All Forum Posts by: Zach Lemaster

@Kenny Colato

Are you asking about just the land value, or the overall value of the home. The value of the home is really the main thing you want to know. As Ryan mentioned you can look at the county site. I would also ask a local realtor or broker to run a quick CMA for you based on other sales to help you come up with a value. They may not want to do this if there is no chance of them working with you, but the more people you can network with the better in that area that can assist with running comps. That would be a better resource vs just looking on zillow, which is also an option, but can be dramatically off.

@Raymond Parkerson

Welcome to the BP forums!  Have you joined any local RE meet ups?  I would highly recommend that as a starting point to network.  Is your question about how to invest in RE without any capital assuming you want to leave all your capital in Crypto, or do you have capital outside of that to invest?  If you do, there are many ways to get started, but you will need to put capital in as a down payment in most cases.

@Jordan Wight

There is quite a bit here that we could spend a lot of time evaluating further & unpacking. I would like everyone to understand the perspective you are coming from in regards to your experience with us so far, which is somewhat in a limited capacity. Also, I welcome feedback. If you have feedback you would like to share with me I encourage you to simply call me to tell me directly.

I would like to add some things for perspective for other readers of your thread. It is important to note that you have only explored new construction with us, which is great because I think new construction is an outstanding option for a newer investor. So when you speak to our overall business model it is important to understand that you are really only speaking about the new construction in two markets, MN & FL. We have many properties we rehab internally along with many different asset classes to invest in. We have not worked on any of our traditional turnkey properties together in any markets besides the new builds. It is important to note that you are still very early in the process, so I think everyone would be quite interested to hear how your experience is post closing down the road so you can better speak to the overall process.

Most of your feedback is centered around the pro forma, and loan process. As you gain more experience you will come to find out you should always be running your own numbers based on your loan product, your lender and your personal financial situation. It is completely impossible to predict what interest rates are going to be on any given day, or for each specific person with various credit scores, DTI's, employment and different lenders involved with different loan options. We've seen many investment properties close at 3% over the past few months, and some in the mid to low 4s. It all depends. This is a moving target. There are many things that are likely over, or under projected in the numbers as real estate is a dynamic investment. Same thing applies to taxes. No one knows exactly where taxes will go, but you can project them based on what we've historically seen. With new builds taxes take a few years to be taxed at the full amount, and there are always options to lower tax rates like contesting taxes which we have been very successful with. Anytime you look at any pro forma for a property you must understand the entire purpose of a pro forma is to simply give you an initial starting point to evaluate a property. You must dive in deeper to evaluate each deal more thoroughly to see if the property does indeed make sense for you to proceed exactly like you have done. This would be true of any property you purchase regardless if it's with us or not. These deals must still seem attractive to you since you are proceeding. I personally purchase quite a bit of commercial assets every year (mainly as a tax approach when we run cost seg studies on the buildings). I will be the first to tell you the pro forma is only a starting point for any property, but that is what due diligence is for to further evaluate each property. I seldom spend more than 10min looking at a pro forma for those projects. A pro forma is simply a pro forma. There is no guarantee on those numbers with any property, and they are all subject to variance for each investor, each lender, each property, etc. There are no good, or bad pro formas, just pro formas that you always need to evaluate further.

When speaking about new builds, a construction loan is only one option of purchasing. This is not the only option so it’s important that all readers understand that. There are also multiple types of construction loans available. You also have the option of simply putting down a deposit on a completed home, or near completed home to not use a construction loan. In this scenario you would likely not have the immediate equity you would in a scenario where you do the construction loan since the property would sell close to market value. This is the exact process you are following with the MN new build you are purchasing with us.

It is very clear that you will not be receiving rent while a home is being built. That is not something to include in a pro forma. Hopefully you didn’t get the impression that this would ever be the case. In terms of values & appraisals we have many case studies to look at with current deals. All lenders, regardless of which loan option you choose to go with, will require an initial appraisal. We’ve seen many appraisals come back well above the price the investor is acquiring the asset for, and once the home is completed there should absolutely be more value in the home with rising land & construction costs. We’ve sent you many appraisals of other properties that have closed showing you this valuation.

I think the biggest thing I would like to clarify here the comment about “passing you off to people with no ongoing relationship.” This is simply not the case, and I truly don’t think it's fair of you to assume considering we haven’t closed any properties with you. There are many people involved in the process from contractors, managers, builders/developers. Everyone has their role that they play, and it’s important you spend time communicating with everyone like you have been. We spend a significant amount of time assisting clients in building a long term strategy to scale their portfolio over time, tax strategize, ensure clients are having a good experience with mngt, ensuring they have the most appropriate legal structure in place based on their goals, and focusing on creative ways of how to come up with capital to scale their portfolio over time. If anyone spends 10min on BP reading some of our reviews, or other threads from some of our experienced investors that have purchased with us for years this will be very evident. I know you have spoken to many of these past clients already. It is our goal to do everything we can to set our clients up for success, but most importantly to become an educated investor which the only way to really gain first hand knowledge is by investing.

I do commend you on being a person that is taking action! Many people never get past that first step! I hope you feel like you have already learned a lot, and that we have helped you in that process. I kind of feel like this post is mainly negative, which is constructive, but I would challenge you to spend some time saying a few positive things about how we’ve been of assistance to you. We’ve spoken over the phone, and I know Scott has had probably 20+ calls with you over the past few months. I know that he has really worked hard to do whatever he can to answer your questions, be available to discuss any topics you would like to over calls. Any credit for the time we’ve put in? Once you get these first few underway there are many high level topics we can work on together to help you scale over time. It’s motivating for us to spend the time to do that when we know our efforts are realized & appreciated.

Feel free to set up a call with me if you have more feedback. You have access to my calendar link that you can schedule at any point in time. I’m having a baby in the next few weeks, just fair warning, so sometime before May will be more open on my schedule.

@Steve W.

See below, and feel free to reach out with any more questions.

• Is this due to the builder selling for under market value and/or projected appreciation while you wait for the new build to complete? --Yes, both being sold below current market value, and of course the build appreciating more during the construction process in a market that has extreme housing demand.  I am referring to our new builds to answer these questions.
• If you are purchasing prior to project completion, how are the builders coping with any rising material costs?  --Anticipated cost increases are already accounted for in the current pricing.  There is also a 10% escalation clause, but has not been executed yet on any builds.  That protects us on dramatic increases, but it would be unlikely that much would happen during a 4-6 month build time.
• What kind of wait lists are you experiencing?
• --No wait list.  First step is getting financing lined up, then choosing build model & lot location.
• --Feel free to reach out with any further questions.

@Nicolas Bowers

One thing you might want to explore is TK new builds in FL that have immediate equity you can likely refi the majority of capital back out to reinvest.  This is a slightly different take on the whole brrr model (Build, rent, refi, redo).  I think this is a great option to be able to get into a brand new build, in an A class area that has strong appreciation, cash flow & immediate equity.  We are doing a ton of these with our clients every month.  Feel free to reach out with any questions you have.

@Hnu Thaper

Thanks for the interest!  There have been a ton of discussion on this topic from previous & current investors if you search the forums.  Here are some previous threads that may assist you in answering your questions.  Feel free to reach out with any questions.

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

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

https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review

https://www.biggerpockets.com/forums/850/topics/895660-my-first-investment-property-an-out-of-state-deal

https://www.biggerpockets.com/co/RentToRetirement

https://www.biggerpockets.com/forums/92/topics/893621-rent-to-retirement-review?highlight_post=5222888&page=1#p5222888

https://www.biggerpockets.com/forums/311/topics/915728-experience-with-rent-to-retirement-turnkey?page=1#p5345200

https://www.biggerpockets.com/forums/92/topics/808479-rent-to-retirement-experiences

https://www.biggerpockets.com/forums/12/topics/533693-anyone-worked-with-renttoretirement-turnkey

https://www.biggerpockets.com/forums/92/topics/581730-rent-to-retirement-zach

https://www.biggerpockets.com/forums/48/topics/874096-reviews-on-r2r-and-nch?page=1&utm_source=Iterable&utm_medium=email&utm_campaign=Transactional:%20topic_notification&utm_content=Transactional#p5123754

https://www.biggerpockets.com/forums/311/topics/883772-turnkey-investing-renttoretirement-feedback-reviews?highlight_post=5171720&page=1#p5171720

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

@Matthew Swearingen

*Disclaimer: I am the CEO of Rent To Retirement.

Did you try searching for this topic in the forums, or on the BP site?  There are hundreds of reviews & threads where investors are asking this exact same question & discussing their experiences.  I've posted some links below that will take you to BP forums where people are answering the same question you are asking.  

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

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

https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review

https://www.biggerpockets.com/forums/850/topics/895660-my-first-investment-property-an-out-of-state-deal

https://www.biggerpockets.com/co/RentToRetirement

https://www.biggerpockets.com/forums/92/topics/893621-rent-to-retirement-review?highlight_post=5222888&page=1#p5222888

https://www.biggerpockets.com/forums/311/topics/915728-experience-with-rent-to-retirement-turnkey?page=1#p5345200

https://www.biggerpockets.com/forums/92/topics/808479-rent-to-retirement-experiences

https://www.biggerpockets.com/forums/12/topics/533693-anyone-worked-with-renttoretirement-turnkey

https://www.biggerpockets.com/forums/92/topics/581730-rent-to-retirement-zach

https://www.biggerpockets.com/forums/48/topics/874096-reviews-on-r2r-and-nch?page=1&utm_source=Iterable&utm_medium=email&utm_campaign=Transactional:%20topic_notification&utm_content=Transactional#p5123754

https://www.biggerpockets.com/forums/311/topics/883772-turnkey-investing-renttoretirement-feedback-reviews?highlight_post=5171720&page=1#p5171720

@Andrew Freed

Thank you for the mention!

@Joe Lijoi

I'm happy to answer any questions you have.  We've helped many investors invest strategically out of state where the numbers make sense in MI & many other states.  It's easy to invest out of state when you have the right teams & systems in place!  Management is key, and making sure you go through the normal due diligence you would regardless if you are buying local, or far away!

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

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

https://www.biggerpockets.com/forums/92/topics/765347-rent-to-retirement-review

https://www.biggerpockets.com/forums/850/topics/895660-my-first-investment-property-an-out-of-state-deal

https://www.biggerpockets.com/co/RentToRetirement

@Tory Sheffer

We love doing cost seg studies!  That is basically our main tax planning strategy each year.  It's crazy to me how many people are unaware of cost segs, or simply don't use them.  We plan to acquire rental RE every year anyways so might as well reduce our taxable income for that year to allow us to have more capital upfront to reinvest sooner vs just paying to Uncle Sam where we never see it again.  We won't sell these for many years, and will 1031 them when we do.  We mainly buy commercial retail & medical.  Closed a $4.3M building in Dec that allowed us to write off $1.2M of taxable income.  Under contract now on a $11M complex that should allow a write off of ~$3M write off or greater.

Cost segregation seems to confuse everyone, except those who are using this strategy. Not your fault for the confusion here. I encourage ALL investors to look into cost seg studies to see if they can qualify. We have many investors that will do cost seg studies on even one SFR or a small portfolio if it makes sense to them.

A couple of follow up questions for you.  What was the asset class you purchased? You stated 27.5 years, but depreciation in commercial is 39 years.  The $640k seems very good for the overall write off.  If you remove an assumed land value of say 15% gives you a property value of $1,674,500, so $640k would be about a 38.2% deduction which is better than we've ever seen on our studies.  Is this accurate?

@Brian Kantor

Thanks for the mention.  I agree with your points.  It all comes down to what the investor's goals are, and what is the pathway of least resistance to get started!  Just because someone buys turnkey does not mean that is the only strategy they will ever follow to build their investment portfolio.  We do have some investors that mainly buy TK as a means to easily scale & diversify their portfolio across multiple cash flow markets where they don't have their own team established, or don't want to take the time, risk & money it requires to build their own team in a new market!  We also have many investors that start with turnkey as a means to simply get started to build a good foundation, and then they may go on to take on some of their own projects once they already have an established portfolio of cash flowing properties.  My main opinion to all investors looking to get into RE is to simply take action, and buy properties TK or otherwise.  I can't tell you how many people I talk to that get stuck in the analysis paralysis stage, and never end up buying a rental.  In that case there is simply no progress being made, and no education the person is gaining that will ultimately allow them to work towards their investing goals.

To your question about equity in a property to recycle sooner, I think the typical rehabbed TK property will likely not have significant equity to be able to cash out refi immediately to reinvest.  All properties build equity over time through appreciation and debt reduction each year where maybe in 3 to 5 years this would be possible (or sell via 1031), but there are creative ways that investors can invest with us where there is a greater likelihood of having more initial equity.  A perfect example of this is some of our new construction that have immediate equity.  I've posted a very detailed explanation of this process on this thread that walks through the numbers.  I suggest checking this out for more information: https://www.biggerpockets.com/...