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.

[Maddan Pun]

Great story Anton! Way to go.. Quite inspiring!

[Josh Lyons]

@Anton Ivanov Just came across this discussion. Thanks for sharing your great story Anton!  Very helpful and motivating.  I hope to follow in some of your footsteps.  Thanks again.

[Alan DeRossett]

wow congrats!

I've never done out of state as the extra expense of travel all seemed to negate any rents. Do you have relatives or people you know in those states?

[Shea Spinelli]

This is is really inspiring! I'm impressed, keep it up!

[William Powers]

@Anton Ivanov, Fantastic sucess story, thank you for sharing. I feel a a book coming from you !! 👍🏼💙 Best MrBill

[Dalton Toelkes]

@Anton Ivanov Congrats on your success, that's very inspiring! I'm starting out in real estate and just moved from the Kansas City area to Denver so I'm looking at investing back there from out of state. I'm just curious if you have any recommendations on who to use for property managers, agents, or contractors there. Would love any advice you have on that area.

[Gerardo Lozano]

Great job!!

[Anton Ivanov]

@Gary Murano

I think I replied to a few similar questions in this post. If you look through my comments, there should be a post with info and links to where I typically look up market information.

But in short, right now I like markets which have relatively low home prices, high cash flow and strong economic/job/population growth projections. These tend to be mostly inland and mid-western cities, away from the coast, but definitely not all of them.

I think these markets will deliver a good combination of rising home values, rising rents and cash flow. Similar to the rationale in this BP post: https://www.biggerpockets.com/renewsblog/biggerpoc...

Unfortunately there isn't one place where you can look up all of the info, it takes quite a bit of time.

@Lee Johnson

I've written about in previously in this thread in a few places.

@Gregg Heminger

Yes, I've had more than 1 VA loan at the same time. The way VA loans work, is there is a total maximum loan limit that you can be exposed to. As long as you're under this limit, you can get more than one loan. The limit varies by county. If you go to their official website, they have some nice PDFs that describe various scenarios of how you can use VA loans - give it a read.

@Alex Evans

No, it's not required. You can get a VA loan with 0% down as long as you qualify. I put a down payment because I like to have at least some initial equity in my properties to reduce risk and because I wanted to have positive cash flow on this property, which would not have happened with a 0% down payment.

[Anton Ivanov]

@Shannon Young

I'm not sure where you're getting the 4 property maximum. If we're talking about conventional loans, you should be able to get up to about 10, as long as you still qualify based on your debt to income ratio.

If you're using portfolio, hard money or commercial loans, you can finance as many properties as you want, provided the lender is willing too work with you.

@Logan Brown

I get this question a lot. Turnkey properties were a stepping stone for me that helped me expand my portfolio out of state and build confidence to buy and manage properties remotely. It's easy to say that I could have skipped it in hindsight, but I would probably go the same route again, because again it was a learning experience.

With that being said, you need to realize you'll be paying market values for these homes, which will affect your profit.

As far as tips, the biggest one I can give you is to not treat turnkey properties differently than any other property. You still need to research the market it's in. You still need to understand what neighborhood it's in and the types of tenants you're going to get. You still need to get the property inspected, etc. Don't assume that just because it's a turnkey property, it will be a good investment. Most turnkey properties are not good investments.

@Tressie Hollins

See some of my other comments where I went over property management. 

[Shannon Young]

Thanks Anton

[Anton Ivanov]

@Chantele Joordens

What I like to do is to network with other local/remote investors first, and then ask them for referrals to agents, property managers, etc. This way you'll actually get recommendations from other investors like you to people who work well with investors. I haven't had much luck just doing online searches because like you pointed out - it's pretty hit and miss.

I can also suggest asking every person you meet in real estate for at least 2-3 referrals to somebody else to keep your network growing.

@James A Oates Jr

Biggest hurdle/problem with out of state investing is definitely property management. You need to find a kick *** PM who knows what they're doing and will take care of the properties for you.

@Kenny Jenkins

You can send me a pm for recommendations. I would strongly suggest you fly out and not only visit the property and meet your PM and rest of the team, but also drive around the city and the different neighborhoods to understand the local dynamic.

@Mansi Kothari

I've done an extensive write up about the direct mail campaign I did here: https://www.biggerpockets.com/forums/223/topics/56...

@Suzanne Goodman

I've shared a few posts in this thread about how I work with PMs.

@Ozkan B.

It may look easy on paper, but everything has been a lot of work. I'm a very goal/achievement oriented person and enjoy making progress in all areas of life. I probably have over 150 goals at any given time I'm working toward.

[Logan Brown]

@Anton Ivanov Thanks for the tips. And again, thanks for sharing your story. It’s an awesome one!

[Jimmy Domer]

Thanks for sharing.  Great insights and motivation to keep growing.

[Leon G.]

"groom each of my property managers to do the job for me " 

can you talk about how you find and/or select property managers? I manage myself my four units and I want to start looking into hiring someone

[Derrek H.]

@Anton Ivanov - Thanks so much for sharing your story! It is really inspiring and motivating to me. I’m similar to you in that I’m very analytical and live in expensive CA (Sacramento). I’ve also concluded that buying outside of CA is better for investing.

That said, my current concern is how to manage the property remotely. You said you had 1) criteria for picking property managers and 2) a system for keeping them accountable. Would you mind sharing/elaborating on your criteria and system?

Also, I’m reluctant to buy property where there is snow, since I think that wear and tear might be greater and appreciation might be less in those areas. But since you bought in Kansas City, where there is snow, this does not seem like it has been a concern for you. Are my weather-related concerns not really a problem in your experience? Did weather (as far as it affects wear and tear costs and appreciation rates) not really enter into your investment analysis for choosing an area to invest in?

Thank you in advance for any wisdom you can share! 

Derrek H, Sacramento, CA

[Stephen Burnette]

I'm interested in how you "trained" your property managers.  What do you do?

[Jeffrey Holst]

@Anton Ivanov congrats

[Alex Olmo]

@Anton Ivanov. Congratulations on your success! I hope you exceed your goals by 10x’s! Please share your reddit article

[Lee Ripma]

@Derrek H.

I'll respond on weather since I also invest in KC but I don't have as many units as @Anton Ivanov (yet!)

I live in CA too and we don't have to worry about weather. Here is what I've seen on my properties on KC:

-more weather means more expensive insurance (50/mo/unit)

-hailstorms: can take out roofs, make sure you have coverage for this

-wind storms: can do damage and make trees fall on your property, it happened to me. Make sure you have coverage for this. I put in non-storm door screen doors. That was dumb. Put in storm doors! 

-snow: it does not actually snow that often in KC. Make sure in the lease you specify who is taking care of snow removal. Make sure you have a plan to apply salt to icy walkways. It is more cold and windy than snowy. 

-cold: it is both hot and cold in KC. Make sure you have a good plan to heat and cool property. Make sure you have someone on call for when the heater or AC breaks during a heat/cold event. That has also happened to me. 

-wear and tear: yes, it is more. Budget for more upkeep on properties than you would in CA and for servicing of your heat/cool systems. 

The appreciation thing is pretty vague. It snows in New York City but that is an appreciation market. It snows in some areas of CA too. Kansas City is, in general, not an appreciation market. Although a lot of areas have had a lot of appreciation in the last 2 years. Maybe due to everyone from CA buying there! KC is a blend of cash-flow and appreciation in my view. It is still possible to buy props for the 1% rule but properties there are HOT! Especially MF. Going day of list for over asking and cash, remind you of anywhere? California!!!

[Damon Yates]

This is amazing exact path I want to take! Great motivational story

[Alex Lewis]

@Anton Ivanov thanks for the info this was really inspirational.

[Mansi Kothari]

Thank you @Anton Ivanov

[Husain Khan]

Anton:  Very well written story.  I too am an engineer and enjoyed your analytical way of assessing things. I am most intrigued with your ability to increase your income.   Can you explain what your "side business" is that generates $150K per year? 

[Henry Belshause]

Thanks for the story! Motivates knowing people who started out similar to me can make it through hard work! I hope to get there one day soon!

[Linda S.]

Thanks for the inspiring story. Congrats on your massive success. I have no doubt your story is helping newbies to keep pushing it. Greatly appreciate it.