All Forum Posts by: 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.

@Peter Cung

Awesome, glad to hear it!

@Mark S.

In my experience, all of the numbers I think you call "reserves" will be slightly different for different cities, neighborhoods and property types.

Vacancy will be very different for a condo in a high-end area in San Diego vs a 10 unit multi-family in Kansas City in a D class area. Same goes for maintenance. If you own a new property in a nice area, in my experience the maintenance will be less than owning a multi-family property in a not so great area.

Cap-ex I actually don't like to use percentages of rent, and instead use dollar amounts. It will depend on the type of property as well, for example cap-ex for a condo will be very different than for a 4-plex.

If you're looking at a specific area in a specific city and similar property types in that area, you can come up with the average numbers that will work there. But if you're looking at properties all over the country in different neighborhoods, I would caution against generalizing too much.

Vacancy will heavily depend on the area the property is in

@Steve Vaughan 

Thanks, sounds like you're doing great yourself, so keep it up!

@Mark S.

The numbers all look different for different markets/properties, so it's hard to give you an exact range that would everywhere. Looking at you posted and assuming it's an SFR, the only comment I have is that maintenance is too low. In my experience it doesn't really matter that it's a freshly rehabbed house. There is going to be wear & tear that is really driven by the age of the property and the type of tenants, not necessarily by the rehab that was done. I would maybe bump that up to 10% to be safe.

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.

@Bryan Thomas

There are several cloud-based property analysis tools that you can use for analyze commercial properties. The analysis is similar to typical rental property analysis, but they offer the ability to enter the unit mix and rent/square footage in more details.

@Christian Cody

NOI = Operating Income - Operating Expenses

Cash Flow = NOI - Loan Payments

@Janis A.

I would double check that you're not underestimating the market rent on these properties. But it could be that other investors are willing to accept much lower returns than you in that market.

@Robert Caturano

Most multi-family property owners should have some sort of bookkeeping/record keeping. If you're serious about this deal, I would as the seller to provide you with a 1-2 year operating history, that should include maintenance/repair costs. This way you can compare what you're projecting to the actual numbers. Of course, the seller isn't "required" to send you these, but I would ask anyway.

I own many multi-family buildings and in general you're correct - owning 2 4-plexes will probably be cheaper (maintenance, cap ex wise) than owning 8 SFRs. With that being said, multi-family properties may attract a lower class of tenant who will impose more wear and tear on the property, so it's not a straightforward answer.

@Steven DAmbra

Like Henri pointed out - Google "COUNTY tax assessor" or "COUNTY tax collector" for the property you're interested in. Every county in the US has a public website that you can search to pull up previous tax bills for that property. Each tax bill will have the owner's name an mailing address.

You can try to google their name + address in the off-chance something will come up to get their phone number.

As far as finding an accurate ARV - this is challenging and would typically require you to look at comparable sales for similar properties in the same area in the last 6 months or so.

@David Olson

I think so, I looked over the screenshot and don't see any glaring errors. Just make sure all of the numbers you're inputting are correct and I would do this a few times for different properties until you feel comfortable.

Also, what helped me when I was starting out is actually go through the math (at least some of it) with a calculator and just understand how it's calculated. If you don't know what some of the terms mean (like cap rate, ROI, etc.), search up at the top and there will likely be a blog post that goes over the formula in detail.