Building a Billion Dollar Real Estate Equity Company w/Zach Haptonstall
Watch on YouTube!
Or listen wherever you podcast!
Episode Description
Welcome to the Freedom Point Real Estate podcast! Guest Zach Haptonstall joins host Jeremy Dyer in today's episode to share his journey of success and offer wisdom he's learned along the way on topics such as strategic renovations, vertical integration, and flexible debt structures.
Zach Haptonstall is the Chief Executive Officer and Co-Founder of Rise48 Equity and Rise48 Communities. Rise48 Equity is a retail syndication Multifamily Investment company with offices in Phoenix, Arizona, and Dallas, Texas. Rise48 Equity has completed over $2.15 Billion in total transactions and purchased 49 assets, 9,150+ units since 2019. Rise48 Equity does all the construction management, property management, and asset management in-house with their staff. Zach’s main responsibilities as CEO include overseeing all acquisitions, sourcing capital, and building strategic partnerships. He and his wife, Grace own homes in both Phoenix and Dallas where they split their time between offices.
CONNECT WITH ZACH HAPONSTALL!
Website: https://rise48equity.com/
LinkedIn: https://www.linkedin.com/in/zach-haptonstall/
CONNECT WITH JEREMY DYER!
Website: https://startingpointcapital.com/
Instagram: https://www.instagram.com/startingpointcapital/
LinkedIn: https://www.linkedin.com/in/jeremydyer
Facebook: https://www.facebook.com/startingpointcapital
Book a Call! https://calendly.com/startingpointcapital/discuss-investing-with-jeremy-dyer?month=2023-12
Summary
Tip #1: Identify B-Class Properties for Value-Add Opportunities
"These properties are typically built in the 1980s-1990s that have original appliances, countertops, cabinets, etc., and we can go in there and renovate the units to our Platinum level scope."
Focusing on B-class properties with outdated features allows for significant value appreciation through renovations. These properties are usually below market rent, providing a substantial margin for increasing rental income post-renovation. By upgrading to luxury standards, investors can achieve higher returns.
Tip #2: Understand Property Valuation Differences
"Apartment buildings are valued based on how much revenue they are producing each month and each year just like a business."
Unlike single-family homes, multifamily properties are valued based on their income potential. Enhancing revenue through strategic rent increases directly impacts the property's market value. This business-like valuation approach offers a clearer path to calculating investment returns.
Tip #3: Embrace Vertical Integration for Better Control
"We realized quickly like, you know what, we cannot have this, we need to have continuity, we need to have full control, especially as we continue to scale."
Creating an in-house property management team ensures greater control over operations and staff retention. This integration mitigates risks associated with third-party management turnover and inefficiencies. Competitive compensation and benefits packages attract and retain top talent, ensuring consistent property performance.
Tip #4: Invest in Workforce Housing
"We are providing a Class A luxury interior finish but it's in this workforce housing type of product which is still affordable."
By offering luxury finishes in affordable workforce housing, Rise 48 captures a broad market segment. This strategy caters to a majority demographic while achieving higher rent premiums. It balances quality with affordability, appealing to a wider tenant base.
Tip #5: Manage Debt Strategically
"The reason we do floating rate debt is that we have no prepaid penalty."
Choosing floating rate bridge loans over fixed-rate loans avoids hefty prepayment penalties, providing flexibility in refinancing or selling properties. Interest rate caps ensure predictability and manage risk. This approach allows for better financial planning and investor returns.
Tip #6: Maximize Renovation Impact
"We're averaging between $300 to $450 a unit of our rental increases during this downturn."
Renovating units to high standards significantly boosts rental income even in market downturns. Targeting properties with below-market rents and upgrading them justifies higher rents. This renovation strategy ensures continued revenue growth and property appreciation.
Tip #7: Foster Employee Loyalty
"We cover 100% of every employee's medical, dental, vision, and 50% of their dependents."
Providing comprehensive benefits to employees promotes loyalty and reduces turnover. Ensuring employees feel valued and secure leads to better performance and stability in property management. This investment in staff translates to more effective property operations.
Tip #8: Adapt to Market Conditions
"We need to have full autonomy over staff, or maybe this person has really great leasing skills for this demographic but it's not fitting this asset."
Maintaining operational flexibility allows quick adaptation to changing market conditions. Adjusting staff roles based on property needs ensures optimal performance. This agility is crucial for sustaining profitability and addressing market dynamics effectively.
Tip #9: Leverage Economic Downturns
"When the market is hot, okay, and you're in these high growth periods, this is where you get the better returns too."
Investing in multifamily properties can be profitable even during economic downturns. By targeting undervalued properties and renovating them, investors can still achieve significant rent increases. This strategy leverages market cycles to maximize returns.
Tip #10: Prioritize Long-Term Stability
"You've got to be a killer in this space if you want to survive if you want to do well during these downturns."
Sustaining long-term stability in multifamily investments requires strategic planning and robust management practices. Vertical integration, comprehensive benefits for staff, and flexible debt structures contribute to enduring success. Ensuring these elements are in place helps navigate market challenges and capitalize on growth opportunities.
