi-family or commercial property investing, then no, I'm not aware of them.
There may be some private equity groups or syndicates you can invest with if you're not interested in doing it yourself, but I don't have experience in this area either.
Quote from @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.
What is the best way to invest in residential real estate in the US right now?
9 of the Best Ways to Invest in Real Estate
1. Buy a rental property
- Cost barriers
- Uncertainty
- Time commitment
2. Invest in a REIT or other real estate stock
3. Participate in a real estate crowdfunding opportunity
4. Buy a vacation rental
5. House hack your way to a real estate portfolio
6. Rent out all or part of your own home
7. Fix and flip a house
- You make your money when you buy, not when you sell
- Time is money when it comes to flipping houses
8. Build a new home on spec
9. Be a lender
Do you want know more strategies ?
Attend Multifamily AP360 Virtual Summit 2022
Congrats on the success so far @Anton Ivanov !! and thank you for your service. I look forward to following your growth.
Excellent post, very inspiring! Congrats on your success and thank you for sharing your experience!
Could you please share more details about how you pick property managers for your properties and how you "manage" them over the time. Thank you!
I typically only find property managers through referrals from other local investors and then do an "interview" with them, where I ask a lot of questions to see if would be a good fit. You can see a list of the main questions I ask in this post I wrote.
As far as "managing" them, it all really comes down to maintaining communication with them, establishing processes/checklists that you'd like them to follow to make sure things are getting done as you'd like, and keeping them accountable. I wrote this post that has a few more details on this.
Great real estate story!
I imagine your IRRs are much higher over Re-financing and the massive equity appreciation 🏦
Thanks, Robert. Yes, our IRR is quite high when you factor in property appreciation, loan paydown and cumulative cash flows, especially if you compare that against stocks/bonds, for example.
@Anton Ivanov thank you for your post. It is extremely inspiring and I am looking to buy my first rental property. Could you please tell me what turnkey companies you use to buy rentals? Thanks so much!
I used Norada back in the day and was happy with the experience overall.
Just keep in mind, that you still need to research the market, neighborhood and each property, even if you're buying turnkey, because not all turnkey properties will make a good long-term rental.
Fantastic story @Anton Ivanov. I am new to investing and member of BP community. I am currently closing on my first deal in my hometown which is, 4 SFH on one corner lot that is being owner financed.
My question to you would be, what criteria you have for PMs and Contractors in outside markets.