Podcast 130. Rent to Retirement Turnkey Rentals with Zach Lemaster

Average Joe Finances:
0:00

Hey, welcome back to the Average Joe Finances Podcast. I'm your host, Mike Cavaggioni and today's guest, we have the pleasure of speaking with Zach Lemaster, the CEO and founder of Rent to Retirement. So Zach, super excited to have you on the show, thanks for joining us today.

Zach Lemaster:
0:14

Mike. Thanks so much for having me. We're excited to be here and yeah, talk everything real estate and finances. I love it.

Average Joe Finances:
0:20

Awesome. Hey just right off the bat, I'd like to ask you the first question that I ask everybody that comes on the show, and we wanna know more about you. So if you could tell us a little bit about your story, who is Zach Lemaster and what is Rent to Retirement?

Zach Lemaster:
0:33

Ah, man. Deep question. No, it's try to give you the Cliff Notes version here. I guess myself, Mike. I've been investing in real estate for almost 15 years now. Started out very slow, similar to you I was in the military. So I spent seven years in the Air Force as an optometrist. I was on scholarship, the HPSP Scholarship. So went in and served my time there. That's where I started investing in real estate. First house we owned bought with a VA loan, house hacked it, best loan out there. I know we talked about that with you. Yeah, and from there it's just saw the writing on the wall with the opportunity to be a strategic investor to use those loan structures, start earning income, not just thinking about, Hey, this is a place to live, but also this is gonna be an asset that can pay for our mortgage essentially. And really every single year since that first duplex we bought more and more real estate next year. We bought a couple more houses later. We sold that first duplex wanted into to multiple other properties and we've just been trading up. I left the Air Force and we moved out to Colorado, that's where we still reside. We worked in private practice for optometry. When I say we, I mean my wife and I, she's also an optometrist. And over time we were able to replace our active income through real estate investing specifically by being, strategic investors to look at different, investing in different parts of the country where we could maximize our returns. That was a huge catalyst for us to be able to expedite our goals is actually looking at different areas and investing in those, not just our own backyard, which could have been, a limiting factor. And so that was a foundation of our turnkey business. Rent to retirement is a simple fact that we've been successful investors, ourselves, identifying the best locations throughout the US and building our teams there to either, we build houses, but we either build them, fully renovate them, lease and manage them for investors looking to invest across the country in these different markets. So today, last year we did close to a thousand houses across 11 different markets. That's mainly Midwest and Southeast. And we have a very large network of investors that's growing rather rapidly. And just yeah, cruising along. We're loving everything we're doing.

Average Joe Finances:
2:29

Yeah. That's awesome. I had to write down a couple things as you were going, but one, thank you for your service. Seven years in the Air Force, that's awesome. So you wind up getting out, starting your own practice with your wife, right? And as you're investing in more real estate, you're able to eventually replace your income, right? So now, you're at a point where you're basically, Financially independent, right? You're financially free and you could focus on doing the things that you wanna do, that you're passionate about and not have to worry about that stuff because you don't have a boss . So that's pretty awesome. Or you don't have to worry about, satisfying a whole bunch of clients with their eyes and everything.

Zach Lemaster:
3:03

Yeah, and that's obviously, that was our goal is to take control of our finances. So we weren't dependent on that and also create a lifestyle where, Hey, we can actually still practice cuz that's the thing, our licenses are still active. We still see patients, but I do it solely on a volunteer basis. We do a lot of international humanitarian missions because that's what I enjoyed. It gets under my skin a little bit sometimes people will be like, They don't really maybe know what you know exactly what we're doing, they just know that I've retired from that career field. We're like, Oh, since you hated that, or since that wasn't right for you, that's why you left. And I'm like no. That's not it. It's not that I enjoy optometry. I spent eight years of school. Going to school for this, I enjoy helping people see and we still do that, but on our own terms, and real estate was able to allow us to do that. And we actually, at the very beginning, that wasn't the plan. We never thought we were gonna replace our income, but we just kept growing and scaling our portfolio and eventually we were able to do that.

Average Joe Finances:
3:52

Yeah, that's fantastic. You get to live the dream, right? You get to live the life that you wanna live, and you can still do what you were doing previously because you enjoy it, and you're doing it out of enjoyment, not out of necessity. So being able to do the stuff that you're doing for humanitarian reasons that is truly commendable. The fact that you can sit there and help other people in need, and you have the opportunity to do that and not have to worry about the income that's coming from that because you've already created something else that's paying you. So you can do something, you can do these passion projects, right? You can go help other people and that, that is huge. And I just wanna say thank you for what you do when it comes to that, because that's just absolutely amazing. A lot of people look at real estate investors and think, Oh, they're greedy, they're selfish, and they just wanna make all this money. You did it to be able to provide services to people that are needing them and provide these humanitarian services. So that is just absolutely amazing. Now I wanna talk a little bit about the the turnkey game itself, right? Especially with the way the market is right now, right? What do you think about the current market conditions and why is real estate investing still a good investment vehicle?

Zach Lemaster:
4:59

Yeah, that's what we're hearing all the time there, there's always something, it's, there's always something in the media, in the news that's gonna cause some concern and chaos and that's what the media does, right? Legitimately right now, we have economic compression, right? We probably in technically a recession, we have some interest rates going up. That's all actually fine. This is a normal economic cycle that happens and these past few years have just been un-normal actually with how crazy things are have been with historically low interest rates that maybe should have never been that low. Now they're just, in my opinion, getting back to normal and we're probably moving into more of a normal type of real estate market. But a lot of people lose sight of that and they just looked back over the past 6 to 12 to 24 months and saying, Oh, this is, concerning of what's happening right now. If you have a plan and you look at the fundamentals of real estate, the fundamentals don't change. Really, in my opinion, you should be buying in all market cycles. We had rentals in 2008, which was a terrible rental or a real estate kind of crash and there's a lot of people that lost their shirt. We didn't because we just invested in, bread butter rentals. And guess what? We had better renters and paid more renting that time, and now those houses are worth significantly more. Big picture I think there's a lot of noise out there. I think it's a good thing that we're having a little bit more of a stable market where it can be a little bit more of an even playing field for buyers and sellers. And of course, interest rates is just a number. You just gotta factor it into the equation. The overall benefits of owning rental real estate with appreciation, debt reduction, using leverage, your depreciation and tax benefits. All those things haven't changed. And likely in a this type of scenario we're going to see, probably more renters. And so it's a good time to invest still, especially when you have a plan and you're looking long term.

Average Joe Finances:
6:32

Yeah, that's a fantastic point, right? And especially when you say how interest rates are essentially just a number, right? It's just another number that you have to factor in when you're putting these deals together, right? That interest rate is gonna help you understand what your cash flow will or will not be. It's just another thing that you have to factor into what you're looking for when you're looking for these deals, right? And I think a lot of people looking at it from the point of, Oh, interest rates are so high now. Realistically, interest rates are back to what they were, like you said, like they went back to normal. They're back to what they were in like, 2014, 2015 timeframe. So this is probably something that's a lot healthier. For the real estate market than people realize, and everyone's expecting this huge crash to come. But realistically, what I see happening right now is the market's kind of plateaued and it's stabilizing now at this point. I think we'll see some dips here and there, but it's all gonna be very market specific. I don't think we're gonna see this mass exodus like we saw in 2008, 2009, right? But what we're gonna see is a very good stabilization before it starts to appreciate again and start going back up because real estate, generally always goes right back up. Not generally. It does, it always goes back up, just like the stock market, they guaranteed if you keep your money in it, over 10 year period you're gonna bring back a 10% return, right? Same thing with the real estate market. If you keep your money in real estate, the asset itself will appreciate and as long as you're investing in something that's cash flowing, it'll keep paying you. So that's huge. And again, like you said the whole interest rate thing it's just a number. And you had mentioned too that you guys were buying in all market cycles, even back in 2008. And I just wanna ask you this a little bit separately from that, for the properties that you owned back in 2008, what do you think the difference was when everybody else was losing their shirt and, how were you able to stay fully clothed in 2008 when everyone else was losing their clothes?

Zach Lemaster:
8:19

I think it comes down to really the type of investments we were buying and we only had a handful of rentals at that point in time, but they were just meant to be rentals. I think the people that got in trouble then were people that were doing speculation. They had this anticipated exit strategy of selling, developing, buying, based on appreciation, not looking at the cash flow numbers. And that was their strategy. It was easy back then, somewhat similar to the past couple years to buy a house and just do nothing and let it appreciate significantly. Their planned exit strategy. In addition to that, of course we had that just the crazy financing that was out there. You had these ARM products that first stated income loans. Someone could walk in and get, loans with no financial backing personally, and they were, loans that changed terms rather quickly and these arm products that, maybe was really attractive. Now, a lot of those loan, you'll never see those type of loan terms again, cuz the lending world is so much more regulated, it set people up for failure in that scenario. So I think it's those two combinations. But the people that just had, cash flowing properties, rental properties in markets with regular loans on them, in markets where there was high rental demand, they did just fine. And those are types of type of assets that we have. And to your other point, Michael, as far as like people sitting back and not doing anything, it's always interesting to me when we talk with people about, they're like a little concerned. And I get that there's concern, but really it's a lack of understanding in education. Because anyone that's really successful in real estate, they're buying in all market cycles, they're changing their strategy, they're being creative. We interview a lot of people that are very successful in real estate and other businesses, and no one's told me like, Oh, I just timed the market perfectly or like I said, Wait, they said, I invested with a plan and had my criteria, and I consistently invested over many years. That's what it's about.

Average Joe Finances:
9:59

Yeah. And if you talk to any successful stock market investor, they're gonna tell you the same thing too. It's not, Oh, I was able to time the market perfectly. No, it's, I had a plan and I was consistent, and I kept investing and investing. It's the same thing with real estate, right? So even Like you said, like you're buying in all market cycles, right? And that's the reason why, because there's opportunities out there right now and actually right now is the time where there's less competition, right? Because a lot of people are pulling out because of these higher interest rates. So you can swoop in and grab some stuff that other people would be too scared to even touch. But if the numbers work. If it's cash flowing, then it doesn't matter if your interest rate is 6%, right? Because it's an investment property and you know that's what you qualified for. If it's cash flowing at 6%, what's it gonna look like when you refinance it in six months to a year at four and a half percent, right? It's only gonna increase your cash flow. Or if you go to refinance and pull cash out, once it appreciates a little bit and you pull some cash out, tax free money, so that's huge. And that's the other piece of the puzzle that I think that people aren't really paying attention to. They're just concerned with interest rates are up too much and I'm too scared to move or take action on it. Warren Buffet says it all the time too. When everyone else is Fearful, be greedy. So now's the time if you invest in real estate to be greedy, right? Now's the time to go in and buy assets. That cash flow. And that's the key word. And I think that's, like you had mentioned back in 2008, 2009, that is one of the thing, the key differences that you had in your plan is that you were looking for assets that cash flow, right? Instead of saying, I'm gonna go buy these assets that are going to appreciate like crazy because that's what's been happening over the past couple years, right? Instead you're like, No, I'm gonna get something that will start paying me right now. And then when the poop hit the fan, so to say, you were shielded, right? You didn't have to worry about getting any of that stuff on you. That's awesome. Now going back into what you do as a turnkey operator, how do you identify the best locations to invest throughout the United States? Cause I know you said you're in 11 different markets right now, so that's gotta be a lot to manage. So how do you figure out, the sweet spots that work for you?

Zach Lemaster:
12:02

There's a lot that goes into it. Same thing, we have a plan and we have a certain criteria that we want to identify each location. We look at macroeconomics, as far as state legislation and locations where population is moving. There's a huge population shift in general down to the Sunbelt and Covid only expedited this to some areas where there's a lot more affordable cost of living areas like Florida. It's just huge influx, Texas, people are just moving andro to these areas, and it's not slowing down and that's the other thing about the real estate market. I'm glad that you mentioned it's going to be very market specific, cuz It absolutely is. Simple supply and demand will show you that there's a lot of areas that have a huge housing shortage still, and with construction delays. That's only getting worse over time. We're not saying any sort of slow down in rents or market valuations in certain parts of the country right now at all. I think it's market specific, but as far as areas that we determine, we want to have areas that are landlord friendly legislation, low taxes. We wanna be in the path of progress where you have economic population growth. We wanna look at the economy there, we wanna see a diversity of industries, not just say, oil or gas or education, something of this nature. We wanna see fortune 500 companies coming in doing development. We attend the city planning meetings of areas to see what kind of, what's the 10 year projection and what's changing legislation wise? Where's the jobs and transportation going? We wanna be in areas where there's still cash flow. That's the theme of what we're talking about is you gotta be able to cash flow. We want affordable house prices where there's still high rental demand. We have whole sorts of metrics and we have a whole team dedicated to just analysis. But, really it comes down to the market. But then also the team, right? You gotta have the right people in place and sometimes that takes some time. Sometimes you gotta go through 20 bad contractors or property managers to find a good one. But we have systems in place to identify those, and then we partner with them and work with them long term.

Average Joe Finances:
13:45

Yeah. No that's huge. So you've been able to, in these different markets, build these teams through trial and error, right? So you already did the hard work cuz we're talking about, your company itself too, rent to retirement, right? So you guys already did all the hard work. We did the people out. You've already got the contractors and the property managers in place. That's huge for somebody that's looking at getting started and they wanna start buying some turnkey properties, when you already have effective systems in place, it's gonna save you so much. So one of the things I'll share with my audience here make sure you go listen to the episode that, that I'm on with the Rent to Retirement podcast, because this is one of the things I talked about on there too, is that one of the mistakes that I had with one of my properties investing from a long distance was not having that right team put together in the first place, and it wound up costing me some, right? Having these systems and teams in place is huge. And the other thing that you mentioned, Zach, too, that's phenomenal and for the people that are listening, you really need to listen to what he said about having these KPIs, these key performance indicators, right? These different metrics that they're looking at when they determine if they wanna invest in that market or not, right? So that is huge. Making sure you understand what kind of jobs are there the diversification in the industry, right? What are the landlord to renter laws look like, right? What type of businesses are in the area, types of job creation that they have, right? Those things are huge that you wanna look at before you start just throwing your money into something. Numbers wise might look like you're getting yourself into something that's a really great deal, you might already have a tenant in place and the things cash flowing, but you might not realize that five years down the road, all the companies moved out of there because they moved elsewhere. And now the person that was living in your property doesn't have a job. They can't pay your rent anymore. So there's more to just finding a good deal than finding a good deal, right? There's so many other aspects that you need to think about and learn about, and that's why I love having conversations like this with somebody that's learned these painful lessons and built these systems and put stuff in place. Zach that's awesome, man. Now, how does somebody, take all this information and then build a well diversified portfolio to a sustainable business model for themself?

Zach Lemaster:
15:53

That, that's huge. You basically just explained that I think in great detail to your audience of having the systems and teams built, it's not about finding just the best opportunity because it's like, are you trying to find this unicorn deal? Or are you trying to build a sustainable business long term, because that's where wealth is made is building a business. And that doesn't mean you're trying to get the best deal on every single house and trying to buy below market value. It's about scalability and that's the hardest thing to do in any business, real estate included. But yeah, if anyone that wants any sort of serious passive income or substantial financial influence from real estate, it's going to require multiple properties and I think it's a good idea to have diversification across multiple locations. And that becomes complicated because each location you need your boots on the ground team and in those areas you need to be conscious of the tax laws in those areas and have tax professionals to help you with those, and sometimes when you're trying to identify a new market, it can be daunting because there's so many options out there. It's like, how do you even really know? And I think that's really the key that we've solved. The piece we've solved for people is by, yes, we've already been successful in these areas, and we coach them through how to develop a sustainable model. Cuz we have standard criteria and a path to follow that's applied to each different location. But I think that hearing about all this too, for someone that's new, it can be overwhelming. Sometimes, unmotivating or paralyzing sometimes to not go out and take action. So working with the right people and just understanding there's a process, you'll learn it as you go and this is my personality, I think, Mike, it's got me into trouble sometimes, but it's also allowed me to be successful is that ready, fire, aim mentality where it's like you just go out and do it and then figure it out on the back end. It helps a lot better if you have people that you're working with that have already figured it out and can teach you along the way that will expedite your success. So I think either if you're gonna do it on your own, get in there and do it, but I think that's a lot riskier than working with someone that has a well-established team and across all these locations and can guide you on how to build that comprehensive business model from a tax, legal, accounting, financing side, and really be successful long term.

Average Joe Finances:
17:53

Yeah, Zach, couple takeaways from that ready fire aim thing can get you into trouble. Cause that's what I did back in 2020. I said, All right, I'm doing, I'm going in I'm gonna invest in real estate and took my shot without having the team in place. And yeah, that can do it. But the thing is, I didn't let it sour me. I didn't let it stop me. From keeping going. Cause I had a goal in mind. I wanted to be a real estate investor, so was gonna make it happen no matter what. And I've learned so much from that. So that's the other key thing though is you can learn from this and just keep going, a lot of times it's always good to learn from others' mistakes and do the stuff that you know is gonna work because you'll spend less money that way. I'd rather pay for a coach or pay for a service than go through the expenses that I went through with that first real estate deal. That's a hundred percent. The other thing you mentioned too, which I also thought was huge, is, not to go out and search for this unicorn deal. It's real estate. Building wealth in real estate is a long term thing. It's not a get rich quick thing. And a lot of people think, Oh, I could just go out and buy multiple properties, or I'm gonna be a flipper and do this and do that. If you don't know what you're doing, first of all, you're just gonna be wasting a lot of money and you're gonna wonder why you even got into it. But secondly is, That whole long term piece. I was just at a conference a couple weeks ago and one of the things they talked about is you know, when you're looking at building a real estate portfolio, you should be looking at five years from now, a decade from now, 15 years from now, what's that portfolio going to look like? That's the type of long game you need to play when you're in the real estate game. You can't have this immediate gratification. That immediate gratification that you get is closing the deal, but that's when the work really starts, right? Just because you got a deal, doesn't mean anything. The real work starts when you start collecting that rent and you figure out how to allocate all of your expenses and keep this going and build a business model that works, I just wanted touch on that a little bit. Now I wanted to ask you something too, cause I know this is there's something that you guys are working on that I'm pretty excited to talk about. So the first question I wanna ask you on this is, what are the pros and cons of new construction versus older rehabs?

Zach Lemaster:
19:56

Yeah, so in the turnkey space, if you're talking about those are the two different options, that's about half of our business right now is build to rent and new construction. I think sometimes when people, they're first getting started, cuz turnkey is good for someone, at least in my opinion, that's getting started in real estate, they need some handholding or it's their first time investing outta state, people that wanna diversify in different locations to get better returns, maybe they live in an expensive market. People that wanna scale quicker on beyond what they're doing regardless what the real estate. Those are all great options for people that are doing turnkey. Sometimes though they have an expectation where it's like, it's gonna be completely passive cuz it's not. You still need to manage your manager, you're still dealing with tenants. Even if you have a manager that's doing that, like you still hear about these things, even if the manager's doing it. And you still have the potential of a tenant moving out or having to be evicted, I'll bet it's low, but like those things still happen. So sometimes we think with an older rehab house, when people have the idea that there's never gonna be any maintenance with it, we can gut rehab it, but still an older house. So newer construction is great for someone that kind of really wants to be a little bit more hands off where you have maintenance, guarantees by, and warranties from the builder and you probably have less maintenance with those. Usually those are in better quality neighborhoods, better location, better quality tenants that stay longer, you have better appreciation. The downside though, is their new construction is more expensive, usually costs more to get in. And when you're comparing a performance side by side, they may be less attractive lower cash flow. So I guess I really like new construction. I actually think that's a beautiful thing is to add a lot of new construction to your portfolio but it does cost more money and it means also that you gotta accept those lower ROIs on paper cuz you understand that long term that will probably outperform. Now we do a great job on the rehab stuff, I'm not trying to say that's not right and there's been a lot of people that have been very successful because they can buy two or three. Older houses for the same price that they can buy one newer construction. So it all comes down to what makes the most sense for you. And I think same thing with like multifamily versus single family. We do both, we own both. I recommend everyone, own both. There's benefits to both. Same thing with new construction and some of the older houses that you might be able to cash flow more in the shorter or earlier new construction. Also, we have some unique opportunities where you can have built in equity, you can actually participate to be an active investor with us to participate in the construction, to learn how that process goes, and have some built in equity. Of course there's more issues with delays and things like this and risk associated with that. But that's a creative option because one thing a question we commonly get is, Okay, I'm buying turn key, this is a great service. All this stuff is done for me, but does that mean I'm paying a premium or does that mean I'm paying overmarket value for that? And it's a legitimate question, and in some cases for some turnkey people, probably, maybe we don't, we price stuff appropriately for the market based on comps and return on investment. And really over the past few years, being a seller's market, All properties, even dilapidated ones sellers are making the calls on price points. You don't really get to negotiate but that would be a counter to those arguments that you don't have any equity in turnkey, that the turnkey guys are making all the money which is a simple fact that we leave plenty margin on the table for investors and you can participate in stuff to actually make more money than the developer does in those cases.

Average Joe Finances:
22:59

Yeah. That's huge. Actually, that was one of the things I wanted to ask you too, is like how somebody can be more of a creative investor and create that immediate equity in a pre-construction. But as you were sitting here talking there's some key things that you were talking about that I think is huge, right? One thing is, if you buy a turnkey property, whether it's renovated or a new construction, actually when you look at the renovated ones versus the new construction, right? When you were talking about the performance for those, right? Your cashflow is probably gonna be better on that rehab property versus the new construction. But when you look at the new construction even though the other one was rehab, there's still things that come up, right? There are older homes, right? So there's things that come up all the time. No matter what. You could rehab something all day, there's gonna be stuff that comes up but when you look at new construction your CapEx is gonna be lower because everything is brand spank and new. Probably the biggest thing you'll have your tenants complaining about is the creaking of the house as it's still setting into the foundation. That's one of the things to look at and you have all the modern stuff that you get in modern construction versus that homes that were built in the fifties, sixties, and seventies. So for the most part, probably a lot less issues with things breaking and appliances having to be replaced, roof getting replaced, and things like that. Now you're buying a property that has this 30 to 50 year roof on it, you're buying it brand new. Again, like you had mentioned earlier and we were talking about before, is it's a long term game, right? So when you look at over the long term, the returns that you're gonna get on that asset versus something that was rehabbed, you're probably gonna do a lot better on that new construction. You'll do better immediately on the rehab, right? Which is great if you're looking for immediate, cash flow that's going to help you, I guess maybe supplement your income or anything like that versus the long term cash flow that you're gonna get with the new construction. Is that making sense?

Zach Lemaster:
24:44

Yeah. Oh, absolutely. It's a balancing act, sometimes it makes, maybe from a tax perspective, cuz there's tax benefits to look at as well. That's my favorite thing about investing in real estate hands down is the tax benefits we receive cuz there's nothing else that comes close to it. When you look at talk about things like 10, 30 ones cost aggregation studies opportunity. There's just no other asset class that can come close. That's how people really build wealth over time, generational wealth. But without getting on my soapbox with that yeah, a hundred percent. The new construction stuff, you have less issues and less CapEx and things like that. And so long term, when you're looking at a proforma it's year one analysis and you have to know that too. Also, rental increases over time. If you're in an area that's a really hot area, you're gonna have higher rental increases where, hey, maybe that year one, even a break even cash flow. Maybe might be, what 15 to 20% return within a year or two. Plus the appreciation on that. But no, we have some cool stuff we work with people on, to use a specific numeric example, a four two model that we build in Southwest Florida. Typically where someone's being a little bit more active, taking out, participating in the construction financing, being able to build an equity, those usually take about 16 to 18 months to build. So those are year longer for waiting but someone can participate, hold a construction loan, buy the land, and that's usually all of their money dedicated to the deal. So they could be in for 50 or 60K use construction financing to build a $300,000 house. That's worth, 425, 430 when it's done. So they have this huge amount of equity that then they can turn around and do a cash out refinance and pull all of their money back out so their net zero, and they still have this cash link property that's appreciating they can sell the property for a gain. So that's just a really creative way. We've had people that, many people that have done that. I think every person we were telling you before, Mike, every person that's completed those builds, they've had over $150,000 of equity and that's just being in the right market. They're already, today's valuation probably about 430 ish on those, but a year from now when they're completed, we're anticipating it to be greater than even if it's not, it's even it's stagnant, then, they're still in a very good place and those are obviously still positively cashing properties cuz they're renting out for $2,500 a month on a $300,000 new build. Lots of different things to look at.

Average Joe Finances:
26:55

Yeah, absolutely. And I love the fact, that you can go ahead and cash out refinance and pull your money back out. It's almost like doing not a BRRRR, but it's like a…

Zach Lemaster:
27:04

We call a BRRRR with a build, rent, refinance.

Average Joe Finances:
27:08

Yeah. Okay. There we go. There we go.

Zach Lemaster:
27:09

So it is our version of the BRRRR yeah.

Average Joe Finances:
27:11

There you go. Nice. I was gonna try, I was trying to think of a NC I was like, NCRRRR, because new construction, rehab or refinance, rent, repeat.

Zach Lemaster:
27:19

We coin our own term for it though.

Average Joe Finances:
27:22

Yeah. There you go. Awesome. Now I love that, Zach. That's awesome. What you guys are doing with Rent to Retirement is just phenomenal and you're helping a lot of investors new investors and seasoned investors like really take stuff to the next level. I'd like to transition this into something that we call the final round and that's why I'm gonna ask you four kind of hard hitting questions about, just to for the audience to get to know a little bit more about you and some of the trials and tribulations that you've had to go through to get to where you are today. So if you're ready to get that party started we'll go.

Zach Lemaster:
27:53

Let's go.

Average Joe Finances:
27:54

All right, let's do it. First question of the final round is, what's the biggest mistake you've ever made?

Zach Lemaster:
27:59

There's a lot of 'em. So it's hard to determine which is the best. A lot of people could go back and say, I wish it would've started sooner, I wish it would've been more aggressive earlier on, that's like the answer for people that are successful now.

Average Joe Finances:
28:09

It's the one I get the most.

Zach Lemaster:
28:11

Yeah, you can always say that, right? But everyone can say that. I think for us, like actually legitimately is just bad partnerships. We've lost a lot of money in projects, basically just jumping into partnerships too quickly. And you can vet people all you want and check references and things like this. At the end of the day, you don't know until you work with them, that firsthand experience and you have a track record established. So start small with someone and then build up and build up over time. We've lent a lot of people money for rehabs. I mentioned you earlier, we were in this indication that things went fine for five years and come to find out they were underwater for the majority of that, and then it just all fell apart. You gotta vet the people, but I think it's all learning lessons. My mentor always told me that you make money in real estate or you learn cuz he refused to say you lost money, but that's really what he meant. But it's I think, probably there was one in particular, we lost 600k on a rehab project and the guy filed bankruptcy and was under underwater not forthcoming with everything. We were just a private lender in that capacity. And yeah, and now we're still having to deal with that. But it didn't stop us, it was painful to deal with, but actually, through that process of going through and meeting other investors that were also tied up into that. We actually formed new partnerships and made that money back, significantly more so it's just a matter of staying on the horse.

Average Joe Finances:
29:26

Yeah, no, that's a great point. And I like what your mentor told you, right? Cause it is, like I mentioned earlier, it's just an expensive education. When things like that happen, that's the way you need to look at it. Cuz if you don't look at it that way, you're gonna walk away from real estate and you're gonna be missing out for the rest of your life. All right. Now the next question is, and this kind of ties in, they all tie into each other, right? But what is something that you've learned that you wish you knew when you first started invest?

Zach Lemaster:
29:50

Let me see if I can get something concrete that's like less conceptual, something I wish I have learned, I would say the, going back to the tax side there's two things I'll say. Real estate is, man, it's so fascinating and interesting because you can participate and be successful in real estate in so many different avenue. We started wholesaling, like that was our first like active investor, we beyond just buying rentals and then that allowed us to buy more rentals quicker. But that was huge. It's just a different ways to do side hustle things to earn money in real estate. So definitely look at something and get involved in that. But I think really what I wish I would've learned earlier on is the tax side of things and how to position ourselves to take more advantage of the tax benefits through real estate investing. This is specifically talking about making the transition from a passive to an active investor to be able to, take additional depreciation and things off of your assets, as well as setting up our LLC specifically. File as an Xcorp or you don't have to pay the self income and self-employment and Medicare and things like that. Because I think that's the quickest way to give yourself a significant raise is by paying less taxes and real estate is a great avenue to do that. And then that just gives you more money than to reinvest and earn income on and then buy more assets that have additional tax benefits. So I would say that I wish I learned about the tax benefits and how to position ourselves sooner and also hiring a tax strategist. This is not a CPA who files taxes that are on the defensive side. Hiring a tax strategist on the offensive side to help you position yourself is something that was paramount for us.

Average Joe Finances:
31:16

No that's fantastic. Great lessons learned that to help you get better today. And that's awesome. So I think that's a lot a thing that not too many people think about when it comes to real estate. Like they know that there's tax benefits, they don't use it as a key to earn more income, like you said, right? That you could take that money and then reinvest it into something else, that, that will also give you more tax benefits. So that's huge.

Zach Lemaster:
31:39

If you don't know about, Sorry to interrupt. If you just throw this out before I forget. If you don't know about cost segregation, accelerated deppreciation, go learn about it, that's huge. Now you have to be a real estate professional in most cases. However, if you make under $150,000, you can take accelerated depreciation, whether you're a real estate professional or not. If you are, if you're an active investor Airbnbs, those don't apply by the same rules. You don't have to be a real estate professional to take additional tax benefits on those. So that's a huge way. To just be, you gotta learn about those things and apply 'em.

Average Joe Finances:
32:08

Yeah, absolutely. And pay attention to what's happening with current legislation cause a lot of that stuff's starting to change, I think. Cost X studies are gonna go down to 80% next year, and they're gonna go down 20% every year until it's not there anymore. Just make sure you guys are paying attention to these things and just constantly staying up to date. Probably one of the things that might help you out even better is if you hire tax strategists like Zach was saying. I'm actually talking with one right now. I actually need to get back in touch with them No, that's fantastic. All right. So the final question of the final round, and this is a just an opinion based question. But besides your own, do you have a favorite business investing or real estate related book or podcast, or both?

Zach Lemaster:
32:45

I love that you called Rich Dad, Poor Dad the Purple Bible. We're interviewing you, I haven't heard that one yet, but I'm gonna start quoting you on that, that's obviously a must. The E-Myth by Michael Gerber that's The Entrepreneurial M yth or E-Myth revisited. That one is huge in running a business and learning about how to focus on a business. Not in a business and create systems. That is why we hire property managers and we don't self-manage properties is so we can focus on the bigger picture of growing a business and hiring people out for those things. That's a huge one, and the last one I would say is The Millionaire Real Estate Investor by Gary Keller. That one's just huge. Think, buy, own, receive a million just huge.

Average Joe Finances:
33:21

Absolutely. So great recommendations. And now I have the most important question to ask you out of all the questions I asked you today, cuz you know, we're done with the final round that is concluded, but the final question is cuz there's people that are listening to the show right now saying, Man, Zach is putting out all this great stuff. I wanna learn more about Rent to Retirement and what they're doing, and I wanna learn more about Zach. If you could please share with us where people could find more information about you and rent to retirement. Can you share your website with us? Any social media platforms that we can follow just to make it easy for everybody. Yeah, absolutely.

Zach Lemaster:
33:54

I think the website is the best place to start. It's renttoretirement.com. Rent T-O retirement.com. That has links to all our social media, we have all sorts of educational blogs and our YouTube channel that we put out with all things real estate related, talking about interviewing people like tax strategists and some of these people that just allow you to be a more savvy investor overall. We have our podcast links on there. And anyone that's interested to learn about turnkey investing, doing build to rent, where they have immediate equity that they can flip or refinance small or large multi-family investing, whatever the case is. Please reach out, we'd love to have an investment consultation with you, we don't charge anything for this, you can set up with one of our investment strategies to go through, talk about your investment goals and criteria, talk about some of the markets we operate in and discover some inventories. So yeah, I think the website's a great place to go.

Average Joe Finances:
34:44

All right, so we'll make sure we have all the links in the show notes to make it easier for you guys. You could just copy and paste it or click away. Just don't do it while you're driving. But hey, Zach, this has been an absolute pleasure, a privilege, and an honor. To have you on the Average Joe Finances Podcast. Thank you so much for joining us today and for giving us such great information. I really think this is gonna be one of those episodes that people are gonna listen to and say, Man, I learned a lot about that and I'm motivated to take action and keep moving. Thanks again man. Appreciate it. It's been a lot of fun. Thank you, Mike. Absolutely. And Aloha from Hawaii.