Make Returns in 5 PLACES at ONCE with Turnkey Rentals with Zach Lemaster Turnkey rentals are great if you want to make consistent cash flow, but are there other benefits?
Zach Lemaster is a retired optometrist who caught the investing bug when he house hacked his first home.
He saw the potential, beyond just cash flow from rent monthly, that owning real estate brings. That’s when he founded Rent to Retirement, a company that help regular people learn how to invest in rentals the right way to grow their wealth.
He is on today going over the 5 places rentals can save and make you more cash than other alternative investments.
Listen and learn!
Zach’s links:
Website: https://www.renttoretirement.com/
YouTube: https://www.youtube.com/c/RentToRetirement/featured
Instagram: https://www.instagram.com/renttoretirementinvest/
See your passive income potential now – TEST IT OUT NOW!
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Watch on YouTube: CLICK HERE!
TRANSCRIPTS:
Speaker 1 (00:00):
Hello, my fellow Ripples. This is Chris Miles, your cashflow expert and anti financianal advisor.
Speaker 2 (00:07):
Chris Miles was able to retire twice by the time he was 39 years old, but he’s not content to just enjoy his own financial freedom and peace of mind. Chris wants you to have your own ripple effect so you can live free today. He’s not the financial advisor you expected. He’s the non-financial advisor you deserve. He’s jumping behind the mic right now, ready to make waves. Here’s Chris Miles
Speaker 1 (00:38):
One our show. That’s for you. You that work so hard for your money and you’re now ready for your money to start working harder for you today. You want that freedom, you want that cash? Well, right now. You don’t have to wait 30 or 40 years from now, but you want it today so you can live that life that you love with those that you love. But most importantly guys, it’s not just about getting rich, is it? Because when you live a rich life, you have a greater capacity to bless the lives of others as you are, become financially free yourself. That is a ripple effect I’m here to create for you guys as well. I appreciate you all tuning in, binging sharing. Now we’re in our 10th season. Thank you so much for some of you guys being with us for pretty much all that time or really close to all that time.
(01:14)
So thank you for being such faithful listeners and really we can’t create this ripple effect without you. If you haven’t done so already, guys, we’re going to be talking about some real estate stuff. It’s going to be really cool. But if you haven’t done so right now, go to our website, money ripples.com, try our passive income calculator today to see how much passive income you could create in the year 2024. Definitely check that out right now. Okay guys, so I brought on special guest. Here’s Zach LeMaster here right now. I’ll tell you we’ve had different people in the turnkey space come on our show from time to time. Turnkey real estate. If you guys haven’t listened to the show much, you probably have heard me reference it many times if you have, but if you haven’t, turnkey real estate is nice because you don’t deal with the tenants, the toilets of the trash, somebody else property manages for you.
(01:55)
You can buy anywhere in the country and they even help serve up those properties for you. Well, Zach’s got the rent to retirement freight website. Check it out. I love, love, love of his calculator. That’s the one thing I raved about when I talked to him. I said, oh my goodness, this is so cool to be able to project out what real estate can do for you guys in a real way. So where our calculator goes one year, and I’ve just referred you to this can go out years and years, even 30 years out plus. And so anyways, amazing stuff. Properties, especially in the Midwest, Southeast, definitely multiple markets that he’s in as well. Not to mention, well, I shouldn’t say former optometrist. He’s still currently licensed an optometrist and a US captain in the Air Force as well, but now real estate investor, we’re going to talk about his story here today. So Zach, welcome to our show today.
Speaker 3 (02:45):
Hey Chris, what an intro man. I appreciate that. Thank you and thanks for having me on. I’m excited to be here.
Speaker 1 (02:50):
Yeah, so help me fill in the gaps a little bit. We were just talking about this before we went on the air. You’ve got definitely a varied background. Tell us about how you went from Captain optometrist to all of a sudden real estate.
Speaker 3 (03:03):
Yeah, I mean it was a slow journey. I think there’s a lot of people or a lot of us in the financial or real estate space that maybe that’s where we didn’t start out just as we were on our own journey, becoming financially literate and learning about investing. So yeah, I have a healthcare background, of course, my wife is also an optometrist. We met in school, practiced in the Air Force as a captain for seven years and then moved to Colorado where we did private practice and really enjoyed it. I never disliked what I did in optometry. We still, as you mentioned, I’m still licensed. We still do a lot of humanitarian and volunteer stuff and man, that just resonates with what you said so much as I was listening to you on the intro, talking about the ripple effect of being financially independent. It’s not about money, it’s about lifestyle and it’s about having a greater effect on people Now.
(03:51)
It is just interesting looking back about our career path and we used to rely on eyecare for a job and I probably enjoyed it less than I do now, which is we just do it for free in a humanitarian way because we’re able to and help thousands and thousands of people internationally see. So that’s a passion thing. So anyways, I just wanted to mention that definitely resonated with me. But yeah, I mean real estate, I got started when I was first as a young captain in the Air Force. I used to be alo and bought a duplex, lived in half, rent it out, the other half house, hectic got the bug. It just made all sense to the world and I decided to do the same thing again and again. And then there’s kind of this pivotal moment, Chris, where my wife and I started to, because we invested locally what we knew and felt comfortable with, but then there was this point in time where we’re like, Hey, maybe we started to explore other markets we’re like, Hey, there really is better opportunity in these other markets where there’s more growth, better cashflow, better appreciation, better deals, lower price points.
(04:48)
And so we’re like, how do we tap into some of these markets? And that was a pivotal moment for us though, and that completely changed the trajectory really of our lives and our business when we started to invest out of state and learned how to do that. And then ultimately we were able to build aggressively, build a portfolio much quicker, investing in better locations that offered better returns and were able to retire from our career paths in optometry early on. And that was really the foundation of Rent to Retirement. We’re a turnkey company and a lot of what we do is helping people really just do the same thing we did. We had a lot of friends and family and colleagues that were like, Hey, we see what you’re doing in real estate investing out of state in these areas and creating success. Can you help us do the same thing? And so that was a foundation of our business now just following the same systems of finding the best locations across the country and offering products where we handle everything for that for our clients.
Speaker 1 (05:37):
That’s awesome. You actually answered the question I was going to ask you one thing to get yourself financially independent doing real estate. It’s another thing to do really, I believe a complex system of creating a turnkey company for other people to invest in too. And it seems like to me that’s kind of like your ripple effect. You don’t have to do that. You could be just fine. You’re like me, we could live quiet, happy lives, just being fine, do our investing and keep everything low key and go sit on a beach drinking mojitos or whatever. But no, you actually are doing something that creates a huge service for people.
Speaker 3 (06:13):
Yeah, thank you. And I mean it’s passion, right? It’s not all easy. Certainly there’s days I wake up and I’m like, oh my gosh, this is chaos and it’s only like 8:00 AM or whatever, but that’s just part of the game, but it’s a rewarding, that’s a self-fulfilling type of scenario when you help people accomplish their financial goals. And it’s so cool to hear people, we interview a lot of our investors throughout their journey because I think we like to showcase that and people are interested in that. They can resonate or they can relate to that, but that’s the reward. That’s what really makes it rewarding is when we can pay it forward and help other people.
Speaker 1 (06:56):
I totally agree with that. Another thing too, just a little side note, we have a whole subsection of listeners that are actually optometrists. I don’t know why, but there’s a lot of optometrists that like this. What was it that got you first interested in, I mean it sounded like you had that duplex, but was that your intent or is it just like, oh, there’s a duplex, I’ll just run out the other half, or was there something deeper behind it that led you to that kind of passion?
Speaker 3 (07:20):
Oh man, I wish there was, but it was just simple, right? It’s like I just always wanted to be smart with my money and I forget even who it was, but someone had brought up the idea of like, Hey, did you know you can buy a duplex and live for free? Real estate’s a beautiful thing. The more I learn about it, especially when we get into the tax side and the different ways you can use creative finance, it’s just like it’s an exciting world that you’re learning stuff every day. And I think that’s also engaging. You know what I mean is that I become more passionate about real estate over time because there’s a lot of different asset classes. We own a lot of different types of properties we have for term rentals and midterm rentals, and we’re really getting excited about some of the midterm stuff we do because you can double the rent on properties and it’s not have to be limited by regulations.
(08:06)
Anyways, the side tangent, but when we first bought that duplex, it was like, Hey, okay, I can buy an asset and I used a VA loan so I had no money. Now nobody down on that. So instead of just paying rent, all my colleagues were doing, I was able to use a VA loan, buy a house, buy an asset that was growing an equity over time through appreciation, I was growing my net worth, but also I rented out half of that that covered my mortgage where the tenant was basically buying the house for me. And I was like, man, this just makes all the sense in the world and once you write out the math, I was like, man, we want to do more of this. And then we were able to reverse engineer, all right, well if we buy this next house and that cash flow is whatever, $5,000 annually, well we only have to do that whatever 20 more times and then we’re able to get into the six figure.
(08:55)
It’s just a repeatable model. Now there’s a lot of intricacies with that. You got to buy in the right areas, you got to have good management, but the writing was on the wall. As I grew my portfolio, Chris and I started to see all the other tax benefits, and when you meet business world meets the real estate tax world, it’s like, oh man, it’s just explode. We buy enough real estate every single year. We have a successful business, but we buy, our goal is to buy enough real estate to accelerate the depreciation, to pay zero in taxes after all across all income sources, not just our active business. But once I learned more and more about that, I was like, man, I can’t do that in the healthcare industry. So it just was continually going down the path.
Speaker 1 (09:37):
Yeah, let’s go a little bit deeper in that too, of the different types of returns you can make in real estate. One thing I know we’ve got client suspicion last year that they love the fact that can make 10, 11, 12% a year on their cashflow, their investments. That being said, there’s still taxes they got to pay. But with this, even though there could be less cashflow, although I’ll say this, one thing that most people aren’t talking about right now is how much the cashflow hass been increasing just in the last month or so, even on the rental that you’re doing. But a lot of times people don’t realize, oh, the not as high, but there’s other returns involved here too, right? Let’s talk about those.
Speaker 3 (10:13):
Yeah, we refer to real estate as the ideal investment and that’s an acronym for all the ways you grow Wealth i is per income or cashflow. D is depreciation and tax benefits. E is equity buildup, specifically the tenant paying the loan down for you. You’re building equity. A is appreciation, and L is leverage. Being able to leverage your money to that leverage increases exponentially the returns. And then like I said, having the tenant actually pay the leverage off for you. That’s why real estate is the most predictable path to wealth and there’s more millionaires made in real estate than any other asset class. We’ve all heard these stats, but when I think early on when you’re investing in real estate, a lot of people are hyper-focused on the cashflow, the income, because that’s tangible, right? Immediately in front of you, it’s that immediate feedback on, Hey, this property is renting out and I have this income that sure I can spend or live off of, or if you’re savvy, reinvest and then get an exponentially high return on that money.
(11:05)
But what I’ve learned over time is true wealth is built through all those other things. Actually cashflow is nice in the immediate time and eventually no one’s really, at least most people are trying to retire tomorrow off of cashflow. And so you really need to be conscious of is that possible at some point in the future? Certainly. But if you really run the math, and that’s why you and I were talking, that’s why we built that calculator. So you could actually look forward and project and say, all right, if I held this property for 10 years at whatever appreciation and rental increase rental appreciation factor, I want a variable I want to put in there, what would my net worth be? What would my income be? How much equitable would I have? And you can do that not only across an individual property but across a portfolio because a lot of people, I think they just have a hard time conceptualizing that and running the math.
(11:56)
But yeah, that’s how you build wealth. I mean, one thing we do, Chris, is we interview a lot of millionaires and specifically around real estate and just survey them including high name people like Barbara Corcoran and from Shark Tank and things like this. But the most we identified out of 30 different questionnaire, 30 different responses, the possible responses, the top things that everyone did in real estate to build wealth. It was the exact same. It was almost unanimous. And really we start to talk about this is our recipe to wealth and success, and it’s not overly complicated. The first thing people do is they buy real estate in good areas. So location, there’s obviously location factor of that. And that’s same thing with us going back to the beginning as once we opened up our eyes to like, Hey, there’s better opportunity out there in different markets and we can tap into that.
(12:44)
That’s going to expedite our success. But the first thing they did is invest in real estate in the good locations. The second thing, second most common thing was they leveraged, so they used other people’s money. That could be the bank’s money that could be raising capital, whatever they use, leverage, obviously you can buy leverage allows you to stretch your capital further and buy more real estate. They reinvested their earnings and their equity and so no surprise there, they reinvested their earnings and as their properties grew in value, they sold those in 10 31 exchange him or they used a line of credit on the equity, they used that equity to buy more real estate. They were using leverage in their equity combined. And then the fourth most common thing is maximizing the tax benefits, and that’s doing things like some of the creative stuff we’re talking about. So I just thought it was really interesting. That’s how wealth is built.
Speaker 1 (13:31):
I think that’s great. I mean with the amount of leverage and the different returns, it’s pretty incredible what you can do. Even a property like yours. Let’s just take an example. Let’s just say you buy a $200,000 property, $40,000 down payment for that property, put 20% down right? Now normally if say a client is looking at a fund that’s 10%, they would make 4,000 bucks that year. But what if they have to pay 25% in taxes? Well, that means they made 3000 bucks. Well, the turnkey, let’s say you put $40,000 down, you’re not going to make that 10% return, but let’s just say it’s $3,000 a year, right? About 7% or so, guess what? You just came with the same cashflow. But here’s the difference with the fund. If you’re just go and invest it, you make 10%, that’s it. But at the same time, you just mentioned this too, is that we’re paying down the mortgage and so $200,000 property, you’ve probably gained roughly about 3000 bucks in equity there.
(14:24)
So that 3000 just added to another 3000, we’re now at 6,000. But also last year in 2023, even though everybody said real estate was tanking, just got the numbers, that average course across different markets, it varies from market to market, but across all markets it was a 6% appreciation. Well, what’s 6% appreciation on 200,000? That’s 212,000 now. So you just made 12,000 on top of the 6,000 you already did, which again, no tax is being taken out. That’s now $18,000 on your 40,000, right? When you do that math, now you’re looking, wait a minute, that’s about 45% rate of return total, isn’t it? Because you got that multiplier effect. Any equity you get in gains, that’s going to multiply by five times because that 12,000, it wasn’t just a 6% increase in appreciation, that 12,000 on 40,000 alone was a 30% because that six went times five. You got 30% growth how many times even in what seemed like a hard rental market, even if you only made 2000 bucks that year and in net cashflow, you still came out making over a 40% total rate of return of growth. That’s hard to compete with.
Speaker 3 (15:32):
Yeah, man. I mean the numbers don’t lie, right? And you’re using pretty conservative numbers. There’s a lot of areas in the southeast where we do new construction, single family and multifamily where it’s like double digit, both rent and home appreciation over the past few years just because of supply and demand. I mean, those are the areas you want to be where there’s high demand, I mean for properties and under supply. But yeah, I mean that’s simple math. I think if people just focused on that, and then like you said Chris, you get into this stuff of like, okay, well look at your amortization schedule, right? And your loans, if you’re doing a 30 year fixed loan, banks are smart, they front load your interest on that, but you hold that over time. That’s the first year. If you pay $3,000 down on your principal, that’s $3,000 on that.
(16:20)
And then the next year it should be more and more. All that combines and then, yeah, it’s just crazy, man. You get the snowball effect too with your, I mean we call it tax-free cashflow or that’s one of the phrases we use because if you’re buying a property and leveraging, I mean you should have between your depreciation, just normal depreciation and your mortgage interest, your management expenses, your tax and insurance, all those things are expenses. That’s a business expense. So you really should be, I mean, yeah, ultimately, see if you build a portfolio, think about if you had a hundred K annually of passive income, that could be the equivalent depending on where you’re at. Some states maybe of like 180, $200,000 income
Speaker 1 (17:00):
Potentially. Probably Californias out there
Speaker 3 (17:03):
Where it’s going with this. But then for us it’s just, it’s so eye-opening where if you buy a rental property, and let’s say, I mean taxes, I know I’m preaching to the choir here, but taxes are the biggest expense we’re going to pay ever, right? In our entire lives. And so let’s think about this. If we were able to offset our income by $20,000, let me use a specific example. Do you have time for this? Can I get into this? Yeah. We have one creative thing we do with some of our investors. We work with some people, they have larger portfolios, they could qualify for real estate professional status. They can do what we’re doing with taking accelerated depreciation. And then we have some people that are optometrists or other healthcare professionals, attorneys, engineers, whatever, that they want to be more of a passive investor, but they really have, they’re in a high tax bracket and they’re like, what else can I do?
(17:51)
It’s great that I get this passive loss against the property and I like my tax free cashflow, but what else can I do to take a big tax or have a big tax savings? And one creative thing we do of color, so I’m not a CPA or attorney, so check with yours, but some creative things we can do would be like, let’s buy a property in one of these areas that you operate as a short-term rental. Because as a short-term rental, if you’re active in the management of it, you can take accelerated depreciation to offset against all income sources. That’s the benefit if you’re active in managing it and it’s all about the year you put it into service. And so we had this one doc that bought a property with us and he was paying six figures in taxes every single year and it was painful for him and he wanted to get ahead of the game and try to be creative.
(18:39)
So he bought a couple of short or properties new construction properties with us, furnished him. That’s also tax expense. And then he operated them personally and we coached him on how to do this, but he was the operator. He managed them for the first year they bought ’em. He ran cost segregation studies to accelerated depreciation. Each one of those was $300,000 or slightly more new construction. His cost studies came back at about 30%. So just using round numbers here though, he had a hundred thousand dollars write-off on each one of those properties. So $200,000 tax deduction in that first year. And the next year after he managed it, he turned it over to property management to handle it for him, but he was still able to take that accelerated depreciation because it’s all about the year you put the property into service and that’s $200,000 for him.
(19:27)
That’s probably close to a hundred k potentially taxes that he would’ve actually paid and never seen again. But now he can take that extra a hundred K roughly and actually invested into real estate to earn a return on it instead of giving it to Uncle Sam and buy more real estate with additional tax benefits. So it’s like the snowball effect. And then just to finish off the story with him, he actually ended up turning his short-term properties into midterm rental properties where it’s much easier to manage and he actually took back over management, but now he’s earning double the income on those that he would’ve as long-term rentals just by doing midterm rentals on him. It’s just really cool how that comes full cycle, but now he’s got the bug and he probably will cut back his hours and become a true real estate pro at some point in time. So I just wanted to share that. Those are some of the examples we’ve worked with people on.
Speaker 1 (20:18):
That’s huge. Yeah, we’re going to again, put your link in the description. I already know a bunch of people are like, I want to do that. I can’t tell you how many times we get people that are making at least a few hundred thousand years saying, okay, I work full time. I can’t become a real estate professional. How do I get this write off? Well, that cost segregation, that can go off your active income right there. So there’s definitely some cool things you do in that sense. So yeah, great steps. And I also know too, one thing that I think makes you unique, I know we’re kind of out of time, but I know maybe we’ll have to do another show just on this alone, but I know you’ve got some really good lowered negotiated interest rates with certain banks and credit unions and things like that too, so that people can make even more cashflow than they would just trying to go do this on their own, which I think is the biggest mistake I see today is people do it on their own, they lose money, and you can definitely help fill that gap.
Speaker 3 (21:08):
Yeah, we try to, I mean, our goal is to set people up for success. Our mission statement is to make the best deals across the country accessible to everyone and help people reach financial independence to real estate investing, buy accessing those deals. And so we want to make sure all the teams and systems are in place. So you can’t ultimately be a passive investor, but also that you’re educated. We want to work with you hand in hand to make sure you’re educated about what are your goals, what are your tax strategy, how can we help get you from A to Z? And now let’s go actually apply that knowledge and that planning and strategy by finding the right markets and properties. But yeah, I just wanted to say this as we wrap up here, Chris, on the lending side, a lot of people, sometimes you just dunno what you don’t know, especially if you’re a newer investor.
(21:52)
Real estate can be dangerous too. I mean if you do it like you said on your own and you certainly can, we started out on our own, we lost a lot of money in the early years, made a lot of mistakes that allowed us to build better systems. But you can just get so much further ahead just by working with someone who already has the systems mapped out for you. And sometimes you just dunno what you don’t know. A lot of people, a common example would be a lot of people think you have to buy, oh, to buy a rental property, I have to put 20% down or maybe 25% on a multifamily. Well, with conventional loans, yes, but that’s not the only loans out there, right? There’s portfolio loans where you can put as little as 5% down on new construction. Now that’s going to limit cashflow a little bit, but think about that scenario I just talked about with that last stock and he actually is doing this and so do we, right?
(22:39)
If your goal is specifically tax strategy and you’re like, I don’t actually need cashflow right now, but I need tax benefits and I want to just grow my portfolio for some point in the future to let rents eventually increase and appreciation and equity build up. Maybe you come in and buy multiple properties with 5% down instead of putting 20% down on one. Maybe you do 5% down on four investment properties, cashflow less, but buy more properties ultimately over time get more tax benefits. So it’s those creative things that we want to work on with our investors and help with the overall comprehensive plan.
Speaker 1 (23:10):
I love it. That’s why you’re here. That’s why we brought you on Once I heard your system, I said, this is really cool. You got some really good niche options for investors, especially those that want to be passive.
Speaker 3 (23:22):
Yeah. Thank you.
Speaker 1 (23:23):
Well, great, Zach, appreciate being here. Again, everybody will put the link in the show notes there just for you guys to be able, because I know some of you’re driving, we don’t want you pulling over trying to click on it right now. So we’ll put that in the show notes for you guys. If you want to reach out to Zach’s team, really figure out what options they have and not to mention, check out the properties they currently have available. And as you heard me say just a few weeks ago, right now is probably the best time to find those properties before we get into the springtime. And you’re going to start seeing bidding wars happening once again as people are starting to fight for these same properties right now. Zach, would you agree right now it’s probably better from a buying at the price you want versus later? Yeah.
Speaker 3 (23:59):
Well we talk about this in the beginning, right? It’s just like right now is certainly the time you want to buy real estate and you want to own real estate because the Fed has already come out and stated that interest rates are dropping next year after the past two years of the most aggressive increases we’ve had in the past four decades. And so what do you think is going to happen when a bunch of inventory is still inventory is what it is, it’s still low inventory. So you’re going to have a bunch of buyers that have been sitting on the sidelines for the past two years jump back in. You want to own real estate prior to that, right? Because that’s going to drive appreciation. Now is the time to buy, especially if you’re trying to maximize those tax benefits. But we do have a dedicated text line for anyone that wants, if you’re driving, you want to learn about any investments we have or how we work with investors.
(24:45)
By the way, we don’t charge investors anything. We make our money from building houses and rehabbing them and selling them. So our goal, it’s no pressure consultation call. Our goal is to add value to you and have a strategy conversation with you. But you can text invest to 5, 5, 4, 4, 4. Again, that’s invest to 5, 5, 4, 4 4. And that’ll get you on our dispo list. And our goal is to set up a call. Let’s talk about your investment goals criteria, your timeline, your resources, let’s talk about some different markets, let us help add value to your investment strategy and see if turnkey real estate is a good fit. That’s what it’s about.
Speaker 1 (25:24):
Awesome. Yeah, appreciate that. We’ll put that in the show notes too, just in case you guys are driving. You can’t pull over quickly enough, but we’ll put that there too. Yeah, Zach, thank you so much for sharing today. I agree. Now is definitely probably the best time You’ve got to take advantage of this and that’s why we’re releasing this episode. We’re not waiting a couple months to release this. We’re releasing this in January for this very reason. We want to make sure you guys have just enough time to beat everybody else out. So definitely guys, go check that out. Go check out the link or text invest to his number there. Guys. The time is now. If you’re going to act, this is it, right? My clients already heard this last month, so you guys are already late to the party because our VIP clients get that priority access first, but I’m telling you, the time is now. It’s never better time than right now. So go and make it a one from prosperous week and we’ll see you later.
Speaker 3 (26:12):
The top things that everyone did in real estate to build wealth, it was the exact same, it was almost unanimous. And they buy real estate in good areas. So location, there’s obviously location factor of that. Second most common thing was they leveraged, so they used other people’s money. That could be the bank’s money, that could be raising capital, whatever they reinvested their earnings and their equity. And then the fourth most common thing is maximizing the tax benefits, and that’s doing things like some of the creative stuff we’re talking about. So