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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.
Congrats on your success and thank you for serving. The biggest challenge for me as an out of state investor is finding a good property manager. I've been thru several in the St.Louis area and I would be interested in learning more about your property management method and criteria.
Thanks for sharing your story Anton! I currently have 11 doors and want to get 6 more this year. I also live in a semi-expensive city (in Canada) so the majority of my units are in a different province where it is much cheaper to buy. High vacancy and cap ex, but each door cashflows decently well.
I'm most interested in how you built the team of people working with you. I have yet to find a real estate agent that understands what "good numbers" look like, or are willing to learn. I have also bounced around with lenders as I don't find they get it either. I would ideally also like to hire a property manager as well. So my main question is, how do you find these people that become part of your team?
Thank you!
Chantele
Very inspirational story. Thanks for taking time out of your day to share. I really love how you have a blueprint so others can follow. I am sort of on a slightly similar path. My first rental was a turnkey property, btw I am very new at real estate investing and learning, barely 7 months in. I also acquired a 7 year mortgage note paying 12% per year. I am looking to get into multi family now to help me reach my internal goals. Thanks again for the inspirational mentorship in writing this blog post.
Thanks for your post brotha, I too am a vet and my wife is currently in the NAVY. We are hoping to be debt free in the next few years, and then get hot and heavy on finding multi family homes across the country. What would anyone say the biggest hurdle for investing out of state is?
Anton, thank you for your service and for sharing your successes. Which turnkey companies have you worked with and recommend? Did you fly out to visit every property and meet the property managers before you purchased your investments in other states?
Thank you,
@Anton Ivanov Thanks for sharing your success story! Motivating for someone who also lives in a high cost of living city (NYC). MY question is around how you found the list of private multifamily landlords that you hand wrote letters to, which by the way is brilliant! I thought about doing something similar in an area I already invest in but haven't pulled the trigger. How did you find that list of landlords? Look forward to hearing you!
Cheers and continued success in your journey!
I covered that a little in my original post - all of my deals have been self-funded. I have a pretty high income from my full-time job, startup and rental properties. Combined with a savings rate of about 65-70%, I can save for new purchases relatively quickly now. It was a little slower at first.
If this is a general question, there isn't anything preventing you to refinance turnkey properties, provided the property value appreciates enough to allow it. I haven't done this with any of the turnkeys I own, but I only had them for a few years.
I touched on this throughout the comments somewhere, but the biggest advice I can give you is only work with a company you were referred to by one (or better - several) other real estate investors. Meaning don't go with call-calling or cold-searching - work with companies who have a good track record.
@Anton Ivanov Just came across this response from you to another member in this thread. Would you mind sending me the Reddit thread as well? Thank you sir!
Anton Ivanov from San Diego, California
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.
Anton Ivanov
If you're really making $7,000 a month in profit from a single duplex, after the loan payments, vacancies, all maintenance & repairs, cap ex, utilities, landscaping and all other expenses - I don't see why you would sell. I haven't seen those kinds of returns anywhere. I typically profit about $250-350 per unit on my deals.
With that being said the question of holding vs selling always comes down to - do you have a better place you can put your money (return wise)? If the answer is yes, it makes sense to sell. If no - then keep it.
As far as finding PMs - see my other answers, basically always find one through referrals.
As far as keeping PMs accountable - develop processes and strategies for how you want thing done. For example, leasing guidelines, make-ready scope of works and pre-approved budgets, procedures for dealing with late payments and evictions, etc. Get it all in writing, send this to your PMs and go over to make sure you're on the same page.
I also like to do a phone call at least once a month with each of my PMs to check up on things, answer any questions they have, help them with any problems, etc. And then obviously check all of your statements, leases and deposits.
I’d love to hear more about how you “groom” your property managers. I am also looking into investing in multi-family properties in areas far away from where I live since I live smack in the heart of Silicon Valley where it is no longer possible to make money in real estate by renting out an investment property. Thankfully I bought my condo when I did (late 2015) when interest rates were super low and the market was cool enough for me to afford to get my foot in the door. At the time it seemed obscene for me to pay as much as I did - and let’s face it, a 1 BD/1BA for over $500k is obscene - but now I could probably sell it for $925k. But I’m not ready to leave the area so I'm staying put and meanwhile looking to invest elsewhere.
Congrats!
I don't understand how you can be successful in first try in all the things you're doing. Like your 9 to 5 job 150k/year (that's a lot), a start-up, another 150k/year (that's a serious amount too) and beside all this you have also time to put in successful real estate investment? It looks like it's impossible for me to be successful in all three at the same time. I have a bachelors degree in IT and 8 years of professional experience in software development and what I earn is: 40k/year ... I'm also looking into being self-employed and doing BRRRR.
@Anton Ivanov
Congratulations you are crushing it!
I built my first portfolio to 32 doors while serving 23 years in the military. My current portfolio includes 6 crash pads and 4 SFR. I also buy 3 to 4 flops a month and sell to buy and hold investor's.
I'm kinda of a think outside the box investor now. How can I make more with less. Five of my crash pads net 3k a month the 6th is only going to net $2400 because I had to pay more for it. I make 5k net on each flop I sell and my lowest cash flowing SFR nets $503 a month.
It's not hard to make 10k a month in real estate. You are doing it, I'm doing it and thousands of others are doing it. It amazes me on a real estate forum how many people don't get it. It only takes 3 simple rules to be successful. Work hard, stay focused and never give up!
Thanks for sharing @Anton Ivanov
I have great respect for people with passion, goals and "right" mindset.
Your post demonstrate perfectly what can one achieve even with many unknown variables (remote markets, using teams over self-work).
I have much to learn and your post gave some great ideas and especially ambition to pursue my REI goals.
Have a great day,
Benny
Thanks for posting this. Really looking forward to reading this when I get a chance
Great story...thanks for sharing!
Your story sure sounds great, but it's not very believable in a number of ways. First of all, how do you convince your lenders to loan you the money? You need at least 20% down, probably more for conventional financing. Plus, lenders limit the number of mortgage you can have, and you say you've financed all your properties. How did you do this? And how do you go to another city and "train" brokers and other pros to "do the work for you"? Your story doesn't go into any of these details, which makes it very hard to believe.
Thanks. Very thought out and congrats. I would beg to differ in that the 50% rule isn't solid but there is more than one way to skin a cat.
@Anton Ivanov: Great Story. You shall be both RICH and YOUNG at the same time. Wow. Поздравляю!
@Jay Hinrichs: WRT paying off the loans - I have done the opposite. I refinanced a property in order to get some cash out AND be paying more interest and less principal. It's nice to have a property gradually become totally yours, but the tax structure does not support it. Paid principal is not tax deductable. So you have this money going out every month and you have to pay tax on it. So I got this pile of cash out, and am throwing every penny back into the buildings. Structural repairs, paint, roofs... you name it.
Great story! Also lost my parents between 2008-2011 and by default got me into being a real estate owner. , Ive now bought and sold 6 units, outside of primary residence, and have a few LP investments in parts of the country that I don't have a "team" such as Philly, Orlando, Columbus, OH. I'm curious what your thoughts are owning so much RE in the 9th year of a bull market? I feel good where I am at, but wouldn't after a typically once a decade "washout". How do you handle that, and are you still aggressively buying today? Would love to chat more
Inspiration story. I hope to be going down a similar path!