Rent To Retirement Review

36 Replies

Hi BP! I recently just closed on my first 3 turnkey homes with Rent To Retirement after being referred to them from a colleague of mine who had invested with them for a few years now. I thought I would start a forum to let others share their experiences, and to keep a log of how my experience is going since I see a lot of people asking questions about working with them. So far I've had a great experience. Communication is very important to me! I worked with Zach who is very responsive, knowledgeable, and willing to assist throughout the process as I was new to purchasing out of state. All my homes are rented, and I'm off to the races in building my passive income portfolio! They put me in touch with lenders to finance the properties that had better rates & fees than any other lender I checked with, which was great. They also had recommendations for insurance providers, and referral for a legal team to assist in setting up my LLC, which I am currently working on. Overall the closing process was very smooth, and did not take up a ton of my time. This was exactly what I was looking for since I still work my full time job. I've done a few flips in the past, which was a huge time commitment & definitely more headache than I cared for. Not to mention I lost money on some of my past flips or barely broke even. I got discouraged with real estate after the long and stressful time of trying to flip real estate on my own while balancing my full time job & family life. So I was very relieved in how easy they made this process to invest in cash flowing properties where the returns were significantly better than anything I found locally, and the process is much more passive! I look forward to continuing to invest with them in the future! I'll share more updates as I grow my portfolio. Big thanks to Rent to Retirement for getting me back into the game of real estate investing where I'm not doing everything on my own!

@Diana Jing  

Thanks for sharing!  That's great that you are getting going investing in different markets.  I've bought a couple properties through them a few months ago, and I'm also am pretty happy with how things are going.  I'll likely purchase a few more before the end of the year if my 1031 finishes up in time on the front end sale.  They were very helpful in assisting me to set up a SDIRA to purchase rentals in.  Turns out the financing piece is a bit more complicated when using a SDIRA, but still a great option to add some diversity to your rental portfolio.  Keep us posted how things are going for you.  I know I've really enjoyed working with them with my properties!

@Diana Jing  This is great to hear!  I've invested with them a couple years now, and am still working with them today.  I was able to acquire some cash flowing properties, but once we maxed out our capital to invest with we really didn't have many other options to continue to purchase rental property with.  We were interested in wholesaling, so they gave us some mentorship on how we could creatively get started wholesaling to build up capital for our next investment property.  We worked with @Zach Lemaster , and within a couple months we have already completed a few wholesale deals giving us the necessary downpayment to purchase that next rental.  Very happy with our experience so far!

Disclosure: Part of company

@Diana Jing @Edward Dawson @Mila R.

Thank you all for the kind words and feedback.  I'm glad we were able to assist you in building your passive income rental portfolios in markets where the cash flow & returns make sense!  I look forward to continued business with you all.  

@Richard Queen

Happy to answer any questions you have over an initial phone consultation if you would like.

Also, here is a link to reviews from 30+ investors who have worked with us over the years:

https://www.biggerpockets.com/users/ZacharyCole/references

Link to another forum discussion with many investors who have worked with us previously:

https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster?page=1

Disclosure: mentor/mentee

I'm currently being guided by Zach on my first couple of turnkeys. The process so far has been smooth and can't wait for everything to close in the next month. Zach has been very helpful to me despite being a very busy individual, so i appreciate him taking out the time to go over every aspect of the process. Not to mention the added gems he drops regarding other aspects of investing. At the moment he is mentoring me on the strategy of investing through my self-directed IRA, which i don't know a whole lot about, but will be considering for my next couple of purchases. From what i have gathered, Zach has a passion for helping people reach their dreams of financial freedom and as i get further along in my career, i can only say that Zach's help will undoubtably be priceless. So, all and all i recommend first time and seasoned investors to give Zach and his team a chance to not only increase your cashflow but to broaden your knowledge of the RE investment space!

Thanks in advance @Zach Lemaster for everything!🙏

Words of advice to others: Take Action!

@Diana Jing

I've also had a very good experience working with them.  I've posted my experiences on the thread below:

https://www.biggerpockets.com/forums/92/topics/518583-feedback-on-renttoretirement-and-zach-lemaster?page=1

Definitely has helped me come a long way in becoming a more successful investor.  Rent To Retirement and their team has assisted me with SDIRA investments and executing a 1031 exchange which has a lot of working parts so navigating that can be quite confusing.  I've been able to acquire multiple properties to dramatically increase my passive income portfolio!  Big thanks to the rent to retirement team, and I look forward to continually working with you all!  I highly recommend to anyone looking to expand their rental portfolio in markets that offer cash flow properties!

@Zach Lemaster  

@rent to retirement

I've been very happy with the rentals I've purchased with your team over the past few years, and I would like to really focus this year on aggressively expanding my portfolio!  I would ideally like to purchase 4 to 6 homes in one or two different markets this year.

Can you send me over your updated inventory.  I should be getting a large tax refund this year, so I would like to apply that to another rental or two.  Rent To Retirement has been really great to guide me in building my portfolio over the past few years!  I'm looking forward to continued business with you all!

Disclosure: Part of company

@Danny Randolph

Yes, we look forward to assisting you in expanding your portfolio as well this year!  I'm glad you've had a good experience so far with your current rentals.  Consistency over time is what it takes to achieve your financial goals through RE investing!  Our current inventory can be found on our website via the links to the live google documents, but I will send them to you as well.  As always, please let me know if you have any questions on anything.

Zach

CEO - Rent To Retirement

@Edward Dawson

Thanks for the reply.  Can you explain more how your 1031 & SDIRA are going?  I'm familiar with the benefits of a 1031, but I'd like to know more how a SDIRA can be used to purchase rental property.  I have some funds sitting in a SDIRA account that I have thought about, but I'm not at the point where I've had to rely on that to invest with.  I know a lot of people are using that to invest with though!  I'd appreciate your input to learn more.

All the properties are going well on my end so far.  I'm actually contracted currently with rent to retirement to purchase 3 more that should be closing in about a month.  After that I may need to explore the SDIRA route more!

@Riley Schaefer

Thanks for the reply! I just asked Edward about input on the SDIRA route. It looks like you have experience with that as well, so I would be interested to hear your experience as well and if this is a good route to invest with. I'm not sure about all the pros/cons of investing through a SDIRA, and when it makes the most sense for me. I've been able to connect with a SDIRA custodian on how to set up the account, but he didn't go into depth on why it is beneficial to use a SDIRA or any other options I might have. Does anyone have recommendations for anyone else to speak to about a self directed IRA to invest with? I'm currently under contract with rent to retirement for three more properties, but after this I may be a little strapped for cash and need to explore more creative options to continue investing with.

@Diana Jing

That is great to hear that you are on your way to rapidly growing your portfolio!  At some point we all find ourselves limited on capital, and a SDIRA or Solo 401(k) is a great option to continue to invest within a retirement account.  There is regulation with it however, and I do think working with a custodian is a great way to ensure you are doing everything correctly.  @Zach Lemaster at Rent To Retirement has been a tremendous help in guiding me to realize the benefits of investing with a SDIRA!  Mainly, if you have limited capital, it is an excellent source to continue to build your rental portfolio.  Also, if you have a good amount of retirement invested in stocks like I do, and want to diversify some of that with real estate, then you have to do that with a SDIRA.  The financing is different however as you have to use non-recourse loans, which aren't as favorable terms as the conventional loans, but it still allows you to leverage to continually invest!  

I've successfully completed my 1031 with Rent to Retirement, and I must say that from the initial sale, to property identification, to closing on the new rentals it was pretty much a cake walk.  Rent to Retirement & their team put me in touch with an excellent 1031 intermediary, and had plenty of inventory for me to easily identify properties that met my investment criteria, and close on time without obstacles.  Big thanks to @Zach Lemaster and his team at renttoretirement for making this seemingly complicated process with strict timelines a very easy process to navigate so I did not have to end up paying capital gains tax!!  No to mention I was able to purchase four cash flowing properties that has increased my passive income!

@Diana Jing Let me know if you have other questions here, but I would recommend speaking with Zach. 

Disclosure: Part of company

@Diana Jing @Edward Dawson

Thank you for the feedback and discussion.

Ed, I'm glad we were able to easily navigate your 1031 exchange and move you into some excellent cash flowing properties to increase your passive income!  I always tell investors there is such thing as return on equity, and if you have equity sitting in a home that is not being used, then your return is zero.  With your one home barely being cash flow positive, but had a large amount of equity, we were able to move you into four excellent cash flowing properties that offered much higher returns, and increased your passive income.  Now you will have four streams of income vs one, and the tax benefits/depreciation, cash flow, appreciation & debt pay down will all exponentially increase your net worth by having four doors vs one!  A 1031 exchange is a very compelling tax strategy to continually expand & invest in real estate that is not possible in any other asset class that I am aware of.

Diana, I'm more than happy to have a discussion on the pros/cons of investing in real estate through your SDIRA or Solo 401(k).  Each person has different goals, expectations, lifestyles, resources, etc. so we really need to look at the overall picture to see if this makes sense compared to other options available.  We've had many investors successfully invest through their SDIRA, and it has worked out great for them.  I would recommend speaking with a qualified custodian to ensure you set up the account correctly, which is step one.  We have plenty of recommendations for custodians and non-recourse lenders that offer excellent loans to assist you.  @Justin Windham is a great person to speak with that has assisted many of our clients.  Please let me know if you would like to connect to have a more in depth conversation on this.

Zach

Disclosure: Provide SDIRA and Solo 401k accounts for customers

@Diana Jing

Congrats on your progress so far! Using IRA or 401k funds to purchase turnkeys can be a great way to increase returns inside your retirement account. We speak with a lot of investors who have, at least temporarily, maxed out available investment resources with non-retirement money but still want to expand their portfolio. One factor to keep in mind with SDIRA or Solo 401k investments are the prohibited transaction rules. In general, a turnkey can be a great way to avoid conflicts with those rules because of the highly passive nature of the investment.

@Justin Windham

Thank you very much for the insight. This is something I really know nothing about, but I've always heard of many investors successfully investing through their retirement accounts. I would definitely like to connect with you to learn more to explore if this is a good option for me. Do you mind explaining the difference between using an IRA vs a 401k to purchase rental real estate with? I have both, and don't really know which is better to use? Any insight would be greatly appreciated. Also, what do typical non-recourse loan terms look like? I haven't looked into any, but I know you can't use conventional it sounds like. I've only purchased using conventional loans so far. I'm in the process of getting a HELOC on my primary to access more capital, but I would like to look into the retirement account options more as well.

Thanks in advance for your insight into this!

@Diana Jing

There are certain advantages of setting up a Solo 401k instead of a Self-directed IRA (if you are eligible to do so). Please see more below:

Solo 401k vs Self-directed IRA:

A Solo 401k has several advantages as compared to a Self-Directed IRA including the following which specifically apply to your situation:

  • Unlike a Self-directed IRA, you can have the account for the Solo 401k at a bank or brokerage that does not charge maintenance fees and where you will have checkbook control.
  • Unlike a Self-directed IRA, if you use leverage (which must be non-recourse financing in either case) to acquire real estate with your Solo 401k the income will not be subject to Unrelated Debt Finance Income tax

General Considerations Re Investing Retirement Funds in Real Estate:

1. If you purchase via an IRA (as opposed to a 401k), you will need to open an IRA account at a specialty trust company which allows for investments in real estate. Unless you invest via an LLC owned by the IRA, you will not have checkbook control over the funds which means you need to run transactions (e.g. income, expenses, etc.) through the trust company who will need time to process the transactions and generally charge fees for each transaction. On the other hand, keep in mind that there are costs associated with maintaining an LLC (such as the $800 annual franchise tax in California).

2. If you are self-employed with no full-time employees, you can set up a Solo 401k through a 401k provider which allows for investing in real estate. In that case, you can simply have the account at a bank or brokerage where you will have direct checkbook control.

3. In either case, all of the income and expenses will need to flow in and out of the retirement account.

4. In either case and if you will you debt to acquire the real estate, it must be non-recourse financing. See more at the following link: https://www.biggerpockets.com/blogs/9552/70408-ira... If debt-financed real estate is acquired via an IRA, any income attributable to such investment will generally be subject to unrelated debt finance income tax.

5. In either case, you can't live on the property or otherwise use it for personal use.

6. In either case, you can't work on the property as it must be a passive investment (e.g. you must hire someone to fix the toilet and can't pay the expense with non-retirement funds).

7. In either case, you must purchase/sell real estate from/to an unrelated person and the real estate can't be titled in your name personally (e.g. in the case of the 401k, it would be titled in the name of the 401k and you would sign as trustee of the 401k).

8. In either case, you should verify that you are eligible to transfer the funds from your existing retirement account (e.g. if the funds are in your current employer 401k, you will likely not be able to transfer until you quit your job).

Considerations in Setting up a Solo 401k to invest in real estate:

1. First, you must be eligible to set up a Solo 401k. In order to be eligible, you must be self-employed (e.g. providing goods and/or services through your personal effort), reporting self-employment activity on your taxes (e.g. Schedule C if you a sole proprietor) & you do not have any full-time w-2 employees (i.e. working 1000 hours or more per year) working for your self-employed business or otherwise.

2. If you are self-employed with no full-time employees, you can set up a Solo 401k through a 401k provider which allows for investing in real estate. In that case, you can simply have the account at a bank or brokerage where you will have direct checkbook control.

3. All of the income and expenses will need to flow in and out of the retirement account.

4. If you will you debt to acquire the real estate, it must be non-recourse financing. See more at the following link: https://www.biggerpockets.com/blogs/9552/70408-ira...

5. You can't live on the property or otherwise use it for personal use.

6. You can't work on the property as it must be a passive investment (e.g. you must hire someone to fix the toilet and can't pay the expense with non-retirement funds).

7. You must purchase/sell real estate from/to an unrelated person and the real estate can't be titled in your name personally (e.g. in the case of the 401k, it would be titled in the name of the 401k and you would sign as trustee of the 401k).

8. You should verify that you are eligible to transfer the funds from your existing retirement account (e.g. if the funds are in your current employer 401k, you will likely not be able to transfer until you quit your job).

Considerations in Choosing a Solo 401k Provider:

1. Confirm that the provider has a pristine reputation (e.g. Better Business Bureau reviews, etc.).

2. You may wish to confirm that the new 401k provider has experience with the particular investments in which you intend to invest your retirement funds as you very likely will have questions in terms of the mechanics (e.g. how do you invest in real estate, etc.).

3. You may wish to confirm that the new 401k provider will handle the ongoing compliance support such as any required 5500 filing (e.g. 5500-ez for a one-participant plan with assets in excess of $250,000), any required tax reporting (e.g. 1099-r in the event of a distribution or in-plan Roth conversion), mandatory plan updates and amendments, etc.

4. If you might take a 401k loan, you may wish to confirm that the new 401k provider will prepare the required 401k participant loan documents.

Disclosure: Provide SDIRA and Solo 401k accounts for customers

@Diana Jing

If your IRA and 401k are not of the "self-directed" variety allowing for investment into real estate, you'll need to transfer those assets to an account that is, namely a self-directed Solo 401k or self-directed IRA. As long as your IRA is not a Roth IRA and your 401k is not with a current employer, you should be able to transfer all assets to whichever structure works best for you. The decision as to which structure to utilize usually depends heavily on whether or not you are eligible for a Solo 401k. That's because the Solo 401k offers many benefits over the self-directed IRA. While the self-directed IRA is a great structure for investing into real estate and other alternative assets, the Solo 401k is widely considered to be even better.

Compared to an IRA, Solo 401k contribution limits are roughly ten times higher and there is no custodial requirement for the 401k. This means you don't need the additional expense and administration of an LLC to have checkbook control. You can take participant loans from a Solo 401k, but not an IRA. Built-in Roth components, spousal contributions, and an additional tax exemption also apply to the Solo 401k. Solo 401k plans are often quicker to setup and cost less money over time compared to most self-directed IRAs.

If either the IRA or 401k are to obtain financing for a purchase, a non-recourse loan is required. This means you will not sign a personal guarantee on the loan to the 401k. Doing so would be a prohibited transaction because you are a disqualified person with respect to your plan. It is important to understand this and other prohibited transaction rules so you can stay out of trouble with the IRS and avoid costly penalties.

@Justin Windham @George Blower

Do you know what typical non-recourse financing terms look like?  I'm having a hard time finding adequate financing options.  Do you have any recommendations for non-recourse lenders?  It almost seems like a lot more money is needed down allowing me to purchase less homes through a SDIRA, so now the question becomes do I take the funds out of the SDIRA with the penalty to obtain better financing to buy more homes, or the funds in the SDIRA to buy less homes?  Also, any ideas what type of penalties there is if I take the funds out?  Any assistance would be greatly appreciated!

Disclosure: Solo 401k and Checkbook IRA

@Diana Jing

Here is a list of lenders offering non-recourse loans to retirement accounts:

https://www.biggerpockets.com/member-blogs/2810/50272-list-of-non-recourse-lenders-for-self-directged-ira-and-401k

Typically non-recourse loans require 30%+ down plus 10%+ reserves because the risk is higher for the lender. 

Early distribution from a retirement account will result in penalties plus taxes. Distribution will be considered taxable income in the year in which you take it, which likely will push you to a higher tax bracket. Would not be a wise financial move for most people. 

Disclosure: SDIRA and Solo 401k accounts for customers

@Diana Jing

Non-recourse loans do usually require a higher down payment than loans that are considered to have less risk for the lender. With a non-recourse loan, you are not pledging your income, assets, or credit. The real comparison to make would be between the returns you can get in your retirement account using leverage vs the returns you could get if your account does not use leverage.

Taking the funds out of the retirement account as an early distribution can result in taxes approaching 50% based on a few factors. The amount of the distribution is generally added to your taxable income and a 10% penalty can apply on top of that. After the funds are distributed, you would lose any future tax advantages that would have applied to the retirement account. A case could likely be made for considering making a larger down payment with a self-directed IRA or 401k as opposed to abandoning the account, getting hit with taxes and penalties immediately, and losing its tax advantages moving forward.