In the 94th episode of Cash Flow Pro, we talk with Zach Haptonstall, CEO & Co-Founder of Rise48 Equity. Zach was born and raised in Phoenix, Arizona. His professional background included Healthcare Sales and Administration, live television news...
In the 94th episode of Cash Flow Pro, we talk with Zach Haptonstall, CEO & Co-Founder of Rise48 Equity. Zach was born and raised in Phoenix, Arizona. His professional background included Healthcare Sales and Administration, live television news anchor, and co-host on a show on Fox Sports Network Arizona. Zach had no previous real estate experience or connections when he decided to go for it!
Zach’s primary responsibilities as CEO include overseeing all acquisitions, sourcing capital, and building strategic partnerships. He resides in Scottsdale, Arizona, with his wife, Grace Haptonstall. His goal is to Help People Achieve Passive Cash-Flow & Grow Wealth Through Multifamily.
Rise48 Equity was founded in 2019 and operated in Phoenix, Arizona. They focus on acquiring deals in Phoenix, which ranks #1 for rent and population growth. Rise48 Equity provides multifamily investment opportunities for accredited and non-accredited investors to protect and grow their wealth.
In this episode, we discuss:
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Casey Brown 0:02
Hey there and welcome to today's episode of cash flow Pro, your daily real estate investing podcast and YouTube channel. I'm here today with Zach happed install of rise. 48. And I had the pleasure a couple of weeks ago here and Zach speak to our mastermind group, we were all in there, just listening to the nuggets that he dropped on how to raise capital, where he's finding investors, how he's doing what he's doing, because let me tell you, 2019, this man, February of 2019, let's go back to January of 2019, this guy owed nothing, zero. And February 2019, he closed on his first deal I just saw when I was he and I were sitting, you're talking, I was living on Facebook, I saw a picture he and his wife in front of the first deal. I also was fortunate enough to find a picture of the finished product of the first deal. And Zack dude, killing it, man. Tell us what's going on. How are you today?
Unknown Speaker 1:02
Yeah, thanks so much case for having on the show, man. Really, really appreciate it and look forward to providing some value to your investors. And yeah, like you said, we've just been, you know, very fortunate and, and just focused here in the Phoenix market, as far as you know, multifamily value, add syndication, like you said, we bought our first deal, February of 19. And then just have really been fortunate to kind of catch that momentum and in scale from there, so we're just solely focused on the value add multifamily here in Phoenix.
Casey Brown 1:27
Awesome, new. Well, we're certainly glad to have you here. And, and I want to point out I was actually in Scottsdale, about six months ago. And while we were in, I guess, Phoenix, Scottsdale is kind of maybe all one is a metro. You're right. Yeah. Anyway, we were over in old Scottsdale, having cocktails, we had cocktail hour, like all day. And of course, my wander my wandering real estate I that is, um, I just I saw like, there was just even even in a place that's is hot. Such a hotbed of activity. There was like, there's opportunity everywhere. They're like, it's the weirdest thing. And the only thing that I could could come up with. And this is kind of how I envisioned this going about, like 100 years ago, right. So these people are traipsing across the desert, they're hot, they're tired, they're thirsty. They're everything. And they were like, huh, hell, let's just stop right here and start a city. A city in Phoenix. That's right. It's like you look out and there's, there's like, there's nothing there. Nothing. And, and so it really, and then to to kind of pancake on top over the years. The idea that that Phoenix and I grew up in Colorado, Colorado Springs, so there was a lot of Phoenix sights that would come back and forth. It's like people would get tired Colorado, they move out phase a guitar.
Unknown Speaker 3:05
That's what my dad is from my whole dad's side of the family. So I actually lived in the springs for about
Casey Brown 3:09
oh, wow, interesting. We'll talk about more of that after we after we get off I'd be curious to hear. But it's so I was like alright, so there has to be something great about Phoenix so my first time there was six months ago or back in November. And and but dude opportunity everywhere. And then like on top of that you've got Bitcoin billionaire. 19 year old kids who are driving around in McLaren's and just zipping in Lamborghinis. And I was just like, Dude, I felt like I was in a different country.
Unknown Speaker 3:38
Yeah. Yeah, no, it's you're right. It's it's crazy. I mean, I was born and raised in Phoenix. So I lived my whole life. And I mean, even in the last five years alone, it's just grown so much. And it's such a large market. Casey, most of you don't realize how big the Phoenix market is. It's, it's actually the fifth most populous city in the entire United States. The only cities that have more people in Phoenix now are Los Angeles, New York City, Chicago and Houston. Phoenix is number five for most people in the country. And it's actually growing faster than anywhere in the entire country for five consecutive years, according to US Census Bureau, so you just got all these people continue to come here, you have all these jobs, all these companies, people are making really good money. And it's and then there's not enough housing for all the people they cannot build fast enough for all the people and this has been an issue for for several years here in Phoenix always, you know, under supplied for housing ever since COVID. It's accelerated significantly. So you've got all these fundamentals that have resulted in you know, recent, you know, very strong growth the last five years but also has positioned it long term to be a very stable and insulated market.
Casey Brown 4:44
Man and it's, that's the thing now, now. We all go back. The only thing and on my show, it's pretty popular. We always kind of, we always kind of traipse back into Oh 789 10 ish that era Hey, um, and I remember I remember Phoenix and it really honestly, man, I remember the.com Bust back in like, oh 2000 2001. And like Phoenix was a desert town at that a couple of those junctures. And that has to I know, oh 7089 10 has been 13 or 14 years ago. But we're not that far separated from that in order to to comfort investors, and have investors understand that man, listen, we were built on our city was built on on some type of state, you know, now we're building on rock instead of building on sand, I guess is what I'm trying to get at as far as like, the it seems like it's a lot more sturdy now as far as income and companies that are actually looking to, to relocate their businesses there and the workforce is there. And something that something that really resonated with me when I was there, again, I keep going back and me being there. It's not a not what this episode needs to be about. But, but something kept resonating with me. And it was, it was like, even when you got down to the waiters, and the waitresses at restaurants, everybody had a very solid common goal. It seemed like they were very educated. They were very, it wasn't nothing was sloppy about anything we did there. And I was so altra impressed with the the class Enos that the area presented itself in, in my in my was maybe just over exuberant about being there, or do you think that that's something that that stands out to a lot of people?
Unknown Speaker 6:57
Yeah, no, it's a great question. Great question, Casey. And yeah, I mean, like you said, in 2008 2009, and there's a negative perception, or one of the big criticisms of Phoenix is that oh, people, so that was a boom or bust market. And, oh, 809. And what most people don't realize is that, yes, single family homes did very poorly in Phoenix in Oh, 809 as they did across the country. But you know, affordable multifamily, these Class B assets were the bulk of the demographic lives, that we focus on the actually, you know, we're pretty resilient during that time, because when people lose their single family homes, and they can't afford those luxury class A apartments, they all trickle down into these types of apartment buildings. Okay. So they're very resilient. And one of the big issues, you know, to your point in, oh, 809 was the employment base, the employment was heavily concentrated in construction jobs. And whenever there's an economic downturn or recession, those construction jobs just dry up, they go elsewhere. Well, now you have a completely different economy. It's so it's so much more diverse, so dynamic. You've got you know, financial services, healthcare, tech, jobs, trade transportation. So you've got this extremely insulated and diversified economy now, where I mean, the closest thing that we've had, I mean, obviously, looks like we're going into an economic recession now, which is solely, you know, been driven by supply chain issues and inflation, and rising interest rates, the Fed. But, you know, the closest thing we've had in recent times prior to this was COVID-19. Right? Well, Phoenix had the lowest job loss rate in the entire country, as a result of COVID-19. Not only did our apartments not see any negative impact, we actually saw significant growth throughout COVID. Because more and more people are coming, primarily the data showing from California, Washington state, New York, New Jersey, Chicago, they're coming from these high tax high cost of living places, they're coming to Phoenix, which has such strong job growth, they might be making the same, if not more money they were making before, but they're living in a lower cost of living, lower tax environment. And it's just it's a better quality of life overall. And then you mentioned the people. And so it actually is well documented the last several years, just the talent pool of the workforce in Phoenix, and that there are a lot of educated people here. There's a lot of people that, you know, are coming here from different places because they see the opportunity, right, and because it's lower density, lower cost of living, you get a lot more bang for your buck, as compared to like California, for example, or Washington State or some of these east coast, high tech cities. And so, yeah, I mean, it's you look at these these markets across the country, you've got like Arizona, Texas, Florida, the Sunbelt, you know, you've got kind of Utah, Idaho. So you got the states that people are all kind of flooding into the differences is that, you know, Phoenix is larger than any of those markets besides Houston. Okay, that we talked about. So it really is the mecca. And I think historically, it's not gotten a lot of attention because you're right, it's just the perception is oh, it's like a desert, a bunch of cowboys out there. No, it's fully. It's a fully developed city. Trust me. It's one of the biggest metros in the entire country. When we say the Phoenix Metro, we're talking about At least 15 or 20 different cities, all in this one Metro. Okay, so we own we own deals in five different cities in the metro Phoenix, Scottsdale Mesa, Glendale, Tempe, Tempe is where Arizona State University is, which is probably like 510 minutes south from where you were when you were there, Casey. So yeah, I mean, it's just this, it's this massive market that just continues to grow. And unlike these other big markets in the country, the Phoenix Metro is not geographically landlocked. Okay, it continues to grow further and further out into the southwest and southeast, literally into the desert. Okay, so all these companies keep coming here. I mean, you name some of these big companies. Go ahead. Go ahead. Well, I was
Casey Brown 10:37
just gonna say that it. The other part of that, that I didn't mention about these guys, just stopping in the middle of the desert, saying, hey, let's put a city here is the fact that there is a essentially, almost enough area for infinite growth. I mean, obviously, everything has its limits. So using the word infinite in anything is not not wise, but I'm just saying it could like, it can just continue to grow. It's like, and everything is square, like, like, you know, your blocks your streets, everything
Unknown Speaker 11:06
was on a grid, it's on a grid. It was,
Casey Brown 11:09
man, I don't know, I just I am touting the Phoenix market. And I know that that's what drives the idea that a lot of people want to invest there is simply because of everything that we're discussing. And, and you know, there was a few little foothills off, I remember what direction we were headed, but there was a few foothills that had that were kind of right outside of the city. And, and not to mention, you know, they do a really good job with professional sports. I mean, so that's, that's a big draw, too. And so anyway, man, I you know, with that being said, I want to talk I want to reverse back just a little bit, and talk about your first deal, like, and what's your first deal? Was it a syndication? And if so, was it a B, or a C, five, or six, B, five or six C? What did the framework of that look like? Because a lot of people listening could either be beginning capital raises, or even even beginning investors that want to know, like, how, how things get started, and where this kind of stuff comes from?
Unknown Speaker 12:17
Yeah, great question, Casey. So you know, when I started to give people context, I had no background no experience, not only in multifamily, but in real estate period, I don't know family connections, no rich uncle, I just came from like a lower middle class, normal family, right, my parents have w two jobs, you know, making average wages and so. So I had no idea what I was doing. I quit my job in January 2018, lived off of savings for over a year, before we even closed on the first deal. And it took 10 months for when I quit the job just doing this full time to actually get the first deal under contract. And so the idea and the strategy was to try to syndicate the deal. Okay, so it was my partner and I, Robert, you know, we tied the deal up, we just put 25k of non refundable, earnest money up. And it was a 36 unit deal, about 3.4 million purchase price, we needed to bring about 1.4 million of total equity. And the plan was to syndicate it right. We've been talking to people in the previous months, and they're all saying they're interested. Well, you know, once you got, you know what I like to call live bullets, and you're under contract, ask him to go, now it's gone. And, and all those people disappeared. And I'm like, Hey, you're not getting back to me. Like, oh, crap, RS means refundable. The money is not coming in. And when you're starting out, you don't have a track record. I don't blame those people for not investing with us, you know, so it, it was it's a grind, it's never like, like from the outside. When people see people on podcasts or social media posts, they think, oh, that person is so successful, they've got it together. It's a grind, man. And it's always very scary. And obviously, we've gotten we've been forced to be more efficient, and execute and build a track record. But in the beginning, especially, you have to bootstrap it. And so I had about 165k of cash left. In my savings, I put 160k of that into the deal. So I was all in and my thinking was first off, I need to eat up this 1.4 chunk, we need to get it down to zero to close. And second, if I put a big chunk of my own money in. I'm hoping I can attract other people by showing that I have significant skin in the game. Yeah. My partner, Robert. Yeah. So I was like, I'm all I wanted to tell people I'm all in I believe in the deal. Let's go. Robert put 275. And fortunately, by the grace of God, I found a 1031 exchange, somebody was selling a 12 unit deal in Seattle. And they had about 650k coming out of the 1031. And so we brought them in and actually did a tenant in common or a tech structure, which I had no clue what that even was until that point. I had never even heard of it. Okay, so
Casey Brown 14:46
give Sam that gives him direct ownership of a share.
Unknown Speaker 14:50
That's right. Yeah, you can bring in an exchange and you have these we have these what are called tenant in common which stands for tick you have different tick LLC, so I had a tick LLC. Robert had one and we had this 10 31 exchange so there's three tick entities. And, you know, I met our third partner at Rice 40. Pick Ron, I met him while we were in escrow and somehow talked him into putting 150k in. So I got him and, you know, weasel him into the deal. And, and then, and then we found a couple other people to round it off. And so, so yeah, we did not syndicate it. It was just a handful of us putting in our own big chunks of money to get the deal done. And it was a very, you know, long stressful Astros.
Casey Brown 15:28
Sorry, so So we're, I want to pause real quick, because there's a couple elements of this, I want to I want to pluck out so that we can get a little more a little more depth on. First part of it is, so if it's a tenant in common structure, that is an alternate or basically a different way to raise equity for a deal. That's, and that makes it not a syndication, correct. That's,
Unknown Speaker 15:53
that's correct. Yeah. I mean, there are such things as what's called a tick syndication, you can do that as well. But what we did was no syndication, meaning we had no passive investors, everybody in the deal was considered active, and the rules of a tick agreement. And I'll give the disclaimer, I'm not an attorney, consult your attorney. But we've done some of these now, so I'm pretty familiar with them, is that each of the tenant in common entities are the tics, so to speak, have to have unanimous voting rights. Okay, so So let's say, Casey, and I want to go buy a deal on Casey, it's a million dollar equity raise Casey puts in 900k, I put in 100k. Well, Casey is going to own 90% of the deal, and I'm gonna own 10% of the deal. But for voting purposes, were unanimous, okay, no matter what, and so if we don't agree, then you're gonna have problems, okay. So you have to make sure whoever you're, you know, quote, unquote, getting in bed with you, you have a good relationship and, and you see eye to eye because if I want to sell in case he doesn't want to sell, we don't sell and vice versa. And so you have to have with the tick, you have unanimous voting rights. And the cool thing about the tick structure is that you can, you can efficiently 1031 exchange and do it and 1031 Exchange out of it. Okay, so for example, we brought in 110 31. Exchange, that was one tick, and we just put two other entities together with cash in them for the other two ticks. Well, when we sold, you know, the two of us two ticks did not 10 Three, one because we wanted liquidity we cashed out, and then other times the other tick did do a 1031 out. So you can you can use the 1031 exchange to bring in bigger chunks of money to do the ticks. You can also do what's called the ticks indication where you guys get rid of that. My next question. Yeah, and we've now done a few of those. And so basically, you know, how it works is we just closed the deal a couple of weeks ago, I'll give you an example. You know, we sold two properties recently, we recently sold two different syndications, right just to one LLC, syndication, hundreds of passive investors. And upon the sale, we tend to 31 Exchange both of them into this larger deal so that our investors can deploy their capital gains tax, and they have the option to participate. And then for that larger deal, as part of the 1031 exchange criteria, or requirements, you have to always be buying a larger deal than what you sold, right. So there's always a Delta of fresh new equity you need to bring in. And so we had to, we had to 1030 ones that are coming in buying the property directly. So the 1031, that entity that sold the first property has to own the replacement property directly, it cannot own shares of another entity, okay, it has to own the property directly. That's why it creates a tenant in common. So you have these two entities owning this property directly that have been 1031 Exchange, then we form a third new entity, which is we're raising all the new money from outside investors. And that becomes the third tenant in common. So you got three tenant Commons. And the reason we do it feel comfortable from a syndication perspective is because we control all the TIG entities, right? So we're not worried about some outside person, animus
Casey Brown 18:42
having a union, Jack Daniels voting, I
Unknown Speaker 18:44
mean, all of our investors are passive investors, and he's entities, we are managers of all of them. And we control that. And so that's why we feel comfortable doing that. So we've done, you know, variations of those. But yeah, I mean, it's, it's a good strategy, especially, you know, if you have a first deal, and you can find one big chunk of equity, you just have to understand that, you know, with the unanimous voting right rules, and by taking a big chunk of equity from any investor, there's always strings attached, right. So you need to make sure you feel comfortable with them. And you have a good working relationship.
Casey Brown 19:16
Yeah. And so the second All right now now I'm gonna pluck a couple things out of that to dive into the second question from the original plucking that I did here. Where did you so you are in Phoenix? Yeah. How did you come across an investor or somebody doing a 1031 in Seattle? Was it random calling was it?
Unknown Speaker 19:41
Yeah, good question. Yeah. So it was, um, it was through conferences. So I started going to conferences in Dallas. And then I joined a mentorship group based out of Dallas. Kind of like you have a mentorship group, Casey. So I joined a mentorship group. That's actually where I met Robert was in a conference in Dallas. We both happen to live in Phoenix and we met each other in Dallas. Okay, you In Phoenix, me too, will try to do the same thing. Let's partner up. And then I met this 1031 Exchange investor through that group. And then I also met Big Ron, our third partner. Now, Robert Baker and I met through this group and this didn't all happen overnight. Casey, you know, this was a long process. I've probably, quote unquote, dated seven or eight different business partners before this point, because you're meeting people, you're, you're like saying, Oh, you want to do this, let's try to work together with underwrite deals, and you start to find, you know, people that work, people that don't work as complementary skill sets, things like that. So it takes time. But yeah, I mean, if you're trying to find not only investors, but business partners, you have to really get out there, you know, and there's obviously a lot of virtual group meetings now, which are okay, I mean, they're not bad. I don't like them, honestly, because I'd like to just get out there and meet people. But but you can get value those, but I think if you can go to in person meetups, you can start flying to conferences, meeting people, you're gonna find like minded people. Because when you're trying to do this, what I found Casey was that I like self educated myself, like the first three to six months, right? Like not knowing anybody in the industry. Same as you, right? You and I are the same, like, we don't have any connections. We just aren't listening to podcasts, right? Like this one. Start reading books and start figuring this thing out. And you start to conceptualize it kind of like you and I were talking before we started recording here today. And, and then, you know, I started reaching out to like, what I call normal people who are not who don't know about this, and I'm trying to like sell them on and explain it. It's like a foreign language. Well, then I start going to these conferences, and I'm like, Oh, my gosh, no longer a foreign language. They all understand it. Exactly. It's all it's like, like minded people who are looking for the same thing as you. And you have, it's just like you said, it's like going to, it's going to a foreign country, to your home country. And you just feel like you fit in the culture, you can speak the same language. And so when you're trying to do these things, you have to be around people who are also trying to do it, because they're going to understand what you're trying to do. And then you can start to find those synergies.
Casey Brown 21:57
Yep. Yep. And that's, that's exactly right. And, and, you know, there's so many gurus out there, there's so many people. And one thing that really, as I started myself started getting into the business world. Man, there's there, it brings to mind real quick, the people out there who, who are trying to monopolize their relationships in a way, or capitalize on their relationships, in a way by selling it back to everybody else. It's like nobody with a lot of different industries, nobody will tell you anything about that industry, but you pay them they'll teach you all about it. Right? Right. So and that was one of the my big and the annoyance factor is when I first started coming in, because I was like, Man, this is like, like, I mean, is it really that difficult for somebody to just say, Hey, man, check that out over there. They'll help you out. And once I started getting with those people at the conferences and starting to figure out, okay, hey, this is the language these guys talk. Once they know you're serious, you're in business you don't want me to do it took me forever to get my first sign letter agreement. And that was a me telling a guy I'm gonna go to work for you. I'm not gonna it's not gonna cost you anything. Capital. Yeah, right. And and once I, once I mentioned, the, my mentor, once I mentioned Hunter Thompson, the guy was like, Oh, I'll have that silent area when my quiet like that. But he was I haven't saw that, or do you tomorrow by 10 o'clock. And so it was it was immediate. And I don't even know why I'm kind of rambling here. I know, I'm trying to tell you,
Unknown Speaker 23:34
but you're right. When you can find these people with the perceived credibility, you know, it just helps gonna get you and there's all these people trying to do it. And so other people we're trying to sort through, you know, are you credible? Are you legitimate? Should I spend time with you. And so you have to kind of, in the beginning, you have to kind of, you know, lend other people's credibility, or, you know, kind of draw from their credibility by associating with them, right to kind of get into
Casey Brown 23:54
it. Yeah, and most conferences, and then that's it. And again, I feel like we have as, as an industry, we've got a responsibility to just do nothing more than educate people. And that's what I was on a, I was on a podcast not long ago with a guy whose self directed IRA stuff. And I'm like, Dude, if like, if these people just had an education, I'm like, How long has the financial industry kept all this stuff beat down so far? Right? People don't realize, hey, they can do these things with their own retirement money. And so anyway, I know again, that's quite a bit of rambling. There's just there's a lot of stuff there to unpack and figure out hey, find your way. Figure it out. But I love the conference talk there because they are so valuable. And again, if it does nothing else, it brings back the idea of of just doing something right it doesn't know you do everybody's always worried about not doing anything because they're scared whether it's gonna be right or wrong. I got news for you. 90% of what you do is gonna be wrong. But you have to do the 100% in order to figure out what 10% is, right?
Unknown Speaker 25:05
Right. You got to just jump, you gotta jump in there, right and just be taken action, and get put yourself out there and push your comfort zone. And going to these events is better than doing nothing, right. And you never know, if you'll meet that one person. You know, I've spent over 1000 bucks 2000 bucks to go to these conferences. And sometimes I'm like, especially in the early days when I was broke, and I had credit card debt, trying to make this happen. I was like cringing, I was like, Oh my gosh, is this the right decision? They have to tell yourself well, I'm only one relationship away from from achieving my God, dude,
Casey Brown 25:36
you nailed it. And that 6000 That $650,000 1031 Exchange guy, man, that was that was your that was your unicorn. I mean, that was he was there and ready to go. And, and, again, I've been fortunate in my real estate career to to be very, very well educated in 1031 exchanges. So so that that that whole talk resonates with me, because I've so many times. And one thing, one thing that I've noticed about 1031 Exchange ease being the person who's getting ready to do the 1031 is there's always an element of panic within them. Yeah, it's like, it's like, you know, and I've, I've so many times had to stop and say, Listen, all we're doing is trying not to pay taxes here. This is not a this this. It's a timed race. But at the end of the day, if your tax liability is capital gains rate, it's 2021 22 23%. And you go out and you overpay by 40% for a property, which of the two would have been the most viable option? Right. So with that being said, let's slow down. Yeah, put it in context, right, and make a decision that's going to be valuable for for you in the long run. So anyway, all right, Zack, I don't even know. Since we're using a different program, I lost track of time here. But I want to make sure that we stay on time for you for whatever you've got going on. But what do you all what does the future look like right now? How does obviously, the ticking up interest rates is a little bit of a challenge. Oh, real quick, before we jump into that, I want to talk key partner real quick, because a lot of people out there and I know that that probably came through relationships and so on, but a lot of people out there are like, Okay, how do I so I know where to source my capital for the equity, I know where to find the private equity, quote unquote, you know, for the for the, for the equity portion of it, but then how did you secure the remaining loan or loan? Whatever it was for the balance?
Unknown Speaker 27:46
Yeah, good question. So yeah, I mean, that's a big part that people don't really talk about. And it's, you know, the bulk of the capital stack is the loan, right. So you have to qualify, and these lenders have a lot of, you know, different thresholds that you have to meet in order to apply and qualify for these loans. And so you have to have as a, when you sign the loan that's considered or called a guarantor, also known as a key principle, right. And so depending on the lender and the size of the loan, you're going to have to have at least 50 to 100% of combined net worth among your guarantors. So if Casey and I want to buy a deal, and we're the only two standing alone, we have to provide a personal financial statement to the lender, which shows all of our assets, liabilities, liquidity, cash, etc. And we have to have combined net worth equal to 250 200% of the loan amount, okay, so they're gonna look at what's your net worth to qualify for this loan, they're not going to just loan millions of dollars to anybody, you know, and especially the beginning, you don't have experience, it can be more difficult to get those loans, right, you also have to have a certain percentage of liquidity, you have to have X percent. And anywhere it can be anywhere from I mean, 10%, five to 10% for very large deals, maybe higher for smaller deals of liquidity, meaning cash, you know, stocks, whatever liquid assets, and the lender is going to ask for that you have to give them your bank statements, the last 90 days, the last three years of tax returns, you're going to go through full underwriting background checks, etc. And so, you know, for us, that was really the big value that Robert brought initially, I did not have net worth and liquidity, my net worth was like my cash, which was almost 300k. So my net worth was like 300k. Okay, and 2018 2019. And that was also my liquidity. That was everything. Okay, I owned a house. And that was about it. And so, so, you know, Robert had had higher net worth high liquidity and brought a lot of value in that regard to help us sign on the loan to kind of satisfy those requirements. And so, you know, there's a lot of sponsors who, you know, maybe, let's say, Casey and I are just starting out and we want to buy a deal. We don't meet those thresholds. Well, we can go find somebody who is like a guarantor or a key principle and you can actually compliantly compensate them somehow, for signing on the loan, okay, you cannot, you cannot compliantly compensate any way to raise capital or to do anything like that per the SEC requirements. And I'll, I'll give a disclaimer, again, I'm not an attorney, right? Consult your attorney, but you are able to, you know, compensate somebody to sign on a loan and basically lend their balance sheet to you. So you have to look at what those lender requirements are. And then you wanna look at different provisions to like recourse versus non recourse, everything we've done is non recourse, meaning that if the, if the property fails and goes bankrupt, the lender cannot come after our personal assets for signing on the loan. Right? They're just going to take the property. And that's it. And so, there's different things involved that goes into getting the financing and your financing, and community anywhere between 60 to to 85%. of the total purchase price, right? So they are the biggest investor really. And you need to get them them secure.
Casey Brown 30:54
Yeah, and we're in that. What type of loan did you use? Just a regular?
Unknown Speaker 30:58
Yeah, it was it was, yeah, it was a Freddie Mac, small balance long Freddie Mac small balance loan. So it was a five year loan, interest only payments, non recourse? I think we had around 70 75% loan to value. And then, you know, pretty attractive prepay penalties. And so yeah, that was the first loan.
Casey Brown 31:17
Awesome, awesome. Well, that's great, man. I mean, that's, again, those are the portions like you said, it's not the sexy part. It's not the it's not the everybody wants to raise capital and, and procure relationships and be the big dog on top of the hill. But, but finding that guy, or lady in the back of the room that doesn't care anything about any of the glitz and glamour, and that they just want to make money, that have that ability to say, Hey, let's go get this 10 million 20 million $30 million loan? That is that's that's the non sexy part. And I think that's why we don't hear a lot about it. So we're What does rise 48? What is what's on the horizon here? And, and, and obviously, kudos to you all, I don't know if I mentioned in the beginning, but 1.1 billion AUM assets under management, since you started in 2019. Which, which basically means basically means you all are, as my grandfather used to say, what does it kick an ass is and taking names or typing names and kickin acids or whatever it is. So that that's that's a lot of what you all are doing. So tell us what, what it looks like and what going forward looks like.
Unknown Speaker 32:27
Yeah, great, great question case. Yes, like you mentioned, I mean, since we started, we've purchased 34 deals all here in the Phoenix Metro, over a billion dollars, you know, about it's about 6000 units. And I mean, just here in 2022, we've purchased 12 properties, over 2000 units just in 2022. So we've had, you know, our strongest momentum ever. And we're very bullish on multifamily as an asset class, and we're very bullish on the Phoenix market, because the fundamentals, and we were sitting here recording this, what third, third week of June 2022. And the fundamentals have never been stronger. Okay, for Phoenix multifamily population growth, job growth, rent growth never been stronger, even in the last several weeks, as the economy is essentially tanking, we've had no problem renovating our units, leasing them up above our projected rents, increasing the value of the asset. So we're very bullish on our entire portfolio is excelling. You know, we've now gone full cycle, successfully executed the plan and sold 10 different assets for selling one more here in July. So we've sold several these deals, they've all been homeruns for investors. And so we're we're aggressively pursuing deals. However, with all that said, you know, as we record this, the interest rates have obviously become extremely volatile. Right? It was just last week they did, the Fed did a 75 basis, basis point increase their largest increase in several years. And so, you know, the last six to eight weeks, we've been sending offers, like crazy, and we can't even get close to the seller expectations for pricing. Okay. And it's because we're having to assume such a high interest rate, by the time we close in 6090 days, that the deals don't pencil, we cannot hit our our projected investor returns. And it's not that I mean, people say well, then our value is going down. Not necessarily because the sellers aren't selling them. They're just not selling them. You know what I mean? Like in the model, we can't offer nearly as much it's we're at like a 10 to 20% discount from where we were a few months ago in the model. But sellers just aren't selling, you know what I mean? And so, you know, we're seeing a significant slowdown. You know, a few months ago, we had 10 deals under contract. We have just one more, we're going to close here in July. And then that's it. We have nothing else in our pipeline. And so, you know, we're aggressively making offers, we think that it's definitely switch to a buyers market in the last two to three months across the country. It's been a seller's market for the last five plus years. It's all of a sudden a buyers market. And we're active buyers and active sellers, right. So we've, we've we've already sold five deals this year, we bought 12. We have one more that we're one more that we're buying one more that we're selling and so, you know on the selling side, we're not going to list any new property He's for sale right now, because it doesn't make sense to give a discount due to this, you know, resale
Casey Brown 35:05
and let let there be a little right stability or be a little, like everything's gonna settle and financially, you know human nature, we want answers we want them now we don't want to have to but but financial in the big markets, you know they and a lot of people don't understand the trading of bonds and the short and the long and the, you know the option stuff that's involved there as far as bringing the ability to bring retail money to the market and have it hedged against these kinds of things. And so again, because it's not sexy to talk about that stuff, it's very technical, it's very everything so, so let the stuff settle, let let them continue to either pour gas or time the flame whatever, and let things settle, then go forward. Don't just want answers. Now let's start. Because that's, that's where, you know, that's where it becomes an irresponsibility towards your investors. Really, if you are making decisions and hell this thing's never going to turn around. Oh, no, you know, don't don't say it's never gonna turn around to your to your three years into a bear market. I mean, then, then you might have some of those. It's never going to change, right ever to change mentality. So Well, listen, Zack, we're getting towards the end of our time here. And we have a couple of questions. We ask everybody that comes on the show. There's no right or wrong answer. But the first of those questions is what is the best book that you have either recently read or are currently reading?
Unknown Speaker 36:38
Yeah, so there's a couple of books by the same author and I saw I do audiobooks. And I mostly listened to like, I listened to these every week. And while I'm working out, both are by Tim Grover, called relentless and winning, Tim Grover was the former personal trainer for Michael Jordan and Kobe Bryant. And so I really like you know, his mindset. And I tried to adopt that myself and apply it, you know, to our business, and it's really just about, you know, being mentally tough, and, you know, just relentlessly attacking your goals, and trying to be elite. And so I really like those books, I'd recommend those relentless and winning, by Tim Grover are a couple that I'm listening to literally every weekend for like the last several months, I just listened to different chapters over and over. And that's great.
Casey Brown 37:21
One of the, one of the Michael Jordan isms, I actually met Michael back in 9697, met him two different times 9697, right in the middle of his, his runs right in the middle, both of those runs that those years. One thing that I that I remember very vividly is, you know, he is number 23. His brother was number 45. And he picked the number 23. Because he hopes someday to be half as good as his brother. And I've always thought that was very interesting that he became probably a million trillion, zillion times better than my brother. But anyway, so next question is what is the what is a dream vacation that you have either taken or hopes take?
Unknown Speaker 38:05
Yeah, so it's funny, I don't really like going on vacation. Casey, I'm on. I'm honestly not a vacation guy. We just went we went to Hawaii. But grace, my wife and I went to Hawaii a few weeks ago. And we had postponed this for like a year and a half. We've been so busy. Twice, we actually canceled it. So some people are gonna think I'm a jerk. Not a good guy. But honestly, I don't like vacation. Because I'm so excited and passionate about, like what we're doing right now. And I'm always gonna go go, I just can't, I can't stop. I get anxious. I don't like to relax. I would rather just be relentlessly attacking my goals. And so I was actually unhappy, very unhappy on the vacation. And I even told her I said, I think Hawaii is the most overrated place in United States, because it's just not like a beach guy. So it's like, so yeah, I honestly I don't want to do a vacation. I think a good I think like July 4 is coming up. So we're just gonna stay home for this three week and that'll probably be a good vacation just kind of hanging out.
Casey Brown 38:58
Yeah, sometimes just just disconnecting. If you don't do anything else, just just decompress and disconnect. One thing I would encourage you does is you sound a lot like myself and I really didn't start finding enjoyment and travel and things until I started immersing myself in other cultures. Because there is a great big wide world out there and culture was something that I just really like, as I said on the podcast not long ago, some people go for sunshine. Like you said, I just I could care less about the sun. I could care less about Hawaii. I could care less about anything that has to do the beach. Send me to I always say like harbors wall. Go knock on somebody's random somebody's door. Go in and just let's watch them cut pasta and
Unknown Speaker 39:47
break bread. That's cool. Yeah. And that's, that's good. And we don't have kids. I mean, we Oh, yeah. We're five kids. You want to have like four or five kids. I'm sure things will change.
Casey Brown 39:56
I've got I've got five and you really okay, I'll ask Are you want a little test drive my friend? Anytime, anytime? All you have to do is Yeah, yeah, all you got to do is say the word you're, you're gonna meet one of them. We're at a conference so but anyway Well listen man congratulations on everything brother not and I hope I hope that you all are just continue to be blessed with everything that that has has been thrust your direction because it's it's you all are doing well and we're definitely always glad to have good success stories because because not everybody gets to have that so anyway but man, tell the listeners if they liked what they've heard if they want to reach out get in touch with you possibly even invest with you all or learn more about rise. 48 How can they
Unknown Speaker 40:43
do that? Yeah, I mean, first of all, thanks so much. Thanks for the kind words for having us on really appreciate it. Man. It's been an absolute honor. Luck as well and 3000 capital. But yeah, I mean, if you want to learn more about us, you can go to our website rise 48 equity.com. So rise for eight equity.com You can actually set up a call with us if you want to learn more about what we're doing through that website. You can also email me Zack Z ACH at rise. 40 equity.com and happy to talk to anybody who's interested in learning more about what we're doing. So first,
Casey Brown 41:13
and I will vouch that when you schedule a call with Rhys 48 This is the man at least for now that you will be talking to
Unknown Speaker 41:22
you and it's right. I called you myself always.
Casey Brown 41:25
We we always we have a thing in res masters and hunters. Like I've talked to Zach about this. I've told him to outsources investor relations and get somebody on board they handle these calls and and he's and anyway, but man that's that's great. Everybody has their their thing that works and, and you know if it's working Dude, that was said don't fix the don't fix a wheel that ain't broke. So, but anyway, well, good deal, man. Well, thank you again for being on the show. And listeners. If you liked what you heard today, head down, scroll down, give us a five star review. leave a review and tell us what you thought about the episode and what you think about our podcast. And again, head over talk to Zack schedule a call with him. He'll be glad to chat with you and tell you more about his company and more about their strategy. And again, Zack, thank you so much and I hope everybody has a wonderful rest of the day.
Transcribed by https://otter.ai