Join us today as we bring on Zach Haptonstall on Elevate Your Equity podcast. Zach is the Chief Executive Officer and Co-Founder of Rise48 Equity. Highlights on the show are scaling a multifamily business at the age before 30 and the importance of having a strong mindset in growing a massive trajectory. More topics include:
• The power of the team and what it's enabled for him
• The one thing that holds people back from scaling
• Things to look out for in the medium term on the properties that he's operating
• What are the strategies to insulate his investors from risks
More about Zach, his company has completed over $1.5 Billion dollars in transactions in just 3 years since it was founded in 2019. Rise48 Equity now has over 100 full-time employees in Phoenix. Zach’s previous 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.
Zach holds an MBA from the Colangelo College of Business at Grand Canyon University and graduated Summa Cum Laude with a Bachelor’s in Journalism and Mass Communication from the Walter Cronkite School of Journalism at Arizona State University.
Zach has been a licensed Real Estate Agent in Arizona since 2016. He is also an official member of the Forbes Real Estate Council, a Directors Council Member of GPEC, and is a #1 Best Selling Co-Author of “Success Habits of Super Achievers.
Get to know more about Zach and his company by visiting his website at Rise 48 Equity. Email him at email@example.com. You may also search for him on LinkedIn.
Thanks a bunch, Zach Haptonstall for coming on the show!
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Welcome to the Elevate Your Equity podcast where we, as married busy professionals, leverage real estate investing to unlock the three plus one degrees of freedom, health, location, time and financial.Derek Clifford:
And today, we have none other than Zach heptonstall. And Zach, if you don't know him is the Chief Executive officer and co founder of Rise48 Equity. We just completed over $1.5 billion in transactions in just three years since it was founded in 2019. And rice 40 equity now has over 100 full time employees and Phoenix, Zach's previous professional background includes healthcare sales and administration. And he's the former president and co owner of a hospice organization in Phoenix, with also over 100 employees and 9 million in annual revenue. And he was also it's interesting guys, a former live television news anchor and sports reporter for Arizona PBS. And he also co hosts a show on Fox Sports Network Arizona. So Zach, man quite an introduction. But if there's anyone that fits that description that is you my friend. So Zach, welcome to the show.Zach Haptonstall:
Thanks so much, Derek, really appreciate you having us on here. And we're looking forward to provide some value to the listeners here today. So thanks so much. Appreciate it.Derek Clifford:
Yeah, absolutely. You've got such a diverse background. So just cannot wait to get into the details here. But before we do, why don't you tell us a little bit more about who you are as a person, including how you get started investing in real estate throughout this whole very diverse career background?Zach Haptonstall:
Yeah, absolutely. So probably like, you know, most listeners, a lot of people, you know, I don't have any experience or connections in real estate. So I just grew up in like a regular, lower middle class family. You know, my parents just had like regular w two jobs. And like most people, you know, I was taught, you know, you go to school, you get a degree, you get a good job, you save for retirement, et cetera. And so, so I always had, you know, good grades going to school, I really wanted to be like a football player. So I actually had a I had a football scholarship to like a division two school, out of high school, and did that for a little bit and then realized, you know, I wasn't really good enough or big enough to go to the NFL. And so then I was like, Okay, well, what's the next best thing? I want to be a sports reporter, right? So I went and I got a journalism degree. And like you said, you know, I was a live news anchor sports reporter fares on a PBS for a short time that that was really cool at first. And then when I got into it, I realized, you know what, you really cannot make any money in journalism. And it's not like what I thought, you know, it's when it's your job, it's not really as fun as when you're a fan. And it just wasn't, wasn't what I thought with all the politics, and how much you're working and, and really not making enough money. So I realized that was not my passion, you have to be passionate about that, to really do that long term. And so you know, I needed to make money. Because I basically had taken out student loans, and I was paying for school out of pocket. I was working full time, nights and weekends, you know, 40 4050 hours a week, while I was going to school full time delivering it was like an odd job. I had gotten through a girlfriend of the times, dad, like I was delivering medical equipment nights and weekends. And so you know, I had this school that I was like, I want to get out of this. I want to become, you know, more financially secure here. And I had read, I had read Dave Ramsey, the whole Dave Ramsey book, like my, it was only my freshman or my sophomore year of college, right. So I was already trying to teach myself about these things. And my parents really did not have a lot of financial education that they provided to us. But yeah, so anyways, so I ended that I wanted to healthcare marketing, working for a hospice organization, um, just kind of an odd job that I had gotten through that healthcare delivery job, right. And the whole point is that you can make pretty good money coming out of the gate. So I remember when I first started, I mean, my first job was making 35,000 base salary, then a few months, they gave me a raise to 55,000. And then a couple months later, I jumped into a different company was making over 70,000. So I was like, Oh, this is good, I can actually start making a lot of money, you know, in my early 20s. And so long story short, I did that for about four years. By the time I was 23, I was making, you know, well over 100k A year 150k A year, I bought a house when I was 23. I paid off all my debt, cash for my bachelor's degree. And then I was pursuing my MBA. So by the time I was 24, got my MBA, I paid that off cash. And so you know, I was very fortunate and blessed to be making, you know, a high w two income making more money than both my parents combined. By the time I was like, 2324, but I just got burnt out, you know, I just wasn't that was not what I wanted to do. My goal was to try to pay off debt become somewhat financially stabilized and, and I was not happy and so, in January of 2018, I resigned and I sold my equity in that company, okay, and I, I didn't know what I wanted to do, but I knew that I had no time to figure it out. Because I was constantly you know, in this rat race hamster wheel, you know, where I'd never had never do any Besides a W two job and so I knew that somehow I wanted to create money or passive income through real estate to gain back control of my time. And I just kind of had to do that to kind of figure it out. And so first I was looking at flipping homes, and I quickly realized that's transactional. It's basically what I just left to doing, you know, have a W two job and making commissions that I started learning about investing. And I really was enthralled with mobile home parks, I cold call, you know, over 90 Plus mobile home park owners, my plan was to try to buy something on a seller carry. I mean, long story short, it didn't work out. But I stumbled upon multifamily and syndication, okay. And that really interested me, because coming from healthcare, I had a lot of physicians, health care, business owners, health care administrators that I knew that were part of my network, just as part of my old career. And I was like, You know what, these people have money, they don't have any time, maybe I can leverage my time and expertise if I can learn to do this, to really start raising money. And that that was really exciting to me, because my whole thing was that, you know, if I'm going to do something, I'm going to start a company, I wanted to have enormous potential, I wanted to have enormous upside, because it's going to be so hard, I knew at the time to get it going, I don't want to do something that's not just going to blow up. And when I started learning about this, I was like, You know what, there is no ceiling to what you can do with this type of structure. And it was very intimidating, right, the big numbers, etc. But anyways, long story short, I burned through savings lived off of savings for over a year, trying to figure out how to buy the first property, 14 months went by when I quit that job. So now we're February 2019, finally bought the first apartment property 36 units, three and a half million, it was just me and a few other people, we all put in big chunks of our own money. And that gave us a lot of momentum going forward to start syndicating these deals, raising money from passive investors. So since then, we've purchased 35 different properties worth over 1.3 billion over 6000 units all here in the Phoenix Metro. And we've been very blessed and fortunate to kind of scale. But that's kind of how we got to that point.Derek Clifford:
Yeah, that's an incredible story. I think that this right here is living proof that if you are willing to work, because that's kind of a common theme that I've been noticing throughout the entire, you know, story that you have brought us to for today is that you are not afraid to work throughout this whole process. You said, you know, I've got to do what I have to do here, I'm going to work really hard and get, I gotta fix the situation by working. And I really respect that. And just wanted to ask you if that was kind of the common thread that you can identify through all of this? Or if there's anything else at play that helped bring you to where you are today to get into the multifamily side? No, thanks. Yeah,Zach Haptonstall:
I think that's a great point. And you're exactly right, I think you have to truly have like a grinder mentality where you are going to go through a ton of adversity. And I don't like to be, you know, self promotion or anything like that. But I think when I look at people who are successful in this business, or in life in general versus those who are not, I think it comes down to, you know, focus, discipline and resilience. It's like, how bad do you want it? How focused? Are you going? Are you going to stay on it? Are you going to withstand, you know, endure all the adversity that's going to come at you? And then yeah, are you going to outwork other other people, because you have to be able to outwork your competition. And the tough thing about starting a business like this there, because a lot of people maybe have started to see is that, at first, even for the first year, like I wanted to work hard, and I was hungry to work hard. But it was so frustrating, because I didn't know what to do. So it's like, I wake up in the morning, it's like, what do I do to even move the needle? If you were just telling me what if somebody tells me what do I do to be successful, I'll go do that. And I'll work harder than anybody else. But you don't even know what to do. So it's like, it's this tough thing. Because you have to kind of create, you have to be able to create these opportunities for yourself. And so you go through, I went through this process where, you know, I really like kind of lost my self identity, because I went from being like, in all humility, like the man and that healthcare industry that was dominating that industry, you know, top in the industry for several years. And knowing what you need to do to be successful. Now you don't even know how to really get towards success, and you're not sure where to start. And there's nobody to hold you accountable. Nobody just show you, you know, a map, I think that's the biggest difference between being an entrepreneur and being like an employee is that as an entrepreneur, you have to embrace the fear and the risk in the unknown. And you can only experience it by doing it. And so everybody's going to be scared to do it. It's just how long will you withstand it? And you'll kind of growth that process. So I think there's all those things are components of that.Derek Clifford:
Yeah, so true there. I mean, I noticed the same thing when I went out on my own as well is that your identity gets tied up in what you do. And once you leave that, it's like what's remaining, you know, because we've been trained as young kids and as adolescents that you build up towards a career that you get through college, through graduate school, and you're supposed to be working to a career and then when you exit that whether it's willingly or unwillingly and you try to step out into the unknown if there's kind of this drag where it's like, Well, what was all that for? Like, am I really willing to wait? Yeah, yeah. And what's what's interesting to to note is that all this stuff happens at a subconscious level to at least that's what happened with me. No, you're right. Yep, these things sort of drive your decision makings that you don't even, you're not even aware that you're making decisions you're making, right? Like you're. So sometimes it takes a little bit of like a pattern interrupt, or a different way of thinking to help bring this to light, and then bring it out into the surface. And so I think that you being able to step out of the pattern and look at, wow, you know, this way of passively creating income, a scalable business, leveraging the people that I know, would want to hop on to this wagon, as it's moving, you know, the the former medical professionals that you used to work with before, I think that was just really, really smart. And that's a testament of being able to put the pieces together and step outside of that comfort zone early on. That's just my two cents on that.Zach Haptonstall:
I think. Yeah, I think you said, I think you made a great point, Derek, that is, so much of it is subconscious. And I and I would even be going months on end. And you don't have tangible evidence that you're making progress, which is very frustrating, and discouraging, because you're like, am I even doing the right thing? And there's no way to tell you if you are you are, and I started reading different books, and I started realizing later on in retro sprek retrospect, you do start to realize that there's a lot of stuff happening subconsciously, as you're going through that adversity. And so I guess my advice people trying to get into this is that keep like stay focused, stay disciplined, keep pushing towards the goal, because you are changing subconsciously. And you are learning things that are going to help you you're gonna mean in an impact your confidence, your experience, things going forward, but you cannot quit. i My whole thing is like you can't be afraid to fail, right? And the only way, the only way you actually fail is if you stop trying, right? Even if it takes you 10 years to go buy an apartment building, you didn't actually fail unless you just stop because then you'll never buy one. Right? So I think that's a good point you make?Derek Clifford:
Yeah, love it, love it progress. It's often dressed up in in coveralls, right, or successes dressed up in coveralls. And it's only truly a failure if you stop, right? Because failures are just learning lessons. And so I love that you're bringing that back into the equation as well. Now, there's a ton of things we can talk about about mindset. Because as we know, as entrepreneurs, that's the underpinning of pretty much everything we do to be successful. But what I want to talk about is your superpower of putting a team together. And it makes so much sense to me. When someone looks at what you've accomplished in three short years, a lot of people maybe think about it and say, Wow, Zach, himself alone, he was able to go in three years, from going from a couple, you know, three or $4 million worth of transactions, your first property right to now 1.5 billion, and that number is probably out of date, you probably have more than that. Now, that is probably really intimidating for someone to think about. So let's break this down a little bit. Because I know there's team involved, you have 100 people working with you and for you. So let's talk about that. What has a team enabled for you? And can you explain to us? What makes you world class at what you do to build the teams?Zach Haptonstall:
Yeah, great, great question. Derek. Can you I mean, to your point, I think from an outside perception, you look at anybody who's achieved, you know, a big number, you think, I think we inherently give them a lot of the credit. And you know, they they are a focal point in the beginning. But yeah, you cannot do it. We cannot do any of this without first my two business partners background and Robert Wright, and I'm kind of like, you know, the representative of the company. So I'll naturally get, you know, a lot of the credit, and a lot of the pressure and a lot of the blame if things don't go right. But it's not like I'm doing all the work by any means. You know, without Bic Ron, for example, my partner, our CFO, none of this is possible, because he really is so integral. And him and I are the perfect complement for what we do. But yeah, I think, you know, what we've been able to do what been effective at it has been able to it starts when you're trying to build a company, it starts with the individuals, right? So if it's you and other person, or there's three of you, the biggest thing is trying to identify, Okay, what are the strengths and weaknesses of each one of those individuals, and you cannot have mediocre average people you have, if you want to be great, you have to have elite performers, right? You have to have elite performers in each role. And so I probably quote unquote, dated like seven or eight different business partners before I met these guys, right? I kept meeting people at conferences, meetups, whatever, and you meet them like, hey, let's underwrite a deal. And you start to realize some people don't want to work as hard as you some people, you can't get a hold of them. Some people you don't mesh with. I had one guy who was a great, he's a hard worker, I really liked him. We were on nightly phone calls for about two months. And then I one day, I was just like, hey, man, we have the same skill set. Like we're not helping each other here. There's a skill set that I need, that's my complement that you don't have and vice versa. So I think you need to find you have to identify as an individual, what are your strengths and passions in the business and what are your weaknesses? And you start filling in those pieces and, and there's there's multiple This is multifaceted. I think one part of it If you want to be the person who's gonna put the team together, you are, by default going to become the leader of the company. And you have to embrace that role. Right. And so I think one big part of it is one thing you mentioned earlier, Derek is that there should be nobody on your team that outworks you, right, you should have the strongest work ethic, because in my opinion, there's different forms of leadership. But I think the strongest form of leadership is, is leadership by example, right? People don't want somebody barking orders at them, they want to see that the guy that's supposed to be leading the company, the guy or woman is working harder than everybody. And that's going to automatically make everybody fall in line, right. And it's going to inspire people, because they want to work hard to and that's also going to establish, you know, a standard and an expectation where you better perform, or you better at least be trying, you know, and and working hard. And so I think that's big, one big thing is you have to have that work ethic, and then you have to be humble, and you have to be able to start to delegate things as we started to scale. And so, you know, initially Big Ron is really handling, you know, post Acquisition Operations and investor relations, right. So he was doing a lot where I was focusing primarily on deal sourcing, raising capital, forming partnerships, and then management of people, right management of teams, things like that. So I'm leading all of our team meetings, things like that, I'll sit in on operational needs, and I'm not leading, but I know my presence, there is key. And so I think as you start building a company, you have to look at the different departments of this real estate company, right? You've got, you've got acquisitions, you have investor relations, you have, you know, underwriting, you have accounting, you have all these, you have marketing. And so you have to start looking at these different departments, which in the beginning, the three of us were doing every single minutia detail of every department, right. And so we were able to, we were able to really learn what it takes for each one of those. But as we as we start to scale, you start hiring people and training them how to do those things, and you have to start to trust people, right, you have to, you have to take that risk of letting them fail, and making sure that they learn and supporting them and in managing them. And so, you know, it's a fine line. And a lot of it is you're only as good as the people you can hire. But it's not that simple. Because these people have to be trained, they have to be supported, and they have to be held accountable. Right. So I think that's one thing that we've done a good job at. And I was fortunate, you know, in the health care, the whole health care saga, you know, I quit the job, lived off savings, bought a few deals, then I ran out of money, Derek and I went back into health care, because I had no money, I was in credit card debt. And my non compete for that previous company ended. So I went took a role as president and co owner of another hospice company for 18 months, and quickly scaled that company from about 50 to 110 employees, that actually gave me a lot of experience in hindsight to kind of building and managing these teams. Because as we started our property management company, and scale that quickly, you know, a lot of those same level or caliber of employees at the health care level, or the it's very similar to the property management, where it's a high turnover industry, you'd have to learn how to have processes for recruiting, hiring, training, etc. And so, so yeah, I mean, I know it's a lot of stuff I put into there. But I think it's really comes down to identifying, you know, what are the departments you need? What are the roles you need, and then you have to start delegating things out, you have to have leadership get to hold people accountable.Derek Clifford:
Man, this is so great for people out there who are listening in and looking to start their businesses. This is where eventually you're going to be headed if you want to take your your business seriously. And I love the way that you broke this down. And I couldn't help but think that at the beginning, Zack, it's about you? What are your talents? What are you missing? Who was in your network that you can bring into that right to help cover the holes or cover your blind spots? So that you can you can expand beyond what you ever thought you could? And when you're in the early phases, and the reason that I'm asking this question is because a lot of our audience members may be there, right? Or, you know, I may be to a certain degree as well. So this may be a selfish question. But how did you find that you were honest with yourself, you know, you're having these nightly calls, and you're like, you know what, it's comfortable, because it's great to be able to agree with someone, right? But when you start bringing on someone that has different ideas, and will help you grow, you may end up finding someone that doesn't agree with you on everything, but you know that you're good for each other. So how do you walk that balance between finding the right person that thinks differently? And that can challenge you? And then they want the same thing? Like how do you negotiate that, finding that person and making that happen?Zach Haptonstall:
That's a great question, Derek. Because that's kind of where I go back to you have to be humble. And you really have to remove your ego. I think it takes individual who's able to remove their ego. And you also have to be very secure in yourself. Because I think it's very easy. When you starting a company, you know, you can get an ego and everybody has insecurities, right? I do too. Everybody has insecurities. But if you're letting your insecurities get to the point where you don't want to admit a weakness that you have or admit a deficiency, then you're only going to be hurting the company and yourself and so if you can be honest and identify what are your efficiencies are what is there somebody who can? Is there somebody that can do something better than you? How can you bring them in? And at the end of the day, you know, my whole thing, and I even tell our team, this is it, it comes down to results. This is a results oriented business. And what is our goal? Like? What is our vision for the company? We want to win? Right? What does that mean? And you can define that for yourself? What does it take to get to that goal, right, and do your feelings, or your ego really matter? You know, they probably don't if they're in the way of getting to that, that goal. So big on my partner is a perfect example. You know, Big Ron is from India, he's different, culturally different politically, ideology wise, but we both have the same goal and the same vision for the company. Right. And we both have removed our egos. And we will disagree on stuff all the time. But I think we've developed a mutual respect for one another, because we both know, we both respect each other's work ethic, first of all, and we both know that we're both grinding to do whatever we can do, and that our destinies are intertwined, essentially, right. So it's like, I'm not going to get in the way of you and vice versa, because we're in the same boat. So whatever's good for me is good for you. And when you can find that one or two key partners, who are elite at what they do, and have elite work ethics, well, then it's so powerful, right? Because not only do you have the camaraderie and the momentum of somebody working alongside you and holding you accountable, but you have another perspective, right, and somebody who's going to disagree with you. I mean, we we had a disagreement this morning about something we're going to do for investors, and he had a good point. And so I changed my mind. And I mean, it's so you have to be willing to listen to people. And it's kind of a cliche thing, like hire people who are smarter with you don't be the smartest person in the room. And, and yeah, you need to try to find people who are smart and can bring different perspectives. And and have an open mind. And I'm still learning this, you know, as, as we go along. Because as you scale, there's different challenges that come up. And, you know, you've got different employees that might clash. And one purpose He Said, She Said, and so your job as a leader is to take a high level view, and be like, Okay, what's best for the company? You know, who's right? What would I do? You know, I mean, so I think you really have to, you have to kind of, really be humble, remove the ego and say, what is best for the team, because ultimately, you're going to benefit in the end if you make the best decisions. And so, and I think when you adapt that personality, then people aren't stupid, right? That was my whole thing. When I was doing health care marketing, that's how I became very good at it is that I realized people aren't stupid. And if you try to, like, lie to people, or have an ego, they're gonna see through it, right. And so I think, as a leader, when you start to always act authentic and approachable, and that you're willing to listen to things and that you're not always right. I think people respect that. And they're more willing to follow you because they think that they're, you know, they're working alongside you. And so there's a lot that kind of goes into that now, but those are, those are great questions.Derek Clifford:
Oh, man, that's, that's awesome stuff. So I hope that the audience, you guys are picking this up. And it's a good thing that we have some podcast notes, or we'll have a web page that basically summarizes all of this as well. So because this is, this is so awesome. This is stuff that I'm like writing down furiously as we as we go through it. So thank you for that. Now, I want to shift a little bit to a related topic to teams, which is scale. That's the one thing that I think of when I read your description. And when I'm talking with you is that from the beginning, when you were looking to pick a business to go into single family didn't scale, wholesaling doesn't scale. It's all transactional, but this multifamily stuff, that's that's something right. So, let me ask you, you know, since you've had scale in the back of your mind from the very beginning, what do you think is the one thing that holds people back from skating? In the first place?Zach Haptonstall:
Yeah, that's a great question, Derek. So I think I think there's a couple of things. I think one is just the fear of taking that risk. I think as as humans, it's very easy. You have a success or a success, and you feel accomplished, right? You made it or you feel established. And then we stop pushing our comfort zone, right, we stopped challenging ourselves. I always tell people I've been I've been saying this for years before real estate, my biggest fear in life is like being mediocre, or not being ambitious. I've heard all these stories about successful people who they accomplished something and then they feel complacent, and then become depressed. That's why people It's why people unretire all the time, right? Because they don't feel challenged. And so I think you I think as humans, we we innately need to always have that sense of progress. And that's, that means different things for different people, right? I mean, you could be maybe you work at the grocery store, when you want to become the manager. That's still progress. But I think that if you stop pushing yourself and pushing your comfort zone, then you're not going to scale that's the first thing is just taking the leap. The next thing is that I think, and this depends on your company and your financial situation. But I think that a lot of people are hesitant or don't have the big picture mindset to invest in their company and be proactive by taking on overhead to grow. And I say that what I mean by that is I One thing that I think we've been successful at, and we've done this intentionally is that we're always trying to proactively hire people. So we're hiring people right now, like this week that we don't necessarily have 40 hours of work for yet. But we know in two to three months, you know, as we take on more properties, we get them trained and oriented, we will have 40 hours of work. And so our whole thing is like, you know, we obviously, we want to buy a bunch of deals like everybody does, but we want to make sure we're scaling responsibly is what we call it, and that we're building out infrastructure as we go along. So that our staffing ratios are always in line with our assets. Right? And, and staffing ratios need to be in line for every department, like for example, we started out with one investor relations person. And now we have I think, five investor relations people. And it's because we're buying bigger deals, we have more investors, we have more workflow, right. And so it first comes down to when you're scaling this real estate company. For us, our first hire was our, our director of asset management, right, and it got to the point where, you know, the three of us the owners were on those weekly Property Management phone calls for every property every week. And then when you start getting to around 1500 units, it becomes too much, right. And we can't be out there in the field, doing all that. So we're like, Okay, this is our first hire. And your first hire may depend on what we talked about in the last topic was like, what are the skill sets of the founders of the company or the owners, because based on what those skill sets are, maybe you need to hire somebody else to fill a different hole, right, or vice versa. But for us, you know, we felt like we had deal sourcing capital raising operations and financial analysis under control. But we needed we needed somebody out there actually monitoring these properties. And so it was it was first asset management, then it was hiring a construction management person or construction manager, John to start to bid out vendors. And then we started getting busy with acquisitions. And I was doing all the loan paperwork, all the lender, counsel, communication, everything that it takes to do an acquisition, I was handling all of that. And I was getting bogged down, I didn't have time to talk to investors anymore. So our next hire was a transactions associate. So you have to kind of start to look at what are our point, our pain points, and then, you know, as you're scaling, you're going to have a goal for how much you want to buy or what your revenue might be. And you need to kind of what we've started to do is anticipate what your pain point could be, right? So that you can, you can now create something like, for example, one example right now, this is not a pain point for us. But it could be. And there's a couple examples, you know, one is that we have an investor portal, which is a third party company, and we've talked to every major portal, there's customization that we want that we need for our process to make it more user friendly. None of them can do it did we've like pull our hair out to try and get these guys to do it, they're trying. So we literally just hired two software engineers who just spent like, 350k, we're building our own investor portal, and it's just going to be for us, maybe in the future, we'll use it for third party, and it can be a revenue producer. But that's not the goal right now. So we're gonna create our own investor portal, because it has the functionality that we need for our internal process to make it most efficient, you know, for our staff. Another thing is that we have concerns about macro supply chain issues, we've been buying all of our materials directly wholesale from our manufacturer overseas, we're buying all of our flooring, countertops, everything directly from a manufacturer who has plants in Taiwan, Vietnam, and Shanghai, and they're drop shipping it to our properties. While our concern is that if there's any type of low, what happens there. So now we're looking to purchase our own warehouse, so that we can create a stockpile of supplies, where we just buy a bunch of stuff up front, keep it there. So we have it if this was so those are the kind of things that we're looking at. But I think in the beginning, you just need to look at, you know, what are your pain points, if you want to keep growing, what's going to happen, and once you kind of build the nucleus of each department, investor relations, accounting, you know, et cetera, well, then it's just about basically duplicating that, right. And then you start to promote people from within, like, this guy was an associate. Now he's a manager, and he's needed to go hire an associate and train him to do what he was doing. Right, and some of those people. So what we've learned too, is that some of these roles, you can't just promote from within, you need to hire a more seasoned, experienced person, right? It was like a plug and play. Like we needed to hire a controller, we didn't have anybody in our accounting team who had experience to be a controller. So we hired a controller, who had a lot of experience in property management, and can manage the rest of the staff. And so there's a lot that goes into it. But I think you just need to kind of identify the different components of the company, and you're not going to maybe think of it as departments at first, because it's just you and another person, but you are doing multiple departments by marketing, investor relations, accounting, acquisitions, raising capital, and then you'll start to build those things out. And then when you start a property management company, you know, it's, there's a lot of staff involved with that. But it's very simple when you start to kind of create segments right where you got the onsite staff is like a manager or leasing agent maintenance. Then you have a regional director, and then as you get bigger, you might hire more regional directors. You may hire a vice president operations which is what we have or I can administrator to oversee the regional director. So it's just the more work you get, you may need to create additional layers and more people for each layer.Derek Clifford:
Yeah, and it sounds like once you said what the like word that I really liked you use was nucleus, when you have the nucleus of the organization in place with your centralized operations, you know what your, what your strength is, or you know what your synergy is like what you guys do is a main business. Now, it's just about like, bringing in people to help fill in places where you can even you know, find more efficiencies, right, and you go further out further out. And so I love this great example of like warehousing and software, these are awesome things that people right now, for like me, we just take for granted the third parties that we use for all of this stuff. But you guys are aggressively going out there and grabbing that part of the business for more control and return on with for your investors. And I really admire what you're doing there. And that's true scale. Because if you're at scale, and you're growing a business, and you have your employees that are happy, motivated and wanting to work with the same work ethic, or almost the same work ethic, as you as leaders have, then you have an organization that runs on its own is truly a business that you could step away from if you wanted to. But I'm getting the feeling that with Rhys 48, what you guys do, you're always looking for more efficiencies, because you guys just have that work ethic built in. And I think that's super, super inspiring. Now, the next thing I'm going to ask you is, there's a lot of people out there that are looking and saying, Well, geez, you know, I'm really old, or man, I'm too young to be tackling all this. I know, Zach, that this was mentioned before, and you probably get this all the time. But can you tell us how old you are?Zach Haptonstall:
Yeah, and that's a great question. So I'm 30. And when we bought the first deal, I think I was like 26, about to turn 27. And so I had to face that I still faced I had to face that firsthand, you know, like, like this disrespect or being slighted. And it kind of puts a chip on my shoulder. Honestly, it's funny I went in. So this was two days ago, I went into a suit store on Sunday, because I wanted to buy a new suit. And I was wearing casual clothes, it's a Sunday afternoon, and nobody would come up to help me, nobody would come up to help me. They were just disrespectful, cuz they probably think I couldn't afford the suit, you're gonna mean and so it's like, it's little things like that it happens all the time. And so if you're too young or too old, it's not an obstacle, it's really not. I mean, my biggest thing was, like, I was so nervous that I wasn't going to be accepted, you know, by the brokers or, and at first, you know, you know, a lot of don't take you seriously, but I would always, you know, wear a tie, or wear a suit, and just try to portray credibility, the best you can. And ultimately, what I tell people is the results will speak for themselves. And still to this day, we're gonna punch of people here that that kind of talk crap about us, you know what I mean? Just because we're young, that kind of slide us and philosophy is the scoreboard doesn't lie your enemy. And so it's like, you guys can say whatever you want. But the scoreboard doesn't lie. So I think that's, that's how you have to think of it is just use it as motivation. And you're really not too young or too old, especially now. Because I think in multiple businesses, you've got younger people, older people kind of jumping into this.Derek Clifford:
Yeah, that's what that's what I want to say is that, you know, it's it's hard to imagine through this whole conversation that you entered the career after college less than, like, 10 years ago, essentially, right. And so I want people to understand that you can go from, you know, stumbling around, like different industries, trying to find something to finally finding something right, especially in the real estate, you guys are listening to real estate investing podcast. So you're here for a reason. But Zach founded here in the investment business, and his common thread of work ethic, getting educated building teams, this is the amazing thing that he's able to accomplish in three to four years, right, going from a $3 million transaction to now having almost $1.5 billion, including a property management company and everything right there. So I just wanted to make sure that if there's an ageism excuse in your head, whether you're too young or too old, have a family don't have time, you can absolutely do this, because of the things that Zach was saying, Bring people on to fill those roles that you can't quite have, or that you have to do maybe for a short period of time to get all the figures in motion. But you can absolutely do this. In those early years. What was family life or your personal life? Like when you were wearing all the hats? And is it much different now? Like are you still working most of your waking hours? Or what does that look like right now? Just, you know, a peek into the Day of The Life of Zack heptonstall?Zach Haptonstall:
Yeah, yeah, good. Good question. Absolutely. So I mean, I will say one thing is that we don't have kids yet. Right? And so that that gives us an advantage. timewise and we want to have on we're actually trying now so we're gonna have a great time. My wife and I have at least four or five kids. But yeah, I would say, you know, right now, I'm probably just as busy but it's different things like writing like now I'm really focused on trying to simplify what we do to like sitting in on operations meetings. I spent a lot of my time talking to new investors throughout the week because we're constantly getting phone calls set up with with us and before you know it didn't have time to talk to investors. Plus, I wasn't really getting new investors reach out to us, we didn't have a track record, right. And so now it's really looking at making sure that it's higher level overview of like making sure acquisitions dispositions are closing like today, we're closing a deal today, for example, one of our biggest acquisitions ever, and I haven't had to do anything. All day Brady, our acquisitions manager, he's in the nitty gritty doing everything. And he's got 100 emails flying back and forth. You know, that was me, probably six to 12 months, just six months ago, you know, now he's taking over all that. So we're, I don't even have to look at these things. But I trust him to lock it down. And all I'm doing is signing a settlement statement. I wired the money yesterday. And that's about it. Yeah, I mean, so it's like, as you start to scale, it is very overwhelming and stressful in the in the earlier years, because you're doing so many different things. There's so many things to account for. But once you can start to find people that are competent, and they start to learn that role, like you said, it starts to become, you know, it starts to run itself. And I think a big part of it is making sure people are incentivized, right. They're being compensated while they have bonus structures. But yeah, I mean, I think that things have changed a lot to where I would say overall, I'm probably less busy than the first couple years just because, you know, there's not all the little nitty gritty minutia things that I have to do. It's more of like approvals, reviewing things, things like that. But at that point, at that same topic, I think it's important to make sure that you're never afraid to kind of get down and dirty or jump in there. If you need right to help out, like, like, typically, our attorneys will review a new contract. And then, you know, some of our staff will look at it as well, this morning, we just got to do under LOI. And so you know, I didn't I had a little bit time this morning and Brady's busy closing this deal. Why read the contract this morning, and I found a couple of errors that were kind of critical, our attorney missed, you already mean, whereas Brady would normally look at that. So you know, when I do have time, I want to make sure that, you know, I'm kind of diving into, you know, the details, you don't want to like overlook anything and become too comfortable. But, you know, it is pretty exciting, you know, to scale and grow because your role changes. And then you know, big round robin are constantly sitting around after hours and like, okay, what can we do? Like what is the highest and best use of our time? Right? Like, how can like, how can we keep what we've been doing? Well keep that going. But what can we do to improve? You know, what, what can we do to become even better? sometimes get caught up? We've been fortunate so many transactions, you get caught up in the routine of like, execute this, this this? Now it's kind of slowing down because of interest rates, right? transaction fees kind of slowing down. So now we're really looking at how can we be more innovative operationally, how can we be more innovative, you know, to attract investors? And what is the bigger vision of this company going forward. And so whenever we have those opportunities, we want to try to look at like more high level stuff.Derek Clifford:
Love it, great stuff, thank you for the extra color there that that helps paint a bigger picture for sure. And completely understand you know, that not having kids in this situation helps it. But again, it goes back to the scale and the team concept that you're so good at, that helps enable that space for you. So I think that's awesome. Now, this is kind of my last question I want I had few more questions to ask, but we're getting close on time. And what I wanted to do was ask you, if I had one question left? What are you guys looking out for? On the medium term for properties that you're operating right now? Like, what are you trying to do to help insulate your investors with all the risk that's out there in the market right now, the, you know, the interest rate risks, the supply chain risks that you mentioned before the geopolitical risks situation with, you know, manufacturing and trade wars and things like that, because you guys have $1.5 billion, probably more than that. Now. That's quite a chunk of money and investor capital. And so you have to be aware of even these small minut things to help inform the decisions where you're going to go. So what do you guys do to help insulate investor risk from that?Zach Haptonstall:
Yeah, no, it's a great question, Derek. So, you know, since we started, we've always built interest rate expansion into our model, which I think most people don't we see a lot of models, a lot of deals across the country, most people don't do this, we've done this since we started, we didn't just start doing this because of the Fed increasing interest rates. So we're always assuming interest rates will increase in the model and the returns that we're showing investors are net of that it's already built in. And then, you know, we purchased interest rate cap, like most people, but we also raise significant operational reserves on the front end of every deal in the last three to four months. You know, for newer acquisitions, we've been raising more operational reserves. So what basically what we do is we intentionally over capitalize a deal on the front end, so we have more cushion or liquidity at the at the operating account level of the property. Okay. So it's it's just basically rainy day funds that are not allocated anything. It's separate from capex, things like that. Because what's happened in the last couple years is pretty much everybody's doing, you know, adjustable or floating interest rate debt. And so as interest rates are going up, your monthly debt service is going up going up? Well, we have significant operational reserves in place to absorb that rising interest rate so that we can still continue distributions as scheduled. Another thing that we're doing we're actually going to reviewing this tomorrow is that there's like three or four properties that we've just been cranking through renovations, keeping about around 85% Physical occupancy on purpose, because we're cranking through the renovations and add to doing the value add on some of those, we're going to slow down the value, add renovations, and in the short term, the next three to four months focused on leasing them up at a higher occupancy, because as interest rates are going up and debt service is going up, we want to make sure that we have higher occupancy, you know, at some of these properties, and slow down on those renovations, other properties will continue to do it because they're at different phases and kind of their lifecycle. But depending on the deal, and we have a CapEx meeting tomorrow with our VP of Operations, I just talked to her this morning, and said, Hey, we're going to talk tomorrow about a handful of properties, we're going to shift the business plan here in the short term to adapt to rising interest rates, because we don't want to be going full blown renovating units and having higher vacancy when our debt service is going up. Right. And there's uncertainty. So So yeah, so we'll kind of we'll kind of shift there and pivot. And then you know, for new deals that we're making offers on, we're modeling permanent debt. So Freddie Mac 10 year debt with very low leverage, right? And we'll see, we'll see if it actually makes sense to do these deals where you I mean, you're lucky to get like 50 to 55% loan to value on new deals right now. And so we have to determine, are we going to try if we're going to buy new deals in the short term? Are we going to do like a longer term hold type of approach? Or how are we going to do that? So those are some of the things that we're looking at? Because it because you're right, and you always have to adapt? Operationally, you have to adapt in regards to your philosophy of new acquisitions, things like that. And so we're definitely trying to make sure we're staying on top of everything.Derek Clifford:
Yeah, that those are great pieces of advice. One thing that we're doing right now to just to add on to this conversation, I think the listeners would appreciate this, and I'd love to hear your opinion on it too, is we're building in a interest rate risk share into our PSAs. And what that means is that we base our loan product on whatever the term sheet is that we get once we get our PSA signed, right? So when we get our PSA sign, let's say the treasuries is at 2.8. The 10 year treasuries is at 2.8 or something, right? What we do is we say, okay, if it's at 2.8, and it rises to three, anything above 3% on the treasuries rate, for every basis point, we want $10 per door of a seller credit, winter clothes. That way, when interest rates go up right over time, then it's not just the buyer taking on all the risk of the interest rate increase. And then of course, we always do fixed debt once we get in at least five years, because we think five years is going to be the point in time in which interest rates may rise short term. But you and I know and we've been talking in the same circles that we think interest rates have to come down because of many factors out there. But in any event, that's kind of our I think that's I think that's smart.Zach Haptonstall:
It's very smart. I mean, yeah, to your point here, we're not doing exactly that. But I think that's a good strategy, we might look at that. I mean, the last couple months, we're putting financing contingencies and all of our deals, right, where, as the last few years, we're going nonrefundable day one with our earnest money, we're not doing that anymore, you know, we're putting 30, we're doing 30 Day financing contingencies, because to your point, I'm telling the brokers, I have to get an executed term sheet from the lender that we feel comfortable with that they can actually perform. And that's why we're going with the agencies as well, because they're more likely to perform. Whereas we're hearing a lot about banks and debt funds are basically pulling out of deals, changing their terms on people yet, right.Derek Clifford:
And that's a whole nother reason to also raise extra capital in the in the end, because we're hoping that's not going to happen, but we're expecting an extra 5% Like because they say they can do 25% or 75% leverage, you know, and we have underwriting for 30%. So we may have go up to 35, just to make sure we may raise for that. And then if we don't need it, we may slowly return that capital back to the investors. So let's come for our plan. That's smart. That's the best way to do I agree. 100%. Yeah, exactly. And we could be talking about this for eons, because I really admire what you're doing. And just really appreciate everything that you are for being a model for people who are both young, and then also older, or maybe want to start later on with the experience that you have. And so it's just really great to talk with you. And we could go on for forever. But what we're gonna do is we're going to head into our Rapid Round. And the Rapid Round is five questions that we asked every one of our guests, and they're meant to be answered in 30 seconds or less. So if you're ready, we're going to rapidly get around you. All right, already. Right. Okay. Number one, what book has had the biggest impact on you? And briefly describe why and we ask that it not be the Bible or the purple Bible, which is any of the rich dad books.Zach Haptonstall:
Sure. Yeah. So I really like it's called How to own your own mind, by Napoleon Hill, same guy that wrote how to think and grow rich, but he goes deeper into those principles. And, and really, he's interviewing Andrew Carnegie, like the steel Maven, and this this book was written like in the early 1900s. And so it's very interesting because everything in the book is relevant to now but Andrew Carnegie kind of talks he He really focuses on laser focus on one goal, one thing and not getting distracted. I think that has been huge for us. Because we have so much equity demand, we could go buy self storage, mobile home parks, but we specifically go to other markets and buy multifamily. We've specifically stay laser focused to be the best in this one niche. So I would recommend how to own your own mind by Napoleon Hill.Derek Clifford:
That's awesome. I love that interview format. It sounds like Napoleon Hill likes that too. Because he did that with Outwitting the Devil, which is another? IZach Haptonstall:
haven't read that. But I'm gonna see that. Yeah, he likes that.Derek Clifford:
He does. But but I'm just adding that how to own your mind right now in the background with Amazon. So there you go. We're all set. Number two, if people wanted to emulate your success, what do you think is the first actionable thing they can do right now to follow in your footsteps?Zach Haptonstall:
Yeah, I always tell people, if you want to get into this, you have to buy the first deal at all costs, because that's what's going to be key to giving you the momentum, the confidence, experience and credibility to get going. And so it does not have to be 100 plus unit deal, it can be a five unit deal, it could be a 10 unit deal. And so the first thing you need to do is you need to start kind of building a team, like find a property manager, attorney, people like that. And you need to start reaching out to brokers. That's the number one thing that people always tell me, they want to get into this. And they never do this, I tell them what they don't actually do. Because they're scared. You have to find the brokers in your market that are selling the deals you're looking to buy, go to loopnet.com, look at five to 10 unit deals, whatever range looking for, who are the brokers in that space, start reaching out to those guys meeting them for coffee, go toward the deals, and start trying to underwrite these things and make offers just you have nothing to lose. Talk to the brokers.Derek Clifford:
Yeah, 100% JV all day, that's what we did to make it all happen in our first market. And then from there, once you get your first deal, it's all proof of concept, you can show other brokers or that broker that you can do it. And that's all they're looking for. They don't want to waste their time with someone's tire kicker. So it turns out that number three, what is one tool process or hack in the last three months that you've used, that's helped save you time and or effort. And it can be either on the business side or personal?Zach Haptonstall:
Yeah, I think the biggest thing honestly, for us is just on the transactional front for me is that it kind of happened at the same time where we, I passed off a lot of the transactional work to our acquisitions manager, and Simon almost simultaneously started getting this huge surge of new investor phone calls. And so kind of opening up my calendar and making myself more available, I'm generating a lot more new investor calls and raising a lot more capital for our company, you know, exponentially more just the last, you know, three to six months. And then you know, Brady, your acquisitions manager, because he gets more experience by handling all the transactions, he's becoming more proficient, and I can trust him. So it's kind of like a snowball effect. And with both of those kinds of meetings at the same time, so again, it goes back to our earlier topic, Derek of, of delegation, right, and trying to trust people to do certain things before I was terrified that he would screw something up, that we're not going to close or anything, there's so many little details that go into these as you know, with your lender and trying to close a deal. So like, that's what it's been for us.Derek Clifford:
Yeah, that's great. I love that. And you know, it's really funny to watch this because we were talking about subconscious fears and things like that in this trust thing, right. And it just love how it is you still experience it, even though you've already achieved many things that most people quite honestly won't. Right, you still are dealing with the same thing that many people have to work with also on a smaller scale. So I love that. Sure. Yeah. All right. Number four, if people you know had to describe you with one word, what do you think that word would be?Zach Haptonstall:
I would say relentless.Derek Clifford:
Yeah, I would agree. I think your work ethic speaks for itself. Number Number Five. Last question is What small thing do most people not know about you?Zach Haptonstall:
I naturally am an introvert. Okay, and I was an introvert all throughout high school, and even college and so doing the whole broadcasting thing was all about me trying to really push my comfort zone. I was terrified. Like when we would go live, I could feel my hand shaking and my my palms watering every single time even after you get experienced I would be so scared. But you start to you start to learn how to not show it. You start like we even had an all staff meeting last week, I spoke in front of 130 of our staff, and I always get nervous. I always get nervous whenever I'm going to speak at a conference a few weeks ago, but you learn how to not show it and I think it's comes back to keep pushing your comfort zone and you will gain experience and confidence doing it. So now whenever I'm going to speak in front of people, like a larger group, it's always the buildup in the very beginning where you feel nervous and then I'll start to settle down right and then I'll get comfortable so I think yeah, naturally I'm an I'm an introvert and most people would not think that or have any idea but it was from being in the broadcasting help that then going into outside marketing. You know, it was really scary because I'm constantly getting rejected, getting my my teeth kicked in every day just coming to places and Not people want to talk to me. That was a lot of confidence and, you know, build your character.Derek Clifford:
Yeah, that's great. That's great. So, Zach, it's been awesome. I want to be respectful of your time, you've got plenty things going on. But before we end the podcast, how can people find out more about what's going on in your world? Do you have any tools for them or anything that maybe they would find useful that you could give them?Zach Haptonstall:
Yeah, thanks so much, Derek. Yeah, so you can you can go to our website rise48equity.com. To learn more about us, we have a newsletter you can sign up for so you kind of always get updates on what we're doing. If you're interested in kind of see what we're doing. You can set up a call with me on the website. You can also email me firstname.lastname@example.org.Derek Clifford:
Awesome. Zach, thank you so much for coming on the show. It was an absolute pleasure. I learned so much from this. I know that listeners out there did as well.Zach Haptonstall:
Yeah. Thanks so much. Really appreciate thanks, everybody for watching the show and look forward to next time.Derek Clifford:
Absolutely. And for you listeners. Thank you guys so much for listening all the way to the end. We really appreciate you so if you liked this content, and like what you've heard from Zack, and maybe to a lesser extent what I was talking about as well please thumbs up like subscribe, comment wherever you're listening or watching this content, please do engage with us. That way we can appease those algorithm gods right. And as we appease the algorithm gods we get exposure to more and more people as well. So please go out there rate podcast. We really appreciate everyone out there. So this is Derek, we are signing off. We'll see you next week. Take care!