JF2257: Sports Reporter to Sales to Multi-Family Investor With Zach

Zach is the Founder & President of ZH Multifamily and an equity owner of over $48M worth of commercial real estate apartment buildings. Zach climbed up in healthcare sales and at the top of his career after accomplishing many of his monetary goals he found that he wasn’t fulfilled. He eventually discovered real estate and decided to leave his job and live off of 12 months of income while he pursued his new dream and now the rest is history.

Zach Haptonstall Real Estate Background:

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“You need to attack, constantly be trying to move the needle forward and know it will be difficult because you will not have tangible evidence that it will work” – Zach Haptonstall

TRANSCRIPTION

Theo Hicks: Hello, Best Ever listeners and welcome to the Best Real Estate Investing Advice Ever show. I’m Theo Hicks and today we’ll be speaking with Zach Haptonstall.

Zach, how are you doing today?

Zach Haptonstall: Hey, I’m doing great, Theo. Thanks for having me on, man. I really appreciate the opportunity to be with your viewers and your listeners here.

Theo Hicks: Absolutely. Thank you for taking the time to speak with us. So a little bit about Zach. He’s the founder and president of ZH Multifamily. He is a lead sponsor, general partner and equity owner of over $48 million worth of commercial real estate. His portfolio consists of 420 units. He is based in Scottsdale, Arizona, and his website is https://www.zhmultifamily.com/.

So Zach, do you mind telling us a little bit more about your background and what you’re focused on today?

Zach Haptonstall: Absolutely, Theo. So I was born and raised here in Phoenix, Arizona. Never really had much of a real estate background, no family in real estate. I wanted to be a football player, so I had a small Division II football scholarship to a school in Colorado. I went there for a bit, realized I wasn’t going to make the NFL, came back and the next best thing is I wanted to be a sports reporter and a journalist. So I went to journalism school, I got a broadcast journalism degree, and I was actually a live news anchor on Arizona PBS here for a short time. And it was a sports reporter, and I hosted a show on Fox Sports Network. So that was really cool at first, being on live TV and everything. And then I just quickly realized that it wasn’t what I wanted to do. I wasn’t passionate about it. I was a sports fan, but I didn’t want to do that as my job.

So I graduated school, I was 21, I decided I don’t want to do this… I have all this school debt and I was like, “Man, I need to make money.” So I was delivering medical equipment nights and weekends, Theo, while I was going to school to pay for school, and my boss was like, “Hey, you can make pretty good money doing healthcare marketing.” So after journalism, I actually had a job of all things as a hospice marketer. For those listeners who don’t understand what hospice care is, it’s basically mobile nursing and care giving for people with end-of-life illnesses. And so my job was to drive all around Phoenix and just cold call, walk into hospitals, doctors offices, assisted livings, build relationships with physicians, social workers etc, to sign people up in hospice.

So long story short, Theo, I was very blessed to do well in the hospice arena. So by the time I was 23, I was making 150k a year. I bought a house. By the time I was 24, I had gotten my MBA, paid off all my school. So I did that for about four years. I was blessed to be making over 200K a year by then. I had no debt, with a little over 100k in my bank account, and coming from a lower middle-class family, I was blessed in doing well and grateful, but I just didn’t feel fulfilled. I just was burnt out and I had already achieved all those goals in that arena… And I wanted to create more freedom of my time and more passive income. So I didn’t know much about real estate like I said, but January of 2018, I said, “Screw it. I don’t want to do this anymore.” So I resigned, and I sold my equity in the company. And I had no plan except I knew I wanted to somehow create passive income through real estate.

So I set aside savings for over 12 months. I said, “I’m going to live off savings for the next 12 months.” I ended up living off savings for more than 12 months, and I just kind of dove in. I started listening to podcasts like this one, reading books, cold calling people, etc, etc.

Initially, I was looking at flipping homes, then mobile home parks, then I went to multifamily and syndication and the power of leveraging other people to come together and acquire these assets.

So long story short, 10 months went by, I burned through a lot of savings, went through a lot of adversity just trying to figure this out. And finally, after 10 months, we got the first deal under contract. We closed it four months later. So it was 14 months from when I first quit my job and decided to do real estate full time that we got the first deal. It was a 36-unit. And then we were just fortunate to catch momentum after that.

Since then, since closing on that first deal, right now we’re near the end of July 2020, as we record this deal, Theo, and we acquired that first property in February of 19. And since then we’ve acquired 420 units, 48 million over five assets, all here in the Phoenix area. So it just kind of goes to show once you get that first deal, you catch momentum – we were able to scale up from there.

Theo Hicks: Thanks for sharing that. So you said your first deal was 36 units, you said?

Zach Haptonstall: Yeah, it was 36 units, 3.4 million. Correct.

Theo Hicks: Perfect. So maybe walk us through how that deal came to be. So you mentioned that you had partners on that deal, you mentioned the cost and the size, but from—you made your decision to do multifamily. You got educated on the process, then what did you do? Did you first reach out to partners and then who did you reach out to for the money? Maybe walk us through that process from, “Okay, now I’m ready to start taking action”, to “This first deal is closed.”

Zach Haptonstall: Great question, because it’s a daunting task, right? To take down these multi-million dollar assets… And I didn’t have tremendous net worth or liquidity to even sign on these loans, so you have to find a partner. That was probably the hardest part, Theo, was going through the adversity of trying to find people who are like-minded, who are motivated, who actually can help you with these deals. And so I initially was just trying to meet with people, cold call people. Then I started going to conferences, meetups, things like that. I met a guy Robert [Inaudible [00:08:03] who also lives here in Phoenix, Scottsdale area, and we kind of hit it off; he’s high net worth, high liquidity guy. He had been trying to find apartments, and so we decided to team up.

So this first deal, to answer your question, it was on market. So it wasn’t like some secret off-market deal. It was through a broker. It was on market. I had personally underwritten at least 30 or 40 deals by that time, and nothing penciled, nothing really made sense. Everything’s overpriced, which is the case in multifamily. This deal finally penciled. So Robert and I, we put in an offer on it, and then it gets accepted and we’re like, “Oh, crap, what do we do now?” That was a scary thing. Like, “Well, we’d better just push forward.”

So we get the deal under contract, and our plan, Theo, was to syndicate the deal. Okay? So I had a network of physicians and healthcare business owners from being in the healthcare arena, and Robert had some high net worth friends. So in our minds, we were thinking, “Yeah, we’ll just get this deal, all of our network will invest in the deal and it’ll be great.”

So we get the deal under contract, 30 days go by, we’re done with due diligence… We’re each non-refundable for 25,000. So I have 25k hard, and nobody’s really interested in this deal. So it’s a scary thing. We’re like, “Crap, we need to bring 1.4 million of equity to this deal.”, and our plan was to syndicate it and we’re not really getting a lot of interest. So I was just calling different people I had met and established relationships with at conferences, and had several phone calls with them… And I get a call one day from somebody I had met at a conference and had several calls with and she’s like, “Hey, I heard you have this deal in Phoenix.” I don’t know how she found out about it, but she’s like, “I just sold a 12 unit deal in Seattle, and I’m going to 1031 exchange. Why don’t I 1031 exchange into your 36-unit deal you have and we’ll do what’s called a tenant in common, a TIC deal, and I’ll bring 650k of equity.” And I said, “That sounds great. Let’s do it. And what’s a TIC deal? How does that work?” So I didn’t really understand that process. We originally planned, Theo, to do a syndication, but we ended up doing a tenant in common, which is essentially it’s similar to a JV, a joint venture structure. Everybody’s active, there are no passive investors.

So I at that time had about 160k to 164k left, and I was all in and I put 160k into this deal. Almost all my cash. Robert put almost 300K, we brought in her for 650k, and then I found a couple guys that come in at about 150k, and we made the deal work. So we ended up doing a TIC structure, not a syndication. We closed on that deal and that just gave us a lot of confidence going forward.

And then there’s different things throughout that process… Right after that, I sold my house, which I was never planning on selling… Because I needed more liquidity, and I invested that money in the next deals… But you just kind of have to figure it out and you have to find complementary partners who have skills that you don’t necessarily have, and that’s the key really.

Theo Hicks: What do you think would have happened if that person didn’t reach out to you for a 1031 exchange?

Zach Haptonstall: Good question. I would like to think we would have figured it out and found somebody, but it’s likely we wouldn’t have been able to close and we could have lost our earnest money. That’s the risk you take with multifamily. And you don’t ever want to be too aggressive. You want to make sure you have stress tests in place in your underwriting and you have conservative assumptions. But of the five deals we’ve done, and we have one under contract, none of them have been super-smooth. It’s like there’s always these scary things that come up, so you have to get to the point where you trust in your underwriting, you trust the deal, the fundamentals, and you have to be a problem solver and overcome different obstacles along the way.

And so I would like to think we would have scrambled… Because one part of that story, Theo, was that literally four or five days before closing, our lender calls me and says, “Hey, man, I’m so sorry. We were too aggressive on this underwriting on line item. We’re cutting your proceeds by $227,000.” “Right before closing, what do you mean? That’s crazy.”

So we just scrambled, and I had a friend who invested 150K, and Robert found somebody who put in 77K and we made it happen. So scary things come up and you just have to adjust and adapt.

Theo Hicks: Another question I have about this first deal… So you mentioned that your business partner, the net worth liquidity guy, he put in 300 grand in your first deal?

Zach Haptonstall: Yeah, it was like 275k. Yep, nearly 300k.

Theo Hicks: And then I’m assuming he’s the one who was the loan guarantor as well, so he signed the loan.

Zach Haptonstall: Yeah, we both did. Yep. But I needed his liquidity and net worth. Correct.

Theo Hicks: And then before this, you had never done a deal before, right?

Zach Haptonstall: Never. I had only bought a single-family home, which was my primary residence. That’s it, no other real estate investment.

Theo Hicks: Okay. So why did he partner up with you and then put all that money into a deal with you, and sign a loan with you if you hadn’t done a deal before? What did you do to sell him on this?

Zach Haptonstall: We initially met in — I think it was July or August. So we had been meeting frequently, and having several conversations for three or four months prior to that. And I thl6ink he could tell how serious I was. And I was transparent. I was like, “Look, I have this much money. I’m going to go all-in for the deal if I believe in the deal.” And he saw that I was putting in 160K. So he knew I had skin in the game and then I had a lot to lose, and we were on the same page. But I will say, he’s a lot more risk-averse than I was. So I was probably the more aggressive one to push to get that first deal.

So it’s really just about building that relationship and that trust, but it’s never a perfect thing, right? It sounds nice in hindsight, but there was a lot of stress throughout that process… But we’ve been partners in all of our deals, and it’s gone well. So you really have to just build that relationship, and you really do need to like the people you partner with, because you’re going to have to communicate with them frequently, and you’re going to have to have tough conversations, and you’re going to need to be able to hold each other accountable and call each other out if one person isn’t holding their weight. So that’s kind of the relationship that we have, along with our other partner now, [unintelligible [00:13:22].07]. So that’s important.

Theo Hicks: So during these three to four months, was it just you guys kind of just hanging out building a personal relationship? Were you just like talking on the phone, texting each other, getting coffee?

Zach Haptonstall: Yeah.

Theo Hicks:  I think is very important for the listeners, because you had no experience and you were able to do your first deal. So I’m kind of focusing on this a lot.

Zach Haptonstall: Yeah.

Theo Hicks: So you met this guy in July/August, you had three or four months kind of conversation, and then eventually he ended up investing with you. What were these interactions like? How often did you meet this guy? Kind of get into some specific stuff.

Zach Haptonstall: Yeah, good question, Theo. We were meeting frequently either at coffee shops or at his house… So I’m engaged, getting married in a couple months. I have no kids. Robert is married and has three kids. So obviously, there’s different dynamics, but he’s full-time real estate and I was full-time real estate as well at that time. And so we were able to meet during the week frequently, and we were underwriting deals together. I was demonstrating to him that in the previous six months before I met him, I was already focused on multifamily. And I was showing him and demonstrating all the relationships I had built with brokers, property managers, lenders, insurance brokers and just people in the industry etc, etc. So that was really a key, was to show him, “Look, I’m fully committed and I’m serious.” And he didn’t have any experience with multifamily either, so he was hungry to get into it, too. So he was trying to find a partner just as I was, but he had been looking for over two years.

So I think when we kind of clicked and we realized that we’re good complementary partners, it made sense for both of us. And we had complimentary assets, you know… Where he didn’t really have the relationships and things like that and I did, so I could bring value to him and vice versa. It just comes down to mutual respect and both demonstrating that you’re willing to work hard.

Theo Hicks: Thanks for sharing that. It was really solid advice. Alright, Zach, what is your best real estate investing advice ever?

Zach Haptonstall: There’s so many components to it… I guess if we’re really focused on people doing their first deal, this kind of sounds like an oxymoron, but my best advice ever is you need to really attack. You need to constantly be trying to move the needle forward, and it’s going to be very difficult because you’re not going to have any tangible or visible evidence that you’re making progress. But by listening to podcasts, reading books, and most importantly, getting out there and meeting real estate professionals, like brokers, lenders, and starting to underwrite deals, is the most important.

So my best advice to you would be you need to relentlessly attack; don’t ever give up. You need to stay consistent. You don’t need to do a crazy amount of things every day, but you need to do something little or try to keep pushing forward. And at the same time, you do have to be patient, which is where the oxymoron comes in… Because I got to the point where it was eight, nine months, I was putting so much pressure on myself that I was discouraging myself, and I had to almost relax and just kind of let it come to me. So just keep attacking, be determined, stay faithful, but be patient, too.

Theo Hicks: Perfect. Alright, Zach, are you ready for the best ever lightning round?

Zach Haptonstall: Let’s do it. I’m ready.

Theo Hicks: Okay.

Break: [00:16:12] to [00:16:55]

Theo Hicks: Okay, Zach, what is the best ever book you’ve recently read it?

Zach Haptonstall: Good question. So just to be clear, I don’t ever actually read books. I do audiobooks because I just can’t read books. But right now, I’m reading the Bible, front to back, on audiobooks. I’m Christian, I believe Jesus Christ is my Lord and Savior… And I’m doing audiobook, New American Standard Bible front to back, which is actually pretty interesting when you’re [unintelligible [00:17:12].12] things like that. There’s a bunch of other good books, The Power of Ambition by Jim Rohn is a good one I listen to frequently, just talking about fundamentals and discipline. So those are two good ones.

Theo Hicks: If your business were to collapse today, what would you do next?

Zach Haptonstall: I would restart it and rebuild it. I would identify what are the issues, why did it collapse, take a little bit of time and reflect and I would come right back and go into attack mode. I would just do it again.

Theo Hicks: What is the best deal you’ve done so far?

Zach Haptonstall: The best deal we’ve done so far—well, we’ve acquired five deals and we have not sold any of them yet and gone full cycle, so it’s hard to say. However, our first deal is under contract and it’s going to be closing in September. So it’s got to be our first deal, our 36-unit deal. We bought it for 95k a door and we’re about to sell it for 148k a door in 18 months. So it was a good value-add business plan that we executed.

Theo Hicks: What’s the best other way you like to give back?

Zach Haptonstall: We like to volunteer. We’ve been to Feed My Starving Children and done food boxes, things like that. We had signed up to go on a mission in Mexico through our church,  but COVID kind of ruined that. In the real estate industry, I really like to just help people and get on phone calls, who are trying to get into it…  Because I went through so much adversity and people told me I couldn’t do it… So I like to get on phone calls with people and just share advice and try to inspire them or support them any way I can and just lend any valuable advice.

Theo Hicks: Have you lost money on a deal yet?

Zach Haptonstall: No, I haven’t. Not on a multifamily deal. The only thing I’ve ever lost money on is the Super Bowl was here in Phoenix, Arizona, Theo, in 2014/2015. And I had a friend who at a previous Super Bowl had leased out a hotel and then subleased it. Because there’s so many people that come here for it. So there’s this really nice four or five-star hotel, Talking Stick Resort. It’s got a casino, and all the hotels were booked in Phoenix. And I had this genius plan to sublease this. So I rented out this suite at Talking Stick Resort the weekend of the Super Bowl for four consecutive nights, Thursday night through Sunday night, 1000 bucks a night. I rented it out, and I reserved it. There was no more suites left. And my plan was to sublease it. So I put it on Craigslist, all these third party websites, and nobody bought it. So I lost four grand, and I literally stayed there for four nights in a row just so I didn’t feel like I completely wasted it. And I didn’t even have any fun or anything. So I probably won’t sublease any hotels.

Theo Hicks: That’s a good story. Lastly, what’s the best ever place to reach you?

Zach Haptonstall: You can just go to our website. It’s https://www.zhmultifamily.com/. You can email me at zach@zhmultifamily.com. I’d love to get on a call. There’s a ‘Contact us’ sheet on the website. You can fill that out and we’ll set up a call and help you however I can.

Theo Hicks: Perfect, Zach. Well, thanks for taking the time to join us today and walk us through your journey. I think that the biggest takeaway that most people are going to get is the specifics you went into on how you were able to find that first partner.

So again, you’d bought a house before, but it was just your single-family house. So it was your first investment deal, first multifamily investment deal. You said you met your partner at a meetup or conference, you met in July or August, and 3-4 months later he was investing almost $300,000 into a deal with you. And you mentioned that the reason why he did this is number one, you were super-transparent with him, and you mentioned that you are going all in, you were putting all your eggs into this basket, which gave him confidence that you had to succeed or you were done for.

Zach Haptonstall: Yeah.

Theo Hicks: You mentioned you went to the coffee shop and met, you went to his house and met. You said you were underwriting deals together, and then the biggest thing that I think you said was that you showed him all the relationships that you would built. So you didn’t come up to him and say, “Hey, let’s do this deal together”, and then he asked, “Okay, what’s the next step?”, and then you have a million things needed to do. You already had the education, you said you had your team built, so again, that portrayed that you knew what you were doing, that you were credible and that you were going to be able to get the job done… Which you did, because now you’re in the process of actually selling that deal.

And then you walked us through the process of that first deal and how it was supposed to be syndication, you didn’t have the money raised beforehand, you had a hard time raising the money, but it ended up working out. You mentioned that really in every deal you’ve done so far, it was always something that comes up and happens.

Zach Haptonstall: Right.

Theo Hicks: So it’s never going to be perfect. So it’s making sure you have those problem-solving skills. I think this also comes in your best ever advice about being patient and relaxing and not losing your mind when things do happen.

And the other aspect of your best ever advice was making sure that you are constantly in attack mode, constantly moving forward, constantly taking action and realizing that just because you’re not seeing that tangible evidence, you’re not seeing that deal being done right away doesn’t mean that you’re not actually progressing. That’s where the patience and the relaxation comes in. So keep focusing on getting educated, keep focusing on building your team members, keep focusing on building deals, because all those actions added up daily will lead to you ultimately doing a deal, whether it’s a month from now or a year from now.

Zach, again, I appreciate you coming on the show. Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.

Zach Haptonstall: Thanks, Theo.

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