John Machacek, Chief Innovation Officer for the Greater Fargo Moorhead Economic Development Corporation, has worked with countless startups throughout our community over the past seven years. He knows their ups, their downs, but most of all, he knows the questions to ask them. Here are John Machacek’s 10 questions for Set Your Rent founder Adam Zach, who is bringing people the ability to rent-to-own homes.
- Tell us your Set Your Rent elevator pitch?
Many people struggle to buy their primary home because they cannot qualify for a bank loan. We raise private capital to buy homes for people so they can finally become a homeowner. Typically this is a 1-5 year bridge loan (lease option or contract for deed) that allows them to act like a homeowner while they work to obtain a bank loan.
- Who is this for and how does it work?
We have a two-side market, aspiring homeowners (we call them tenant-buyers) and investors. We essentially connect the two. The tenant-buyer picks the home, we buy it, and sell it back to them as a lease option or contract for deed, sometimes called rent-to-own.
This is not for people who can get a traditional loan. In fact, we have routinely turned clients away who were able to obtain a bank loan, since it is a lower cost to them. That is our ultimate goal so if they can get a bank loan initially, we really push for that. Most of our clients are entrepreneurs or families with low credit scores. Entrepreneurs are wonderful but a bank sees them as risky and unproven so they often require 3+ years of sustainable profit as shown on taxes. Any entrepreneur knows that building your own business can be difficult and takes time. That is where we step in since the bank sees our business as being more secure. For families or individuals, bad things happen to good people. When someone has a credit score of 500 or zero credit score, banks have a hard time dealing with that. As a private company, we are able to be more flexible.
On the investor side, most of our clients have diversified portfolios with cash on hand, investment in stocks, etc. For those with money sitting in a bank account “earning” 0.10%, our services are attractive. We are able to offer what might be related to a 1-5 year CD, just with a much more satisfying return. This has the added benefit of seeing how their investments are helping others in the world, and often right in their own community or state.
- This started as a hobby and essentially is still a side-gig as you work full-time as an engineer. When/how/why did you start this hobby and how did it progress to where you are now?
I stumbled upon real estate to start, without much thought. I bought my first home at the age of 24 as a “house hack”, which is when you live in the home and rent the extra bedrooms, in this case, to my three college buddies. My business partner Jon has a similar story on the house hack.
I had some goals behind getting a home but didn’t really consider it an investment at the time, it was just a fun house to party and hang out with friends at. It wasn’t until a few years later that I realized I had been living rent free for 3 years while my roommates paid down my mortgage. And on top of all of that, the home appreciated substantially in value. This is when I started reading books on real estate investing and getting serious about it. I read that 90% of millionaires own real estate. Since I value freedom in my life (freedom of time, money, and location) the passive cash flow from real estate satisfies that desire.
Over the last five years, this turned from a hobby, to an obsession. From buying the 2nd rental property in 2015 to the more recent 17th rental property, a lot has changed. Forming a partnership in 2017 was a big step. Jon and I combined forces and capital to spend our nights and weekends scouting properties and buying homes. Now we are automating many of the tasks to reduce our time commitments.
- How do you balance holding a full-time job while also operating Set Your Rent?
I think a full-time job with a side gig can be managed quite well with nights and weekends, where it gets really complicated is also being a husband and father of two young kids which take priority over both. It takes a tremendous amount of discipline and desire. A lot of people choose to watch Netflix, tinker in the garage, watch the news, or go to bars in their spare time, I rarely do any of those anymore. I find much more satisfaction in personal development, family, and real estate so I spend any free time in those areas.
For a typical day I wake up at 3:30 a.m., and I love it. I get 3 hrs to read, work out, and complete my most important tasks for the day (engineering or real estate) until I put my dad hat on from 6:30 a.m. to 8 a.m. when my kids start waking up. I then transition to engineering from 8 p.m. to 5 p.m., and then family gets priority for the evening.
At first this was hard. Really hard. It would be much easier to sleep in, not workout, stay out late, watch movies, play video games, drink beer etc. Now I couldn’t imagine doing anything else and if I get off my routine, I get upset. For reasons I am not yet fully self-aware of, I have been able to create habits that benefit me in the long run over instant gratification in the areas of health, wealth, and relationships. I attribute a lot of it to the un-sexy habit of reading each day.
- How did you go about informing your employer about this side gig/hobby?
I don’t think I specifically made it a point to tell my employer, but almost anyone close to me (colleagues, bosses, CEO) know I do real estate investing , I just dont bring it up often at work. From my perspective, this is my hobby, which happens to make money. It used to be playing games, fantasy sports, news, social media, and other “time wasters”. Now my hobby is acquiring real estate.
I really have the best of both worlds. I work for the best engineering firm in the area with a phenomenal leadership team. My greatest compliment I can give is an example of our CEO who, in my opinion, is a leader worth following. A man who is doing things right and when I told him about my real estate efforts, his comment was not “you should be careful” or “watch out its risky”, it was instead a breath of fresh air, he simply stated “good for you”. I am blessed to work for a great company at AE2S.
- Are there process synergies to your work as an engineer with work on Set Your Rent or are they different sides of the brains, so to speak?
Absolutely, but I would say the synergies are less in the technical knowledge overlap and more in overall work ethic. In engineering school, I believe they make you suffer just to prove you are resilient and don’t give up. I think they are called “weeder classes” where 50% of the class is weeded out when the going gets tough. Most people just give up. Engineers from an early age understand that if they put in the work in college, they will be rewarded later with a higher paying job. This translates well into real estate. If I work really hard to find a good deal or buy one property, I yield the benefit for the next 1,5,or 30 years with little to no effort.
- As I’ve got to know you over the past year, I know this is bigger to you than just getting a financial return. You get excited talking about the positive impacts on both the new homeowners as well as the people choosing to invest in these projects. This is often referred to as “impact investing”. Will you please elaborate on some of the impacts you have experienced?
You are right. Admittedly at first this started as an avenue to retire early, pretty self-centered. Basically we were just looking for alternative income, not much passion or purpose there, just chasing a profit. This completely changed with Set Your Rent. With Set Your Rent we are literally changing lives. We know this because that is what our clients are telling us in written and video testimonials! We are able to help them acquire their dream home when no one else would. Some of our clients have been renting for 10+ years being forced to move every year because their landlord does not want to renew the lease or sells the place. Now they get to achieve the American Dream in home ownership. I believe the famous Zig Ziglar line holds true “You can get anything you want in life, if you just help enough other people get what they want”
On the investor side, this is two fold. Yes, they get a modest return on their investment, but what we have heard is that the “impact investing” side of things where they are truly doing good in the world is just as beneficial to them. Instead of just sticking money in a bank and getting a paltry return, we are able to provide a higher return along with a life altering story. It really is what makes this worth pursuing.
- I also know you are a proponent of the power of our entrepreneurial ecosystem and the value of networking. Will you please share with the readers your insights and lessons learned? Networking started as foreign concept to me. I labeled it in the “time waster” category as I didn’t find any immediate benefit. As I read and grew as a person I specially recall axioms like “Your Network = Your Net Worth” and “If you want to go fast, go alone, if you want to go far, go together”. One catalyst that got me started on networking was the SCORE program which offered free mentoring for young entrepreneurs. Since that initial meeting back in 2018 we have had great conversations and connections that were absolutely priceless. Initial meetings spurred participating in the phenomenal Innovate ND program where we acquired grant dollars to launch our idea and also led to winning 1st place at the 2019 Grand Forks Shark Tank competition. We are still meeting with SCORE to this day and highly recommend it.
Networking has translated well for our business. I would say I spend about 3-5 hours a week networking. Our property that we bought in Illinois was a direct function of someone knowing someone who knew about us. I also participate and pay for this service by joining three different masterminds related to freedom and real estate.
Lastly John, you are a super-connector, if anyone is in the Fargo area you have to know John. He has been extremely generous, supportive, and helpful in my time in Fargo and I really appreciate you and all the work of the EDC.
- Speaking of connections and your network, do you work closely with real estate agents and if so, how does that work and how has that been?
We do. They have been our greatest partners. This is a win-win-win. The real estate agent will refer folks who cannot quite obtain a pre-approval letter from a bank. We review that candidate and if they are a good fit we use that agent to buy the home for the aspiring homeowner. Agents have found this program extremely unique and by direct referrals and awareness we are helping agents buy/sell more homes in a year.
- What can we do as a community to help Set Your Rent succeed?
Create a city that people want to live in. With growth comes opportunity for everyone. I believe a rising tide lifts all boats so thinking about how you can start your business here, grow, or give back.
Secondly, spreading awareness. Not many folks know about us and many are grateful when a friend tells them about our program. We are working to do a better job networking and getting our information out there but if you know any struggling aspiring homeowners or investors that want to impact invest, feel free to reach out to see if we can help you.