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.

[Will Louie]

@Anton Ivanov I loved reading your post!  Thanks for taking the time to share your story and how you got to where you are now.  I'm still active duty so it was great to hear about your success and methods.  Best of luck toward your goal of 50!

[Jamin Solomon]

@Anton Ivanov Great stuff, man! Very inspiring to see where the story started to where you are now. I like the idea of the full review and breaking down all the numbers to see which units are least performing in order to get into something better. Best of luck in the future!

[Mo S.]

Thanks for sharing!!💞🏦

[Maria Alfante]

Congratulations on your success @Anton Ivanov !

[Ola Dantis]

@Anton Ivanov Great story. 

More importantly, I think we guys did a great job at DealCheck! 👏👏👏👏👏

[Christopher J Lemmon]

Nice job!! Your a baller man!! Thanks for sharing about your success!!

[Gil Flmeinga]

I really enjoyed reading this.  I am also in California and I think we are way overpriced.  I just bought an RV and will tour the country, but also looking for real estate markets.  Can I take you out for a Starbucks when I get to Kansas City?

[Kelvin Espinal]

Thanks for sharing, @Anton Ivanov. Can you share how you selected your market? Also, any recommendations on building your management/support team remotely?

Thanks again.

Kelvin

[Olu Sanya]

Awesome job @Anton Ivanov , I own a mixture of Duplexes and SFR in Atlanta currently $6500 cashflow per mth 7 doors not debt on the properties, just bought our latest duplex last Monday in Austell GA. I also have a goal of 50 units, $50,000 a mth cashflow. I will be @ $10,000 early next year.

Glad to see someone else with a 50+ unit goal.  keep it up.

[Joe Splitrock]

@Anton Ivanov I have read a lot of success stories on BP, but this probably has to be the best "real deal" story. Fast time line, great cash flow and built it all yourself. Nice summary and realistic goals for the future. You are a rock star investor! Congrats.

[Jay Hinrichs]

great story... treat it as a business. SAVE a bunch of your income.. starting off being a high income earner .... all things that help you create this machine as fast as you did.

Have you thought about using the cash flow your not touching to start paying off your highest interest rate loans first. you get them paid off its like owning another unit without having to buy one..

your pay day comes when these are all paid off.. !!

[Wes Woodhouse]

@Anton Ivanov thanks for sharing, you've done a great job. I like that you have a plan and are methodically executing that plan. 

[Minh Nguyen]

Great story, especially inspiring as I'm a software engineer myself and slowly growing my portfolio.

[Anton Ivanov]

@Siler Coggins

I totally agree about treating your rental portfolio as a business, especially once you get 10+ units or so. You need processes and people to run those processes to be successful.

@Aaron L. @Mark S.

Regarding $250-350 cash flow per door - I don't think that's actually very high? I know investors who find deals where they cash flow at $400+ door, I'm just not as good at finding/putting together deals as them. The key here is buying properties below market values and buying value-add properties that you can rehab and raise the rents on.

My most recent purchases were all multi-family in Kansas City (mostly 4-plexes), B class areas, about $50k price per door. These were all private sales. You won't find these numbers with turnkey properties, especially with the current prices.

[Anton Ivanov]

@James Riggs

I built my team in KC through a lot of networking, mostly here on BP. I reached out to a few investors I knew who invested there, asked for references, kept calling around, etc. I also visited KC and met all of my "team members" there in person at some point. I'd say it was a process that is always work in progress.

@Chirag Shah

I still think turnkeys are a great way for somebody to get started investing out-of-state if you don't want to (or don't have the time to) build a local team yourself, source deals, manage rehabs, etc. etc. With that being said, you will sacrifice returns and cash flow for this "convenience", if you will. It's all a matter of what you want to do.

I haven't looked at turnkey numbers recently, but I know home prices have been rising across the board, so I wouldn't be surprised if it's a lot more difficult to find worthwhile properties in the current turnkey market. I've had great experience with Norada Real Estate (ran by @Marco Santarelli) and would recommend them.

@Henry Murray

All of the first bunch of properties I bought are in my or my wife's personal name. If you're using conventional loans, I think you have to have your name on the title anyway. Once we switched to buying larger multi-family properties and commercial loans, we set up an LLC and bought them through that.

I'm not a legal expert, but in my personal experience it's not really necessary to have an LLC for your first few properties. Once get 5-10+, I would consult an attorney to help you set up a structure that will protect you and your assets from potential lawsuits.

[John Horner]

Congrats, impressive!  Most people have trouble doing this in their own market but you've managed to do it from a distance!

[Anton Ivanov]

@Gil Flmeinga

I don't live in Kansas City, I live in San Diego, but I'm open to a coffee nevertheless :)

The question about market selection is pretty loaded and there are tons of discussions on that around here. I personally favor markets/approach that's outlined in BP's annual rental market survey (here is the latest) - that is focusing on cities that have a good mixture of cash flow (driven by relatively low prices and strong rents) and appreciation (driven by good economic/demographic conditions).

So my research generally consists of starting with the 50 biggest metropolitan areas in the US and narrowing them down based on which ones fit the above criteria the most. I also prefer not to invest in any markets with extreme weather conditions (too cold, too hot, prone to natural disasters, floods, etc.), so that narrows the list down quite a bit.

As far as building a remote team - it all comes down to networking, this site being a great resource. I'd suggest reaching out to other local investors and asking them for referrals as a start.

[Kelvin Espinal]

@Anton Ivanov Thank you, I will do just that.

[Mark S.]

@Anton Ivanov, that is impressive.  My numbers are from TK in Memphis.  I realize I am sacrificing returns and cash flow, but I don’t have the time/desire/wherewithal to find, negotiate, and rehab the properties myself.  Since I’d end up paying retail for the rehab myself because that’s not where my skillset is, my logic is my time is better spent elsewhere and the economies of scale I gain by using a large TK outfit essentially equate the the delta between any “deal” I may get on my own and the amount I’d end up spending as a small “mom-and-pop” investor to a contractor/crew.  It will take me longer to get to my goal, but I ackowledge that going in.  With that said, the total returns still crush average annual returns in the stock market (although I’m heavily invested there, too).

[Michael DeVowe]

Congrats and thanks for sharing!

[Aaron L.]

@Anton Ivanov @Mark S.

Would you mind sharing a quick example of the numbers you're getting on 1 of your buildings? You're obviously doing very well for yourself, and I don't doubt your success ...the reason I'm asking is I'm genuinely interested. 

You said you bought a 4plex for around $200k in a B area...

I crunched some numbers and even with a 25% down payment, monthly rents of $800, and setting aside the reserves you mentioned above, I'm only coming up with a net cashflow of around $200/mo per unit. I don't imagine you'd be renting a $50k unit of a 4plex in a B area for much more than $800, but maybe you're getting really great deals! Or maybe my numbers are just wrong :)

Thanks for taking the time to reply. 

[Salvador Arias]

@Anton Ivanov, I can relate to having an analytical mind. I believe analysis paralysis has stopped me from starting on my first deal. After reading your story, it makes me believe my goals are more attainable than what I first presumed. I am a licensed contractor in Los Angeles, CA, just North of you, but my goal is to acquire a portfolio as extensive as yours. Where do you recommend I start looking for rental property out of California? How do I get in contact with the right people to get me started out of state?

[Ernesto Hernandez]

Fascinating. You mention having included a picture of their property on your direct mail campaign. How did you get the photo and why did you include it?

[Mark S.]

@Aaron L., search for my post on 3/2 SFR in Memphis, TN - Am I Crazy? and I think you'll find exactly what you're looking for. I'd post direct link to it, but I'm on my phone and can't find easy way to do that right now.

[Andrew Syrios]

Congrats Anton!