Wouldn’t $10k per month of passive income be nice? Anton currently has that with his portfolio, and he only has to spend one hour each week to manage. He also has another career, so his real estate investments are not his main focus, which makes the passive nature of his investments ideal for him. Joe digs into Anton’s portfolio and story, extracting the lessons for us to learn from. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“Get your foot in the door, you’ll learn more from your first deal than any kind of reading or research” – Anton Ivanov
Anton Ivanov Real Estate Background:
- US Navy veteran, real estate investor and entrepreneur
- Owns 35 units across 4 states, generating $10k in monthly passive income, requiring only 1 hour a week to manage
- Based in San Diego, CA
- Say hi to him at https://dealcheck.io/
- Best Ever Book: 4 Hour Work Week by Tim Ferriss
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Anton Ivanov. How are you doing, Anton?
Anton Ivanov: I’m doing great, Joe. How are you?
Joe Fairless: I am doing really well, and nice to have you on the show. A little bit about Anton – he is a U.S. Navy vet. Thank you for what you did for our country. He is a real estate investor and an entrepreneur. He owns 35 units across four states, generating $10,000 monthly passive income. Here’s the kicker – it requires only one hour a week to manage… And he is based in San Diego, California. With that being said, Anton, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Anton Ivanov: Absolutely, Joe. Thanks, first, for inviting me on the show. I got started with real estate kind of in a set of unfortunate circumstances. I was in the U.S. Navy a few years ago, and both of my parents passed away actually while I was stationed in Japan, overseas. They owned a condo here in San Diego, and I ended up inheriting it after their deaths. Prior to that I never had honestly any intention of getting into real estate, at least in the immediate future. I didn’t know much about it, so here I am, I’m living in Japan obviously, deployed with the U.S. Navy, I’ve got this condo… I wasn’t really sure what to do with it at the beginning. I thought about selling it. I glad I didn’t; I talked to a few folks smarter than me, and they were like “Well, you know what – it’s a good asset. Why don’t you try renting it out? Get a property manager and see where it goes. Don’t make any rash decisions.” Which I did.
I happened to find a local property manager here in San Diego, I rented the property out… It didn’t cashflow very well. San Diego prices are very expensive, rents not so much… But it trickled in, a little bit at a time. But over the years it kind of gave me my first look at what passive real estate investing can do for you in terms of cashflow. That was the kicker for the whole driver of after I got out of the Navy and kind of settled in a more normal life, so to speak… It really opened my eyes about what real estate can do for you in terms of passive income specifically, and replacing your full-time job, and obviously helping you retire early. I like to think of that as kind of the start of what followed.
After I got out of the Navy, I moved back to San Diego. Me and my wife, we purchased a duplex that we house-hacked actually, with a low down payment VA loan. That was our first ever property that we bought ourselves, without inheriting it. And from then on we just kept growing. We started investing out of state, we bought four turnkey properties in Atlanta, Georgia, and then Birmingham, Alabama, and from that we went a more traditional route and built a local team in Kansas City, started buying value-add multifamily properties, doing our own rehab, doing our own management, and right now we’re at 35 total units, over 10k monthly cashflow, and the most important aspect for me is our portfolio is more or less 100% self-sustaining and passive, whereas if I wanted to take a six-month vacation, and just basically not worry about it, I have the confidence that it’s going to keep running. It doesn’t need me there every day. And in fact, I work full-time. I’m not a full-time investor. I have a career, I have a business startup, so that’s my full-time focus, and real estate provides me with that passive income, and eventually retirement.
Joe Fairless: When you say it’s self-sustaining and passive, will you elaborate on how you’re defining that? And perhaps elaborate by giving some examples of “If this were to happen, I’m still okay on a six-month vacation, and I don’t need to be present and spend time focusing on that, because I have it solved for.”
Anton Ivanov: Absolutely. To me obviously, passive means that I don’t have to spend my own personal time managing my portfolio. It’s not my full-time job, and it’s not something that even requires my presence. Most of my properties are out of state, and the first key in having this system set up is obviously finding good property managers. Somebody has to manage the properties for you, so if you’re not gonna be doing it, you need a team, and specifically a really good property management company to do that for you. So my first step, and always advice to all investors who want to invest out of state, or just have a passive portfolio locally, is you need to find an absolutely stellar property management company or team to help you.
I’ve found that the best property managers I’ve always worked with have been through referrals from other investors. There’s a lot of companies that manage properties out there, a lot of them are okay, subpar; instead of googling or finding one randomly, first meet investors that invest in that market, that have a track record with using some company for the same types of projects that you want to use them for. So if it’s single-family, find investors who invest in single-family; multifamily – find investors who invest in multifamily, ask them who their property manager is and if they’re happy with them, and get your first few referrals and contacts that way.
And then obviously, interview the property management firm yourself, see if they’ll work for you in terms of the properties you want to buy, whether you want to do a rehab or not, what kind of maintenance fees do they have, what kind of management fees do they have, and so forth. That’s the key, Joe. Obviously, I’m sure you and your listeners know, first find a good property manager.
The second for me has always been to kind of — I call it training or grooming your property managers. A lot of investors I meet – they find a company to manage their properties, and they expect “Okay, I’m done at this point. I turned it over to them”, and everything’s gonna go smoothly from then on. That may or may not be the case, but the best thing you can do is basically go through as many scenarios before they happen, with your property manager.
We’re talking about your unit becoming vacant, what type of turn rehab are you doing, what is your budget, what are the specific items that you want done on the property. They’re getting ready to lease it – what is the leasing criteria? Do you want pets, do you want no pets? Section 8, no section 8? Identify and agree on a list of criteria with them. Evictions. What is your late payment policy? What is your eviction policy?
Go through the entire process with the property manager and make sure you guys are on the same page. By being proactive, especially when you’re working with a new company, and establishing a set of checklists, guidelines, basically processes that you agree on, you’re setting yourself up for success later. So when you say “I go on vacation for six months”, because I walked my property managers through pretty much every possible scenario that could happen, and I’m comfortable with the process that they’re going to follow – we reviewed it, we agreed on it – I’m not really worried that something unexpected is going to come up. Because if it does, I’ve already talked to my property manager about how to handle it, what steps to take, how much this is going to cost, and so forth.
So you’re basically delegating your work to them, and giving them the power to make decisions and actually manage the process, but at the same time you’re maintaining control over the overall structure of the process, the fees, and so forth… So when you come back six months later from your vacation and they call you up and say “Hey, we had an eviction. This is exactly how I handled it, like we agreed. Here’s the costs. Everything was done basically how you wanted to” – that for me is truly having a passive portfolio that you’re not constantly stressing over all the time.
Joe Fairless: You live in San Diego… Where are your properties?
Anton Ivanov: I have three properties here locally. I don’t manage them myself either. I have one in Atlanta, three in Birmingham, and 28 units in Kansas City.
Joe Fairless: Let’s talk about the 28 units in KC… Are they all single-family?
Anton Ivanov: No, they’re actually all 2-4 multifamily.
Joe Fairless: Okay. How did you end up in Kansas City?
Anton Ivanov: I kind of started investing out of state, reasons being that Southern California was not a good rental market, in my opinion. I like a combination of both cashflow and appreciation for a good long-term growth. San Diego sees some pretty good appreciation if you buy at the right time. The cashflow here is terrible. So I started looking out of state, and I basically did an analysis of various markets.
I focused first on bigger cities; I didn’t wanna invest anywhere that was too small. I focused on markets that had very strong economic, population and job growth, because I believe that those qualities are what drive both price and rent growth over time. As a real estate investor in rental properties, that is what I wanna see. I don’t wanna see prices stagnate or decline, I don’t wanna see rents stagnate or decline. I want both to appreciate, and what I’ve found based on my research and reading is if a market has economic growth, population growth and job growth, then that will cause overall prices on rents to go up.
And furthermore, I wanted a market that had a fairly low entry point. We’re talking about maybe between 60k and 80k purchase price per unit. Obviously, compared to San Diego, we’re looking at hundreds of thousands per unit, and Kansas City basically fit all those criteria – it had good economic, population growth, it was a thriving city, diverse economy… At the same time, it didn’t really get hit by the real estate cycle recovery like some of the other markets, so you could still find deals for fairly cheap there.
Joe Fairless: So once you identified Kansas City, how did you start purchasing property there?
Anton Ivanov: The first thing I actually did is network and build my team. That’s the key, like I mentioned before; starting with a property manager, but also finding contractors, rehab teams, brokers, agents, and so forth, to basically assemble a group of people to help you with acquisition, rehab and management of your properties, because I’m not there myself doing it. And the first thing I did was actually connect with local investors, like I mentioned. I think that’s the key.
So instead of finding a broker and an agent, I actually went on sites like Bigger Pockets, a few local people I knew here in San Diego that had friends who invested in Kansas City, and basically met 5-10 other investors who were successful in that market, learned from them, learned what types of properties they were buying, learned what areas they preferred, and also used them to grow my own network of real estate professionals.
So I did all of that, and it probably took about 6-8 months frankly, just networking, researching, doing this part-time, because again, I work full-time, so I just had to find time to do it. I flew out to Kansas City myself, met all these people that I was talking to over the phone or e-mail, actually drove around the city probably for two straight days, got a first-hand experience of what these different areas are and look like, to make sure I’m not just blindly buying a property in some area that I think is good.
So I went through the 6-8 month preliminary work that was absolutely essential, because it laid the foundation for being successful in that market later. And only when I had the team, when I was comfortable, only then did I start looking for properties to buy.
Joe Fairless: What’s something that has not gone right?
Anton Ivanov: Specifically in Kansas City, I would say a few times I over-estimated the performance of certain properties, and that’s obviously the key to being a successful real estate investor – you’re about to buy a property, you’re going to run the cashflow projections and make some assumptions of what you think the rent is, what you think the vacancy is, what you think the maintenance will be. Because I was new to the city, didn’t really live there before and only had indirect knowledge, a few times I did over-estimate how much the property could rent for, what the vacancy rate would be, what the maintenance would be. That resulted in less cashflow than I predicted.
Now, thankfully, what helps when you invest in a city that’s thriving and growing is that it does give you some room for error. Because if you think rents are higher than what they actually are, but they do appreciate over time anyway, then maybe the first few years your cashflow will be diminished, but then it’ll catch up to your estimate. That’s really what saved me in terms of my estimates. But learning from that, obviously; when it’s a new city, new market, you will make some mistakes. The best you can do is use different sources of information, double-check your numbers with other investors, brokers, agents, run it by them, see what they think. Don’t just go on Rentometer or something like that, find one estimate for the rent and think that that’s what it’s gonna be.
Joe Fairless: I noticed in those examples you said brokers, agents and other investors… Did you intentionally omit other property managers, or was that just “…and property managers”?
Anton Ivanov: No, property managers are great people to run by rental estimates. Again, I wouldn’t base the projections on any one estimate, so definitely ask a few brokers, agents, a few property managers what they think a given property may rent for, and take all that collectively, find a middle ground and use that in your projections.
Joe Fairless: Let’s say you were to find a four-unit property that you typically buy in Kansas City today. What would you estimate for vacancy and maintenance? Feel free to pick whatever area you usually buy in, because I know that plays into it, too.
Anton Ivanov: Right. So now that I have some track record in Kansas City, estimating all these numbers, especially in the same areas, is much easier, because I can look at my previous performance and estimate vacancy based on that. For example, for new fourplexes I buy in the same areas, my vacancy estimate is at least 10%. Historically, it’s been around 8% so far over the few years that I’ve been in that market, in the areas. I just add a few little percentages, round out to 10%, to be a little more conservative… Especially because it’s multifamily and these are B-class areas.
So it’s helpful when you have past performance. Definitely use that if you already own properties in the market. Definitely look at how they’re performing. But at the same time, do keep in mind that if it’s a slightly different area, a slightly different property, the vacancy or rent or maintenance may be slightly different… So don’t just blindly throw estimates out there.
Joe Fairless: And as far as the maintenance, how would you estimate that?
Anton Ivanov: The maintenance – typically, when I first get into a market, like Kansas City, when I’m brand new, I usually use a percentage of the rent as an estimate. For multifamily, I do something like 12%-15%. Again, probably a little high, but if I’m new, I’d rather overestimate. Once I have a little bit of track record, like I do now, I can assign a more specific dollar figure, usually in a certain amount per month, per unit in maintenance costs, basically based on the average of how my portfolio is performing in a given area.
Joe Fairless: And what’s that a percent of?
Anton Ivanov: If I use a percent to estimate maintenance, it’s typically of the gross rent. And then if I use a dollar figure, it would just be, let’s say, $100/unit/month for the entire building.
Joe Fairless: You’ve got 24 in KC? Did I hear you correct?
Anton Ivanov: 28 total.
Joe Fairless: Sorry, 28 total in Kansas City. You’re also in Birmingham, Alabama and in Atlanta. Did you come across Atlanta and Birmingham the same way that you did Kansas City?
Anton Ivanov: Fairly similar. The Birmingham and Alabama properties – I bought them turnkey. This is where basically a company rehabs the property, finds a tenant, sells it to you off-market for a sub-price. Those were my first forays into out-of-state investing when I wasn’t comfortable building my own team. I still did some research on the markets and made sure I’m investing in the areas that I believed will appreciate over time, but obviously I was also investing in the areas where turnkey properties were being sold.
Joe Fairless: Based on your experience as a real estate investor, what’s your best real estate investing advice ever?
Anton Ivanov: What I always like to tell new investors, those getting started, is don’t be afraid to start small. It’s tempting to say “Hey, I wanna buy a 50-unit apartment complex”, or even a fourplex, but when you buy a bigger property like that you basically compound your potential to make mistakes… And as new investors, you probably will make mistakes, and you’ll learn from them, but the bigger the properties you start with, the more costly your mistakes will be.
I always say, don’t be afraid to start small, whether that’s just one local single-family property. Maybe you house-hack a duplex… Just get your foot in the door. You’ll learn more through the first deal that you buy than any reading and research you do online. That will set you up nicely for growing your portfolio going forward.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Anton Ivanov: Let’s do it, Joe.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Break: [00:18:17].22] to [00:19:11].03]
Joe Fairless: Okay, best ever book you’ve recently read?
Anton Ivanov: 4-Hour Workweek by Tim Ferriss.
Joe Fairless: Best ever deal you’ve done that we haven’t talked about already?
Anton Ivanov: Probably I’ll have to mention the duplex I house-hacked at the beginning, just because this was the very first property I bought. I learned a ton. I still own it, and it’s still performing greatly.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Anton Ivanov: I’ve kind of mentioned this before, but over-estimating certain numbers in your cashflow projections, like potential rents, vacancy, maintenance… For example in Kansas City, when I was first getting started, I probably used estimates that were a little over-optimistic, and the learning from that was to be more conservative, to talk to more people about your estimates, and then in the future use past performance as an indicator for more properties that you buy.
Joe Fairless: Best ever way you like to give back?
Anton Ivanov: Sure, Joe. I’m the founder of DealCheck.io. It’s a property analysis platform that you can use to analyze rental properties, flips, multifamily and commercial buildings. It’s available as a mobile app. Just search for DealCheck on the iOS or Google Play store, or use DealCheck.io online. It’s free to try out. If you’d like to upgrade to a more full-featured plan, type in “bestever25” promo code at checkout to get a 25% discount, just for Best Ever listeners. Again, DealCheck.io, “bestever25” promo code to get your discount if you’d like to upgrade.
Joe Fairless: And how can the Best Ever listeners learn more about what you’ve got going on? Follow what you’ve just said, I imagine?
Anton Ivanov: Absolutely, DealCheck.io. We’re on Twitter and Facebook, and if you’d like to e-mail me personally, it’s Anton@DealCheck.io. I’d love to answer any questions or hear from you.
Joe Fairless: Anton, thank you so much for being on the show, talking about your investment approach that you take to open up a new market and invest in it if it’s not the market that you live in, and how you approach building the team, as well as some underwriting assumptions that you do, and your overall investment philosophy. Thank you so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Anton Ivanov: Thanks, Joe. You do as well. Thanks for inviting me.