Founder's Story - Zach Lemaster: Building Wealth and Retiring Early with Turnkey Real Estate | S2: E44

Starting point is 00:00:00 Welcome back to Founders Story. Something that I really want to dive into is how can I retire early? How could I set up just myself, my family, future generations, create this generational wealth? I want to know more ways I can do that. And as we know, home prices, mortgage rates, all these things have changed drastically the last few years. So that's why we have an incredible expert today, Zach Gleemaster. And he's the founder and CEO of Rent to Retirement and the Nation's, he said this, arguably the nation's leading turnkey investment company. So Zach, welcome to the show. Hey, Dan, I'm excited to be here.

Starting point is 00:00:49 Thanks so much for having me. So we're going to dive into this whole rent to retirement. Before we get into the nitty gritty and all the details, what sparked this in your life to say, this is the path I'm going to take? Yeah. So, I mean, like most people that are, I guess, in real estate full-time or some other business ventures, maybe we didn't start that way. Right. So, I mean, really the foundation of our business developed just out of us, my wife and I needing to have a systematic approach to find the best markets across the country and invest in those. But we didn't start a career path in real estate or really anything to do with this business. We started as healthcare professionals. So we went to school for optometry. We met school. I was an

Starting point is 00:01:35 Air Force captain for seven years after that, as I was on scholarship. That's where I started investing in real estate. I bought my first house and this is probably about 15 years ago now, but bought my first house was a duplex used to VA loan, put no money down, lived in half, running out the other half, fell in with the idea of a real estate in general. And then we went on to buy more and more real estate. Right? One thing I tell people, Daniel, since, since we bought that first duplex 15 years ago, we've never stopped investing.

Starting point is 00:01:58 So every single year we bought more and more property. It doesn't mean we've made money on every single deal, but we've never let us slow us down, let that slow us down. But there was a pivotal moment that really changed the trajectory of our lives and our business. And that's where we decided to start investing out of state, specifically looking for areas where there's simply better opportunity. We saw that the successful investors were diversified across all these different markets, right? And so we decided that, hey, we really want to invest in areas where we got better returns there's more affordability you know higher demand for growth things like that and it was a rocky start but through that my wife and i developed

Starting point is 00:02:34 this really systematic approach to identify where the best markets are throughout the country and building all the teams and systems we need to be successful investing in those areas so that allowed us to really scale our portfolio to retire from our career path in medicine. And really was the foundation of this company is we had a lot of friends and family and colleagues that were coming to us saying, Hey, we see what you guys are doing in real estate, we want to invest with you. We don't, we don't have the knowledge, the time, our local markets too expensive, whatever the case is, now is the birthplace of rent to retirement. fast forward to where we're at about 10 years later today you know we work across 15 different markets last year we did over a thousand properties uh mainly in the built rent new construction space helping people

Starting point is 00:03:14 invest in some of these best locations throughout the country where we handle everything for them so that's about as quick of a story as i can give you on on my background i want to dive into this whole, the strategy around locations. Going back to 2008, I can count so many times where I lived somewhere, I visited, I saw an amazing opportunity, but I either didn't have the cash flow at the time, I didn't even know, it wasn't even in my mind to buy it, because who knows in the future, right?

Starting point is 00:03:42 So how do you look at that? Because successful people in real estate that I've seen, that I've met, they are really good at this whole figuring out locations and finding these amazing golden opportunities. Yeah, I don't want to oversimplify it, but honestly, I mean, supply and demand is the biggest thing to look at, right? I mean, we're investing the beautiful thing about real estate, which is the oldest investment class known to man, because it's a human necessity. It's housing. You know, there were, there were landlords before there were any sort of

Starting point is 00:04:13 other investment avenues, but I mean, housing is a, is a need, right? And right now we have the worst affordable housing crisis we have ever. We have a deficit of 7.2 million houses. So really following the trends, I think that's like, you know, on the surface, one of the most important things you can do. You know, there's a big population shift down to the Southeast, you know, so areas like Texas, Alabama, Carolinas, Florida, Georgia,

Starting point is 00:04:38 these are all areas that we really focus on new construction because we're serving a need, right? This is where there's a high demand. That also means we're gonna have a lot of demand from tenants. We're going to have rental increases, home appreciation over time. But other than that, that's like the most fundamental thing, of course, but there's all sorts of other things we look at. I mean, it's not rocket science. We know the recipe to building a successful portfolio, and we just research different markets where we find those things, things like landlord- legislation low taxes future population economic growth like we talked about diversity

Starting point is 00:05:09 of industries we don't want to be in an area that just has oil and gas we want to be in an area that's below the median household price point in the us which is around four hundred thousand dollars today so we want to be in areas where you can still buy a new construction house for two to three hundred thousand dollars that's going to rent out for $1,800 a month and have positive cashflow. So looking at affordability, home prices relative to rent ranges and things like that. But a lot of that is driven by supply and demand, right? So areas that populations move and they have an undersupply of housing,

Starting point is 00:05:37 I think you'll be okay in those areas. And those are the areas we focus on. I remember living in Orlando for almost 10 years and the condo I was living in, I was paying like $500 a month rent and people were buying them for like $30,000. I couldn't believe this, but you had to pay cash at the time. I'm like, I know one day this has to become a thing. And I love the area. It was amazing. But what is, so what is turnkey investing? I'm not, I don't really know the definition and I'm not huge into real estate. So somebody like me, I might really not understand. How do you describe turnkey investing? We will return to our show shortly. But first,

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Starting point is 00:07:52 to be able to invest in the markets that offer the best opportunity where our team handles everything for them. Turnkey is a house that's either newly built or fully renovated. Majority of what we do is ground up construction, single family, small multifamily. A house that's been newly built or fully renovated majority what we do is ground up construction single family small multi-family a house that's been newly built fully renovated leased and professionally managed by our team in an area where there's where there's growth and potential so essentially the idea is that someone that's interested in investing in real

Starting point is 00:08:20 estate regardless of their location where they live, regardless of their experience level, has the ability to easily buy real estate in some of the most attractive markets where they can have the best returns and scale and diversify their portfolio across these different locations where we are handling everything for them. They're not having to be a landlord, buy themselves another job. We've all heard horror stories of people owning real properties that were a terrible experience, right? And so, you know, why not let the experts, our team do that for you so you can still have a hundred percent property ownership and the financial benefits of investing in real estate, but you're not having to actively manage it, right? And, and also in addition to that, we're helping people build a business plan because you need to have, you know, the right

Starting point is 00:09:00 legal structure in place. You need to understand all the tax benefits around real estate. So we're helping people build a comprehensive strategy and coaching them through how to get started and scale their portfolio as well as access the best inventory across the country. So that's what we mean when we say turnkey in the services that we offer. I wish I knew you many years ago when I made a really bad investment that it was a nightmare with the rental situation. I lost a lot of money, but sometimes I look at the value of what the home would be now. And it's like two to three times what I paid for it. And if I had only held on, or if I had a company, if I understood these things,

Starting point is 00:09:37 I guess everything is hindsight, right? So how are you seeing these type of investments? Or what are some of the people that you work with coming back to you saying in terms of like now that they don't have to do a lot of this work, like, are they happy? You know, what are some of the like testimonials that you're hearing from the people that are working with you? Yeah, we have a very good public reputation. I encourage anyone to, you know, just Google myself or our company Rent Retirement, to kind of see the reviews that we have. And I mean, we're very proud of that and building the reputation we have over the past decade in the investment space. But, you know, most over 90 percent of our investors are repeat clients. And that really, I think, comes down to the concept that one house, while it can make an impact financially for people, it's not probably

Starting point is 00:10:25 going to make you financially independent, right? So people are here to continue to invest in real estate and build a portfolio of homes. And that's what we help them do over time. Real estate investing, it's a lifelong journey. And if you do it the right way, which is really, again, investing in good locations with good teams and having a business plan around how you scale that. If you can do that consistently over time, you can really create financial independence and make big moves within a short period of time, not overnight, but within a few short years of dedicated, intentional investing, you really can make a rather large impact on your financial position, just like we did. But it doesn't take a lifetime, right? You don't have to sit around and contribute to a 401k for, you know, forever until you're 59

Starting point is 00:11:09 and a half and hopefully you're healthy enough to retire. Right. So I think that's becoming more mainstream, but yeah, a lot of our clients are repeat investors. You know, we're helping them look at different creative ways that they could scale their portfolio, different financing options. Like we have local credit unions where people can buy investment properties with as little as five percent down we have loans that rates are bought down into the four percent range right now so a lot of people that are sitting on the sidelines thinking that uh interest rates or this or that they just they you don't know what you don't know right if there's options that you can still buy rates down and things like that to still make moves. Like now is actually kind of the time

Starting point is 00:11:45 where you have better opportunities to buy and be a little bit more of a savvy investor. So yeah, we're just trying to help people continually take consistent action towards reaching their goal. But if you haven't started investing, that first house, you've got to get it done. Not necessarily, you know,

Starting point is 00:12:01 it's not so important financially. Yes, it is. But more mentally and emotionally, right? Get into the game, own that first property. And to your point, I think, I mean, real estate, you're housing people make no mistake. Like there is just like any investment, there's risk, there's, there's potential volatility. I mean, this is a lot of times around the tenant. This is why we mainly focus on better class locations, like a class locations that attract better quality tenants with new construction. But I mean, you're still, this is, you know, you're housing people. You'll have

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Starting point is 00:15:11 You know, they're not making any more lands. The last four and a half years, I've seen this tremendous boom in rentals with a lot of people not being able to afford, you know, full mortgages. And then some people are renting. And I've seen some insane increases in rentals across the country, at least what we've heard from guests or friends of mine. What are you still seeing now in mid-2024? Yeah, I mean, there's certainly an affordability crisis, right? That's kind of what we had talked about a little bit ago with, I mean, inflation is still rampant. That's just, if you look at post- post COVID between that 2020 to 2022

Starting point is 00:15:46 time period, there's just crazy unsustainable appreciation, right? In home prices and in rents. That's corrected a little bit, but not significantly. A lot of people anticipated a large market crash, but there's an inventory shortage. That's why there hasn't been a real big correction in home prices. And rents have tapered off and stabilized a little bit. But, you know, real estate and rents and things like cost of living is not getting cheaper. I hate to break it to people. So what are we doing about that? So we're very interested in investing in real estate. But also the unique thing is like also, I mean, a rewarding aspect of being in this business is serving like society. And I mean,

Starting point is 00:16:24 I think that's something that's overlooked a lot in real estate. And so we're, we're truly serving an affordability, um, crisis right now with building homes in these lower price points. Uh, so these, again, we focus on areas of home prices between 150 to probably, probably 350, $400,000 on the very high end. Um, and this is where the majority of the housing is needed. We don't need any more million dollar home, luxury homes, right? What we need is your bread and butter workforce housing for people, um, that, you know, either can't, can't afford to buy anymore. They need a downsize because rents have gone up. So really, yeah, it goes back to supply and demand. If you can increase supply, that's really the only way to solve that issue. Yeah, because rents aren't, things aren't

Starting point is 00:17:12 getting any cheaper. So, but from an investment standpoint, right? I mean, those are the areas you want to be invested in anyways, where there's growth and demand. That means you're going to have a lot of tenant interest in your rental. You're going to have a likelihood of increased occupancy time and less vacancy because there's high demand in that area. So it all goes hand in hand. And these are just things to be conscious about as you think about building a long-term sustainable real estate portfolio. So when it comes to adjustable rate mortgages and different mortgages like that, I remember hearing about this a long time ago. Is this still a thing?

Starting point is 00:17:46 Are people still using it? How do you feel about it? So you're kind of referencing probably that same time period you did previously in like 2008, right? And that's just for everyone's reference. Like no, no, yes, well, history repeats itself and the markets have fluctuation. There's no instance that's the same as prior because just time is different, right? Technology and economics,

Starting point is 00:18:08 everything is different. And so there's, there's never a situation like a market correction that was exactly like the past one. Historic, like previously in 2008, we saw adjustable rate mortgages. Yes. Where people were able to go in and have stated income loans. Like the bank did zero underwriting. People are putting no money down. They couldn't afford these things. They were buying a ton of stuff, not paying attention to cashflow, fundamentals of real estate. They're buying luxury stuff. It was just pure chaos and lending was so loose. Adjustable rate mortgages have always been around and they're still around. And quite frankly, I mean, the US is the only country in the world that has a fixed 30-year mortgage. My wife's Canadian and we own property in Canada.

Starting point is 00:18:48 Like there is no such thing as a 30-year fixed mortgage. Adjustable rates are the norm. And so it's just really understanding what an adjustable rate is. And frankly, what all the lending options are and how to apply them appropriately. Because an adjustable rate mortgage could be a very good tool in today's world potentially right if you can get a lower rate and they usually have a lock period it's usually like a three five seven year lock period where the interest rate is locked and it may vary but um you know you just need to understand you need to it's all go it all goes to preparation, right? Why are you using this loan strategy?

Starting point is 00:19:26 And then what is the ultimate exit plan? You certainly cannot go in and just, you know, buy, use loans blindly and use loans that are the only option for you because you can't financially qualify for other loans. But my point in all of this, Daniel, is that I think it's important to, if you're in that position, you're new or you don't really understand these things, or you just need some guidance, like get out, like seek guidance, right? Have a coach, have a mentor, let our team walk you through how to build out a strategy and offer years of experience and kind of help you understand things or find out about different loan options you may not know about and implications to be aware of. Because

Starting point is 00:20:01 there's, you know, when you get in the financing world, there's a lot of things to be aware of because there's you know when you get in the financing world there's a lot of things to be aware of like private mortgage insurance prepayment penalties you know um qualified versus non-qualified mortgages so a lot of it's a world to really try to understand um to be a more savvy investor but it's all about surrounding yourself with like-minded people and you know people that can help offer you some guidance and coaching along the way to set you up for success. Yeah, I'm with you. I think certain parts of your life, you want to figure things out on your own.

Starting point is 00:20:32 And then you get to certain parts of your life where you're like, I just want someone who's done it, who's made the mistakes, who can share with me because I don't want to have to go through all those pain points. I feel like maybe when I'm younger, I want to live through pain and learn these things. But as you get older, I don't want to do those anymore. I want smooth sailing as much as possible.

Starting point is 00:20:51 I want to work with experts so I don't have to go through these details because I'd rather spend my life doing other things, hanging out with my family or going on a trip. When it comes to exit strategies, what are you seeing in terms of three, five, 10, 15, 20 years down the line? So most of our investors, I would say this, this obviously varies, right? I think a lot of people, when they look at real estate, rental real estate, they have this idea in their head that I'm going to buy this rental property. I'm going to put it on a 20 or 30 year mortgage. I'm going to own it for that long. And the mortgage is going to be free and clear and great.

Starting point is 00:21:27 I've owned this house, which is a great concept that the tenant, the tenants essentially bought for you, right? Because they're paying your mortgage through the rents and you cashflow it. In that meantime, you've had some tax benefits. The home is up in value over time. Like again, all the things we call real estate, the ideal investment, because these are all the ways you build wealth in real estate. I as income, cashflow,reciation and tax benefits is equity

Starting point is 00:21:48 build up as the tenant pays a loan down for you a is appreciation and l is leverage you know which real estate is the only asset class where you can borrow the majority of the money for someone else's money i.e the bank to buy an asset that you have 100 ownership and control over that someone else pays off the loan for you the tenant right so right? So it's just interesting concept. That's how people, I mean, real estate is the most predictable path to wealth. And that's why more millionaires are made in real estate over time. It takes time though, right? Like you have to consistently invest over time. But to answer your question, the common exit strategy, even though some people have that long-term idea of like, let me own for 30 years. The reality is, is most people are holding, regardless of where we're at in the market cycle, they're likely holding four to six years

Starting point is 00:22:28 and then selling and doing what's called a 1031 exchange where you can sell real estate and roll it into more real estate without paying any capital gains. Again, real estate has more tax benefits than any other asset class. It's just absolutely insane. IRS incentivizes us as real estate investors because we're doing things like creating jobs, stimulating the economy, providing housing, right? So that's why there's so many tax benefits to investors. So usually the course will go that someone will buy an investment property. It has a whatever, a 10, 12% cash on cash return, which is great. That's your cashflow. Just talking about cashflow, not your, all the other things, right? Your appreciation and tax

Starting point is 00:23:05 benefits. They'll own the property. Every single year you own the property, you're building equity, which is a difference between what the home is worth versus what you owe on it. That is, that is compounded and grows over time. You know, through the home appreciating, even if you're talking an average 5% appreciation on a $300,000 house, That's $15,000 of equity you're building per year that compounds. Plus the tenant's paying the loan down for you, right? The principal goes down over time. And so after, you know, five to six years, you have a large chunk of equity. That's, you know, let's say you bought a $200,000 house, you put 20% down, that's $40,000. So you owe 160 on it. Let's say, you know, after five years, it's worth 260. And

Starting point is 00:23:48 you paid that loan down from 160 to 140. And I'm already losing myself in the math, but there are you probably have like $80,000 of equity right between the home going up your original down payment, the home going up the 10 paying the loan down. There's what's called return on equity, meaning you really there's a return of this equity sitting here if it's just sitting there not being used the return on equity goes down over time and eventually goes to zero and so what you can do in real estate is you can sell that asset that should be that's cash flowing great and has great equity but the idea is is that you can sell that property go through a 1031 exchange so you don't pay uncle sam anything no capital gains and then you take that eighty thousand go through a 1031 exchange. So you don't pay uncle Sam anything, no capital gains. And then you take that $80,000 or a hundred thousand dollars or whatever you

Starting point is 00:24:28 have in the property now and buy two to three more rentals, right? And now all of a sudden you've scaled up your portfolio. You have more cashflow overall. You have a more diversified portfolio and, and all these, and now you have three properties that are each one of them appreciating and going through that same process again. So there's a snowball. The best part of that is that you didn't put any more money into the deal than your original down payment to buy that first property. So that, I mean, doing things like that and being conscious about how to scale your money and compound it over time, which this is what all investors are really doing that are building significant wealth in real estate. I mean, that's just a really predictable way to just really build a rather robust portfolio

Starting point is 00:25:10 over time. So that's probably the most common path that we walk through people. Some people are investing through their retirement account and they need to hold it for longer. Some people are buying houses for different reasons. This is a college account, right? This is, yeah, I'm going to own it. I'm going to put on a 20-year mortgage because when my kid goes to college, this is going to be their college fund. And like, that's their plan with that property. So it just depends on the investor

Starting point is 00:25:32 and what the overall strategy is. But that's typically the holding period is four to six years. Man, Zach, I've learned a lot. This is why I enjoy getting to talk to people like yourself because I get to learn. I get to ask the questions that I really want to know the answers to. So thank you for sharing today. It would have been great to have met you 15 years ago. But hey, you know, it's never too late. And

Starting point is 00:25:57 I appreciate that. So if people want to get in touch with you, they want to learn more information about what you're doing, how can they do so? Yeah, go into our website is the best source, Dan. So that's renttoretirement.com. That's renttoretirement.com. We have our own podcast, YouTube video. We do a lot of market research. If you're interested in setting up a consultation with our team, you can do that on the website, or you can text REI to 33777. That's REI to 33777 to set up a time with our team. Just talk about your investment goals, right? Learn about, you know, some different markets and the idea of turnkey investing or investing out of state.

Starting point is 00:26:32 Because to your point, it's never too late to get started, right? But you do have to get started if you want to go down this journey at some point. So I'd be happy to connect with anyone that's interested to learn more. Well, thank you, Zach. Renttoretirement.com. Love the information. I'm going to get started with some I want to rent to retire. That's my goal. And I really appreciate you being here today on Founders Story. And like you said, we're all about impact. So if people are making money, setting themselves up generational wealth,

Starting point is 00:27:01 creating jobs, giving people homes. I mean, it's really an amazing way that you can make money and impact, create business and impact because that's what we're all about here. But thanks for joining us today. Thank you, Dan. Thank you for tuning in to Founders Story. Keep exploring, keep dreaming, and join us next time for more inspiring entrepreneurial journeys.

Founder's Story - Zach Lemaster: Building Wealth and Retiring Early with Turnkey Real Estate | S2: E44

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