Creative Finance and Buying Directly off MLS with Adam Zach

My guest today is Adam Zach. Adam has a magnificent obsession with learning and with real estate. He works 10 hours per week as a professional engineer but dedicates most of his time to family, learning, and building up his real estate businesses. The business that allowed him to semi-retire is his niche in rent-to-own investments and creative financing by buying homes for people who can’t qualify for a traditional bank loan. He currently holds 26 properties in 5 different states.

Adam first shares his background story and how he got into real estate. After college, Adam worked a high-paying job as an engineer. He was living the American dream. But pretty soon, he started getting the itch, he started to wonder about financial independence. During this time, he looked into many different things but eventually, he decided that real estate is the way to go. However, he didn't completely cut ties with his 9-5, he still works 10 hours a week as a professional engineer.

We then move on to discussing the first property Adam bought. He shares that the very first property that he bought was kind of an accidental purchase. He bought a house with his college roommates so that they could have a place to live in and party. But once he learned about property appreciation three years later, he decided to turn it into a rental as opposed to just selling it. He then started to educate himself more and together with his wife decided to invest more into real estate.

Next, we talk about what exactly Adam is doing in this industry that is different. He refers to his business model as “Set Your Rent”. At first, he would tell college students to pick a home off the MLS that they wanted to live in, and he would buy it for them as long as they paid the 1% rule. This was a way of him getting a property that was turnkey as opposed to buying a property that needed to be fixed up. He then noticed that after a year or two, college students would leave and the market rents would be a bit lower. So, he then decided to find people instead of finding properties. Most of the time it's entrepreneurs or people with no credit or poor credit and he uses the same concept. He either does rent-to-own or a contract for deed and this is what really helped explode the growth of his business and accelerated the path forward.

Adam then explains the difference between rent-to-own and a contract for deed and which one he prefers. As a landlord, Adam first checks if there is a city inspection required and if it is, he then uses the contract for deed route, because then he is not obligated to meet all the requirements. But from the standpoint of taxes, and every other purpose, a rent-to-own is a better option because a contract for deed gets charged as an interest income whereas a lease option is still a rental, so you get the depreciation and you're acting more like a landlord in that situation. On the other hand, when he’s trying to buy a piece of property, he prefers a rent-to-own option because it’s much more flexible

Eventually, we dive into discussing some of the cracks that Adam noticed in his model so far. He shares that their biggest obstacle so far was Covid. The pandemic caused financial issues to some of their tenants but luckily they were able to come up with different payment plans to avoid eviction and foreclosure. To avoid these situations, Adam’s company screens potential tenants as a landlord but also as a bank using a third party. They also make sure that their payment is not more than one-third of their income.

Lastly, Adam shares some of the concerns he had when he was first starting out. His main priority was to make sure that they were not taking advantage of people. This is why he always makes sure to ask his clients if they tried to get a bank loan first. He also advises his clients to try different banks as well as credit unions and mortgage brokers. He knows that this option is probably the most expensive for his clients, but it comes with many different benefits that his clients are seeing as a higher value.

Make sure you don’t miss this amazing episode of Just Start Real Estate with Adam Zach and learn how to find deals in a new way that is not being talked about!

Notable Quotes:

“I think sometimes it's good, even for us real estate investors, to realize we're business people at the end of the day, so I think bringing outside industries and talking about how they do things can be valuable.”

Mike Simmons

“You start getting the itch and looking out the window a little bit longer each day. You kind of start thinking - what does financial independence look like?”

Adam Zach

“I think it all started by just getting really curious and having a large enough unhappiness meter to be like - you know what, I'm going to do something about it.”

Adam Zach

“You will get punched in the mouth from time to time in business and if you don't want it bad enough, you will not get back into the ring.”

Mike Simmons

“I feel like real estate is almost the ultimate game where if it’s heads, I win and if it’s tails, I break even. And that is a fantastic gig.”

Adam Zach

“Every minute you spend overanalyzing, somebody else has already gotten the deal anyway.”

Mike Simmons

“Our goal is to never turn someone down, but just give them terms that make them want to improve themselves.”

Adam Zach

“If you're an entrepreneur listening to this, just because you were told “no” by one bank, it doesn't mean a different bank will say “no.” Talk to a big bank, talk to a local credit union, and talk to a mortgage broker.”

Adam Zach

“Let's just try to educate the world so that maybe they can find themselves, get some freedom, or get into this so that they can then go and help other people.”

Adam Zach

“Most successful people I've met in this industry are some of the most generous, honest people who sincerely want to help.”

Mike Simmons

“I have given people advice for free and I've given people advice they had to pay a lot for. And the people who pay for the advice tend to listen and act and execute at a higher level because they value it.”