My Realty Gains
Zach Haptonstall was born and raised in Phoenix, Arizona. He is the Chief Executive Officer and Co-Founder of Rise48 Equity.
Zach’s professional background includes Healthcare Sales and Administration. He is the former President and Co-Owner of a Hospice Organization in Phoenix with 110+ Employees and $9M+ Annual Revenue. He is also a former live television news anchor and sports reporter for Arizona PBS and co-hosted a show on Fox Sports Network Arizona.
What You’re Going to Learn:
How investing in Commercial Real Estate can help W2 families?
Prashant Kumar, CCIM – What are your thoughts about the normal W2 employees, who are husband and wife and folks still don’t have any time for themselves or their kids? Forget about insight into investing. For a lot of folks, Investing is only about Investing in stocks. They do not know what commercial Real Estate Investing is. If you say Real Estate, they understand single family. Buy a single-family and buy one more rental and one more rental. Just tell us something about how commercial Real Estate Investing can help such families.
Zack Haptonstall – I can personally relate to, most of your listeners and readers and the people that you try to educate with your platform here because I was a W2 worker. I grew up in a lower-middle-class type of family. I was taught to get a degree and then you will get a good job, and you can work there for a long time. I got caught up in this rat race. Just kind of get this tunnel vision right, where that job is your world, and you don’t realize other opportunities to invest Passively into a vehicle like Real Estate and how it can help you build wealth and help you to generate cash flow.
I didn’t even know any of this stuff until about 2018, just four or five years ago, I started listening to podcasts like yours and reading books and trying to educate myself. I think that investing passively in these types of multi-family and apartment buildings can just be such a powerful vehicle for investors. Maybe you’re working hard, you and your spouse are working hard 40 to 60 hours a week, making what people consider good money, but you feel like you can never truly get ahead, even though you’re making what is considered good money.
If you can invest in these types of properties where it doesn’t take any of your time. You can make that money work for you, as you like to say, and grow that money, generate monthly passive cash flow, become tax-efficient, and grow the money so that all of a sudden, in three, five years, ten years, you’ve created a small fortune just by putting some money away into these types of investments, which are completely different than the stock market.
They’re not impacted by the stock market, I can tell you. Our apartment buildings were not impacted by COVID whatsoever. It’s just great to be able to invest in these what we call hard assets because these renters have to have a roof over their heads.
They pay the rent every month, and then that rent is essentially going into your pocket. As the owner of these properties, so I think it’d be a great vehicle. I know that’s what you’re trying to kind of educate people.
Prashant Kumar, CCIM – Awesome answer.
Prashant Kumar, CCIM – I know your journey has been very fruitful. I would like to know a little bit about your journey also so that people get motivated. I know we all talk about the benefits, share some of the highlights of your journey in the last couple of years. As you said, you started in 2018. This is a short span of three and a half, four years.
Zach Haptonstall – I was born and raised here in Phoenix, Arizona. I lived here my entire life. I grew up with kind of a lower-middle-class family. We don’t come from a lavish family. My parents had no background in Real Estate, nothing about it. I got a journalism degree, so I was a live news anchor, and sports reporter for Arizona PBS for a short time because I like sports. I wanted to be a sports reporter, and that was cool at first. Then I quickly realized that I hated it because you don’t make enough money. You work crazy hours. It’s very political. I was like, I don’t want to do this. I was like, I need to make money because I have student debt, right? then I try to focus on how can I make the most money to get rid of my debt and become more financially established?
I went into healthcare marketing, working for a hospice organization, of all things. Just something I kind of fell into. I worked as a marketer, worked my way up to a director of marketing, and then ultimately became president and co-owner of a large hospice organization here in Phoenix. We had 110 employees. I got my MBA and all the things that we just talked about. I was thinking, of getting the degree, continuing to advance, and getting a high W2 salary. But even as I was advancing, I was very blessed and fortunate to pay off my student debt and buy a house by the time I was 23, I was making 150K plus a year.
I was 26, I’m making 200K plus a year, making more money than both my parents combined. But I didn’t feel satisfied. I felt like I was kind of stuck, and I hit a ceiling. So January 2018, I resigned and sold my equity in that company. I had no plan. I said, I just want to somehow create Passive Income through Real Estate, but I don’t know how I’m going to do it. And so I lived off in savings for well over a year, just burning through cash.
And I was trying to figure out, how do I make money through Real Estate? I didn’t want to be a Real Estate agent. At first, I was looking at flipping homes, and I realized that’s just transactional. I don’t want to do that. Then I learned about mobile home parks. I started cold calling mobile home park owners. I tried to buy one on a seller’s carry. I had almost three hundred K of cash that I had just relentlessly saved the previous four years with that high W2 job following the Dave Ramsay plan. I got a good bump of cash from selling my equity in that company but I was living off of this cash and had no income, and I was just burning through it, paying a mortgage, monthly costs, etcetera.
Well, finally I started to discover multifamily and as I said, I started listening to podcasts just like yours, reading books, started going to conferences, and I learned the power of multifamily investing in what we call syndication, where you raise money from passive investors. And so that’s when I kind of went forward and decided I want to build this syndication Real Estate platform. I met a couple of partners, and we bought our first deal together. That went well, and then we started raising money from passive investors. So since then, we’ve been very fortunate. And since then we’ve acquired 31 different properties, all here in the Phoenix Metro, worth over $1 billion, over 5000 units. We’ve had nearly 2000 different individual investors. Now we have a couple of different companies, we have a property management company, we have our real estate company, and we have over 100 plus full-time employees on full benefits. So we’ve been very fortunate. But it took me 14 months from when I quit that job to close on the first property. So the first 14 months were just a lot of adversity. And even after I bought the first three or four properties, I wasn’t making any money.
You don’t make any money the first two and a half, three years. There’s a lot of adversity to go through. But just in the last 18-24 months, we caught our momentum and make it very successful and lucrative and very fortunate.
That’s kind of my story is that just kind of dove right into it. It took a lot of time to kind of break in, but now we’re firsthand experiencing the results and the benefits of investing in real estate.
Prashant Kumar, CCIM – Well, you guys have heard it right. Leaving a $200,000 job and not doing anything, not earning anything for 14 months, and then starting the business, acquiring the first property after 14 months, and getting into a couple of properties. The first couple of years, I would say two years, two and a half years. Jack did not make any money, but persistence pays off.
Paid off, right?
I mean, now, as you said, in the last 18 months, your portfolio has grown up to $1 billion and you have 100 employees. If you are in a W two job for the last four years, maybe you would have made 200,000. You would have jumped to 250,000 at most, right?
That’s the maximum that could have happened. I mean, in your w job, you don’t get paid exponentially. You just get paid, like 4% 5%, which doesn’t even meet your inflation.
Prashant Kumar, CCIM – What are the passive investor’s experiences?
Zach Haptonstall – I was able to experience the benefits of Real Estate actively. But the reality is that most people, and probably most of your listeners, can’t just quit their job and do what I did because it is very dramatic. It may sound cool, but it’s not necessarily realistic for most people. Most people need to passively invest and that’s how all our investors are. most of our investors are w two income earners who are looking to diversify away from the stock market and are looking to generate passive cash flow and grow their money in something that they have a lot more visibility and transparency into, that they understand. Do you know what I mean? Whereas you give your money to a financial adviser, they’re putting it into a bunch of different stocks of companies that you have no idea what’s going on. A CEO can send a tweet and completely tank your stock. COVID happened and the stock market can tank. We’re recording this near the end of May 2022 prison. We’ve seen the economy have a significant downturn as far as the stock market is concerned. Well, through all those periods, these apartment buildings have continued to improve and they’ve had no negative impacts. They’re not impacted by the stock market because this is where people live. And so a lot of our investors are thankful and that’s very rewarding because they didn’t know about this.
We have a ton of new investors and a lot of first-time investors in every single deal because past investors are happy with the performance and they’re referring to their colleagues, their friends, and family. It’s kind of like the light bulb goes off for them, where maybe they’re not going to quit their job and do it act like you and I do. They can put their money to work, working for them passively and they’re getting that passive income and they know that they’re growing it consistently and it’s in a much more conservative type of investment, which is not at the whim of all these other outside variables. That’s kind of the rewarding part, is that our investors that are truly grateful and we’re all kind of making money together, we feel like we’re truly doing them a service and helping them.
Prashant Kumar, CCIM – Give us some examples of a good deal or a bad deal.
Zach Haptonstall – There are just so many benefits to investing in these deals because it’s very conservative. I tell investors, that investing in these types of apartment buildings, it’s not like investing in like, a tech startup company or an app.
I’m not going to ten extra money in a year or two. It’s also very unlikely that we lose money because these are very conservative investments and it’s more likely we get a lower projected return than what we showed you, but still give all the money back plus a return, you know what I mean? When things are good, you can get a very strong return and potentially double that money in two years or less. We’ve been seeing with some of the investments. You get the benefits of that passive cash flow distributions, which are all profits on your money. It’s all passive and then you get the benefits of any type of depreciation. I’ll give the disclaimer I’m not a CPA consultant or CPA, but our investors pay virtually no taxes on their monthly cash flow distributions because the depreciation of the property offsets the tax they have to pay.
So even though you’re getting monthly distributions every month hitting your account, you’re not having to pay any taxes on that. It can be very lucrative in that regard and you look at some of the wealthiest families across the world for decades or centuries, they’ve all done this exact strategy where they’re taking advantage of the tax code.
This is nothing new and it’s not illegal. It’s perfectly legal. There’s not a lot of education out there. I think more and more people are now starting to understand the tax benefits of investing in Real Estate and then the appreciation benefits that you can achieve. You not only get the cash flow, which is past the depreciation benefits, but then you can get significant appreciation when we sell these properties and drastically grow the money. One thing that we like to implement is what’s called the 1031 exchange.
For those who don’t understand what the 1031 exchanges are, this is just like an IRS tax code strategy that’s been around for decades. You could use this for your single-family investment property. A lot of people do that when they sell a property, you take those sales proceeds and you transfer them to a new investment property. And by doing that, you can completely defer the capital gains tax that you’ve paid. You’re deferring that and not paying that capital gains tax upon that sale, which just helps to grow the money, even more, leverage it into more cash flow, and then that cash flow is then tax-free because of that appreciation benefit. This is something that we like to implement and we’re always trying to do whatever is most tax-efficient for the investor.
Prashant Kumar, CCIM – Awesome. We are getting so much great information. One thing you kind of hit was these are the tax codes. These are the tax codes written by the government, by IRS. These are nothing illegal. I mean, yes, we are trying to save taxes and saving taxes legally.
That’s what the government wants you to do. They have created there are no loopholes in any way they want. They say that the poor remain poor because they spend what they earn. Middle class means middle class because they earn and they spend and they save.
The middle class means middle class. The saving goes to the bank account or the stock market or whatever. The rich become richer because they invest smartly. To get from the middle class to a rich class, if we start saving our money smartly, you have seen it, you are the perfect example.
In four years, three and a half years, it’s encouraging to see when you are highly paid, and professional, then you quit your job and you remain there was no cash flow at that time. You were living off of your and taking all the miseries from the family and friends and in the comments and everything. The point is if we invest smartly even if you are a W2 earner you are saying that you quit your W2 jobs and go to the Real Estate.
Zach Haptonstall – You don’t have to do what I did. You can take advantage of this by investing with people like Prashant and like us and get the benefits of this and still do your W2 jobs and be passive. Grow the money by investing it wisely instead of saving it or spending it.
Prashant Kumar, CCIM – Yes, instead of saving and investing, invest wisely and invest in a conservative vehicle like Real Estate. Multifamily, multi-tenants, asset classes. There could be other asset classes also, but here we talk about multifamily a lot because that has grown over some time. Once again, we are talking with Jack Hampton Stall, he’s the CEO of rising 48. Rise 48 has risen in the last two and a half, three years, quite a bit.
The purpose of this is to motivate people who are not able to take the first steps. Get some education, and invest in some of the projects.
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