I make an extra $36,000 a year from my 4 rental units. Here's how I've scaled and managed my real-es

Publish date: 2024-07-18

2022-04-06T13:08:29Z

Former retail banker Ravi Davda scaled his portfolio to four high-yield properties in six months.
His goal was to create semi-passive rental income to supplement his freelance work while traveling.
This is Davda's story of his real-estate investing strategy, as told to Kiera Fields.

This as-told-to essay is based on a conversation with Ravi Davda, a digital marketer and property investor from Birmingham, England, who's living in Bulgaria. It has been edited for length and clarity.

After graduating from university, I started working in retail banking. I worked for a small firm outside of Birmingham, England, then moved to Lloyds Banking Group in nearby Wolverhampton. All the while, I was living at home and saving money.

After over two years of intense saving, I was able to put a deposit down on my first apartment in Birmingham.

The apartment was worth £119,000 in early 2013, and I put down a deposit of £25,000.

I lived in the apartment for a year and a half and continued to save while paying off my mortgage, which was significantly cheaper than rent.

By then I had met my wife. We decided to move to Milton Keynes in the summer of 2014, where I had started a new job at Santander Bank. We purchased a property there for £175,000. We only had to put down a 15% deposit, around £26,000.

We used personal savings to put the deposit down, and the rent from the Birmingham apartment helped pay the mortgage.

We had planned to settle in Milton Keynes, but after two and a half years I decided I no longer wanted to work in banking and quit. We moved back to Birmingham, selling the Milton Keynes property in the summer of 2017 for £225,000, a £50,000 profit.

I began freelancing in early 2018 as a business coach and, later, a digital marketer.

I also sold the Birmingham apartment in November 2018. The property was a leasehold property, and I didn't like not having control over leaks and other issues. We sold the property for £200,000 and made just under £80,000 in profit.

We wanted to own and rent properties in the UK while working abroad where our own rent and living expenses would be cheaper

We were renting in Birmingham but wanted to go traveling. We still had more than £100,000 from selling both properties. In late 2019 we decided to invest in two rental properties in Stoke-on-Trent.

I used to work with the owner of a letting company there.

It was a commuter town, and the properties had high returns on investment, around 8% yield. This meant the rent each month would cover the mortgage and any additional costs, as well as create a small monthly profit.

This is very important, as the higher the yield, the faster you'll make back your initial investment.

We bought our first two properties, which were both three-bedrooms, costing £85,000 and £78,000. The first property was cash-flowing in less than three months and only needed £4,000 worth of work to be tenant-ready. The latter was cheaper, as it needed more work — it cost £9,000 in renovations and wasn't cash-flowing for eight months.

By March 2020 we had purchased two more properties, also in Stoke-on-Trent. Both had two bedrooms, costing £75,000 and £74,000. The latter was cash-flowing immediately and needed no renovations. However, the former wasn't cash-flowing for nearly 12 months. It needed £6,500 worth of work, but because of COVID-19 it was massively delayed.

All in, with legal fees, deposits, and renovations, we spent just over £100,000 on the four properties to get them tenant-ready. We had to pay the 25% deposit, £1,500 per house for lawyers' fees, and then the renovation costs.

We bought 2 properties at a time because if one wasn't immediately cash-flowing, the rent from the other could help cover any extenuating costs

This process didn't always work, especially when we were starting out. It was very tough — everything we were making in rent from the cash-flowing properties was reinvested, but we spent our entire savings plus more.

One month I remember having to ask my parents for a loan just to cover the costs, because some were completely unforeseen. That is the risk you have to take when investing in property.

Once all the properties were being rented or ready to go on the rental market, my wife and I moved to Bulgaria, in late 2020. My wife works for a UK company remotely, and I run my digital-marketing business.

The main benefit of paying these maintenance costs up front is that for the last 18 months we haven't needed to fix much.

Now the outgoing costs each month have stabilized. We pay the letting company £60 per property each month to manage the tenancies. The monthly mortgage payments are between £100 and £135 per property, plus insurance.

Our monthly revenue on all 4 properties is £2,300, or about $36,000 a year, with an average profit of £1,500

I spend a couple of hours a week keeping our records updated and filing any paperwork or email correspondence with our letting agency in Stoke-on-Trent.

The living costs in Bulgaria are so much lower than in the UK. With our wages and income from the rent, we can live very comfortably. It helps that I am not materialistic — I don't spend money on clothes or frivolous items.

This means if there are any problems with the properties — a bad month — and we need to dip into our salaries to cover costs, it's easier and doesn't impact our quality of life.

With this four-house real-estate portfolio, I won't see the entire return on investment for at least 10 years. I justify this slow return rate because the value of the houses will also be appreciating, and it provides us with a steady passive income monthly.

If you are planning on living aboard while managing rental properties, make sure you have a great relationship with your letting agency

They value our relationship because we have a large portfolio and they know we are planning to expand in the future.

I try to give them as much responsibility as possible. If there's a small problem, like they need a plumber or an electrician, they will handle it and send us the bill at the end of the month.

They also manage the tenancies and turnover — most of our tenants stay for six to 12 months, and we just get sent a packet of potential tenants to vet if a house is going to be empty.

I would ideally like to expand our portfolio, but it is difficult to purchase property as an expat. I have no plans to sell either. The plan is to just keep them ticking over.

The only downside to investing in property is that there is no quick way to get your money out of that investment. I also have some investment in gold and ISAs.

I think it's good to have diversity in your portfolio so that if you do need to cash in some of your assets you can do so quickly.

Are you a real estate investor who wants to share your story? Email Kiera Fields at kfields@businessinsider.com

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