The Property Perspective
From hidden gems to billion-dollar deals, this is The Property Perspective - where seasoned real estate pros reveal how they spot value others miss, and industry disruptors share the unconventional strategies reshaping real estate.
The Property Perspective
Kicking Goals in Real Estate: Rich Lennon's Path from Soccer to Financial Freedom
Unlock the secrets to transforming your real estate ambitions into passive wealth with our insightful conversation featuring Rich Lennon, a seasoned real estate investor turned private money lender. Discover how Rich's competitive drive and a strategic move to Richmond, Virginia, set the stage for his journey from an accidental landlord to a prominent player in the real estate market. Whether you're a seasoned investor or just starting, Rich's story is packed with valuable lessons on leveraging local market opportunities, especially during unpredictable times like the COVID-19 pandemic.
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00:00 - Hope (Announcement)
Is building your real estate business trapping you instead of freeing you? In this episode of the Property Perspective, host Preston Zeller speaks with private money lender Rich Lennon about the evolution from active real estate investing to passive wealth building through arbitrage opportunities and asset transition strategies.
00:18
From hidden gems to billion-dollar deals. This is the Property Perspective where seasoned real estate pros reveal how they spot value others miss and industry disruptors share the unconventional strategies reshaping real estate. Now here are your hosts.
00:32 - Preston Zeller (Host)
Hello everyone. My name is Preston Zeller. I'm the Chief growth officer at BatchService. I'm here today with Rich Lennon. He's a private money lender, real estate investor, and has had a really wild journey in that arena up to this point. Happy to have you here, Rich, Welcome.
00:51 - Rich Lennon (Guest)
Thanks, Preston. It's fun to be here, man. I really appreciate you having me on.
00:55 - Preston Zeller (Host)
Absolutely yeah. So I'd love to hear, just briefly, where are you at today? So you're in private money lending? I am, yeah, expound on that a little bit more, and we'll have the opportunity to talk about it more later as well.
01:06 - Rich Lennon (Guest)
Yeah Well, I had a real estate investing career. I did that for a long time. I also call myself a recovering real estate investor, I think that's also appropriate, and that business gave me a lot of gray hairs, and so I went hard into private money lending four or five years ago when COVID started, and now I'm. I lend quite a bit of money in my local market only. I've landed in Richmond, virginia, and it is the best decision that I've made in my real estate investing journey.
01:38 - Preston Zeller (Host)
Awesome, Cool. Well, I can't wait to hear more about that and the benefits there. So let's take a step back then Again, start kind of wherever you want in your journey and let's just see what comes to mind when you think about the beginning of Rich's story your professional career.
01:59 - Rich Lennon (Guest)
Yeah, I think the first thing you would want to know about Rich Lennon he's super competitive. So a lot of the things that happened in my business were simply for competitiveness. I wanted to be bigger and better and the best. And that fire definitely burns within me. And I had been an accidental landlord up until about 2011. I had bought properties to live in and then I sold and I moved to the next property. I didn't have to sell it, so I just kind of kept it and rented it out and there was not a detailed strategy in that.
02:35
And in 2010, I believe it was my wife we were living in the DC area at the time and hard to cashflow, by the way, in the DC area and my wife came to me and said, hey, we're going to move to Richmond.
02:48
And so, like a good husband, I'm like, okay, we're going to move to Richmond. And one of the things she pitched me on cause I had been getting interested in real estate up in DC is she had pitched me on, hey, richmond's a better cash flowing market and you know you could go and you could buy some rentals and, um, and that could be something that you get into. And I said, okay. So my initial thought was hey, I'm going to buy one rental a year and I'm going to be more, uh, more financially secure than my friends when I go to retire in 20 years, whatever it was. I mean, it really was that basic and yeah, I'm super competitive. So it was like, okay, I'm going to buy one a year, then I'm going to buy two a year, and then I'm going to buy one a quarter, and then one a month and then one a week, and it just kind of escalated and uh, yeah, it started in 2011 and um, and it's been a fantastic journey.
03:47 - Preston Zeller (Host)
Well, how did you get into it in the first place? I mean, what were you doing before real estate investing?
03:50 - Rich Lennon (Guest)
I've been an entrepreneur my whole life. So my education is engineering. So I was engineering as an engineer at virginia tech. I briefly, briefly had a job for general electric in their engineering field after college and it just wasn't for me. I was literally inside a nuclear reactor and I was like, oh wow, let's not do this for my whole life.
04:12
And so Homer Simpson yeah, that's exactly right. And um, I so I. My first real jaunt into being an entrepreneur was I was a. I was a youth soccer coach, a pretty good one. I had quite a bit of success. I did that for 10 or 15 years and I equated it to being a plumber to people, because there are a lot of clubs up there. What I would do is I would hire the college kids to come in and coach soccer for $25 an hour and then I would bill the club $75 an hour, and so I was just making the arbitrage off of that money and then that supplemented my own income, because as a soccer coach you don't earn a huge income. I did that for a long time until I just kind of got burnt out on it.
04:56
Yeah, what, what age range Uh, all of them. So I've done as young as um, you wait, and you nines. And then I had been. If you ever imagine crazy parents and soccer teams flying all over the country to get their kids into D1 schools. I coached those teams as well, and you know it was a whole thing. It was great. I met a lot of amazing people, but at the end I was happy to say goodbye.
05:20 - Preston Zeller (Host)
Yeah, yeah, how many years did you do that?
05:25 - Rich Lennon (Guest)
Oh, I would say, uh, 15 or so. So maybe since the I started in college for a part-time job to earn some money, versus, you know, maybe delivering pizzas or something and I just had a passion for playing. I really enjoyed the sport and I coached full time until maybe I was like 35, 35, something like that.
05:44 - Preston Zeller (Host)
And now I'm in my fifties and it's been a couple of minutes, but and I think I think people part of the reason why I was kind of honing in on that is people have this, I think, obsession, especially today, and even I did at some point with, like you have to make it in your twenties, yeah, or even your 30s, really like and whatever that means. But you know, oftentimes today it's like you know I'm making you know millions upon millions of dollars, um, but you know I I'm, you know I, I I'm. You know I'll ask you this question in a second. But in those 15 years into your mid thirties, you were undoubtedly learning tons of skills. Um, you know, I'm sure, people skills, uh, you know people coordination, can you know excuse?
06:39 - Rich Lennon (Guest)
me skills how to run a balance sheet.
06:40 - Preston Zeller (Host)
Yep, sure, yeah. So like what, what were the key things that you really took out of that experience that you then kind of rolled over?
06:48 - Rich Lennon (Guest)
Well, the there was no. This was a while ago, right? This is a. This is a long time ago, and there weren't things like podcasts and there weren't like big internet educational platforms and I was an engineer in an engineering school. They don't teach you how to be a business person, and I was an engineer in an engineering school. They don't teach you how to be a business person, and so I spent a lot of times in my 20s figuring out what it is to be a business person how to provide a good service, how to collect a fair compensation for that, how to manage the books and how to pay those taxes and starting projects that didn't work. So losing money is an investment right. That was all part of that journey.
07:28 - Preston Zeller (Host)
Yeah. So you're kind of some risk tolerance and that kind of stuff. So wait, you played soccer prior. I did, I played soccer my whole life.
07:48 - Rich Lennon (Guest)
I played and I just loved it. I loved the sport. I I went to Virginia tech, actually did not play soccer for Virginia tech, I actually played a little while for their rugby team which is probably another story for another day and um, but yeah, soccer has been a love from mine for a long time and it and I finally hung up the boots. Yeah, probably in my early 40s to mid 40s, where you know an ankle sprain was a one year on the bench and then it's hard to come back and you know the injuries stacked up and I just had to kind of let it go.
08:15 - Preston Zeller (Host)
Yeah, I played in a men's league when I lived by Portland Oregon and that was wild. It was like all the aggression people had from the other parts of their life just came out on the soccer field with one field ref, and so it's like he's down the hill. People are doing stuff in the back.
08:35 - Rich Lennon (Guest)
How many times I had to say, hey, man, we both have to work tomorrow. Like what in the world are you doing?
08:40 - Preston Zeller (Host)
Yeah, some janky slide tackle. Yes, okay, exactly, right, okay, so you went, you got out of the coaching. Um, is that at that point, is that, when you went, kind of start shifting into real estate more?
08:53 - Rich Lennon (Guest)
Yeah, yeah, I did a. I briefly did. After and maybe during the tail end of my um soccer journey, I started an online business. It was we basically funneled Google traffic, if you will. So we would pick keywords. We were good at finding out what was going to be hot for Christmas, like nine months before, and we would all year long we would get ranked in all the keywords that we needed for a product, and then, of course, some of them would hit on Christmas and some of them were complete duds. We would flow the traffic across our website, pass it on to Amazon and take a toll, and I did that for two to three years.
09:33
It was a good business, but I just was selling other people's products and it was just I didn't love it. So I kind of got rid of that, just sold part of it to a partner and just walked away. And right before I started really buying houses, I was staying home with my kids. For two years I was kind of put everything aside and then I was home for my kids for a number of years and then we had our third kid and I looked at the wife and I'm like, okay, I'm out and I, you know, went back and I really got into real estate investing at that point.
10:05 - Preston Zeller (Host)
Yeah, so this is like mid-2000s time frame. Yeah, that's right. Is that where we are? Yeah, that's probably accurate.
10:13 - Rich Lennon (Guest)
So I really started buying houses significantly in 2011. So this was maybe 2008, 2009, that kind of thing.
10:23 - Preston Zeller (Host)
Yeah, 2008, 2009, that kind of thing. Yeah, so you're coming off well. So 2011, it was like a lot of the craziness of 08. It kind of settled right so you could go get, start to get those deals. I think you know that time frame was interesting too because, you know, I think by comparison of maybe when you were doing some of the keyword stuff, um and so, and for Black Friday and whatnot, just like 2000, 2010, obviously at the dot converse, and then you had this really quick acceleration of what is the internet becoming social networks, and then from 2010, 2011,. Around that timeframe, up to, like I'd say, 2013 or so was the, or 2023 was like all this these innovative software's started coming out.
11:15
Yeah, and I think that's when you started to see, um, more real estate software kind of crop up as well, um, but so you know, I'm curious because there's so many new people who get into this space and there's so many tools which can be an inhibitor, uh, to some degree. So you got started. How were you going about finding deals then in that early time period?
11:42 - Rich Lennon (Guest)
I was a direct mail guy and I encourage people to find the lead generation source that fits them well. I was never into texting I'm too old, right and so I was never into pay-per-click, because you have to respond to those people within 30 seconds or the lead goes away. So my personal style fit the mailer where I could send a mailer to somebody, they could call me up, I could get back to them within 24 hours. I did at the time, which was a lot of mailers. You know, maybe in today's world it wasn't a whole lot, but we used to send like 20,000 mailers a month to try to get that lead. You know we spent around $10,000 in those mailers and, um, you know it's funny.
12:28
You, of course we talked a little before you get on. Of course you guys do batch leads and you guys are all about finding the data. I will promise you in 2013, there was no one that was helping us find the data or do the skip tracing or that just stuff wasn't. We would pull up and I'm I was big into vas early in my career, thankfully so I had vas and we would go into the local databases of real estate and we would look for probates and like we really would go in like say, oh, this, this property is transferred for zero dollars, like what's going on here, and that's how we got our data. And it was very time consuming and very expensive. And, yeah, I could have used all those platforms, by the way, and all that data. That would have been very useful at the beginning of the career when I was doing all that stuff.
13:16 - Preston Zeller (Host)
Yeah, I think there is some. Yeah, I think, outside of like direct to the source, there was maybe some list services, but that's there was. There was a little bit.
13:29 - Rich Lennon (Guest)
It was minimal, they weren't great, and then you had to really tie them by hand to the skip tracing piece so you could get some sources that would give you a list source, so you know would be one of them that was out early. But then, skip tracing it, they only give you part of it and you had to put the rest of it together. So it was very, very, it was a barrier to entry. Let's just put it that way. Sure, yeah, yeah, so you start acquiring properties. You said, like you said, you would start with one a year, and then I mean, I don't even think the first year I bought just one, I bought one. Actually, my first one was a wholesale. My wife I had resistance at the spouse level for this type of thing, and so my first deal or two were wholesale deals where I was able to bring the check home to the wife and say hey, look at this.
14:24
Look at this check. How did you do this week at work and?
14:29
and then you know, I just took that money and I dumped it back into marketing and, you know, just kind of took off from there and I was, you know, I never, once you start the marketing, you can't really say no, you can't say oh, I don't, I'm not going to buy the house now that I'm in the family room, and so you just figure out the money part of it. And I just had the desire and the drive to go and do better and then I just kind of fell in love with it. You know I was one of those guys who talked real estate all day, every day. You know, probably lost some friends over that time period because they're like shut up I don't want to hear about this anymore and but I was real passionate about it and that that passion definitely paid off where were you finding the money at that time?
15:10 - Preston Zeller (Host)
I mean, obviously, wholesaling, you don't really need that, but when you first, when did you first realize like oh I, I like I need some outside cash to do this deal, and how did you find that money? I?
15:24 - Rich Lennon (Guest)
I found those monies in my local groups. So my first big money lender came when I was sitting around a campfire at my house and I was the. The county had raised the, the real estate taxes, and so that was a discussion around the campfire. I didn't bring it up and I was just they were complaining about the taxes and then I just, in an exasperated voice, I was like man, listen, man, I own like 15 homes in this county right now and I would tell you that we do need the tax increase because that helps our houses. And I took that position in the argument and we had a discussion.
16:00
Somebody that was listening and never said a word email me the next day and said, hey, we were going to do real estate. We never really got into it, but we have all this money that we were going to do with it. Could you use our money? And that was the first time it really opened up to me and unlocked. And I was like oh, wow, okay and um. So that was my first money source. And I mean I found other money around, like a bouncy house at a kindergarten party where you know you're in a bouncy house because you're afraid the bouncy house is going to fly away with your kid in it. And so my other dad was doing the same thing and of course it's awkward and you're like, oh, what do you do, what do you do? And then I just started talking about what I do and he's like, wow, I'm really interested in that.
16:40 - Preston Zeller (Host)
And then he became a money lender as well yeah, that is, those are such quintessential, like dad found money stories, I feel like, um, well, and, and you know, I think it just goes to show right, like you can't, you can't write people off you know, you cannot, because I think that's we're so.
17:01
It's so easy to do that and be like, look, look at someone and go. They don't look like the type that's going to do X, y, z, you know, for my business, or has these connections you never know, um. And so I'm curious. The first one what was? Was this like family money they had, or was it, you know, was the guy managing a fund or like what was it?
17:22 - Rich Lennon (Guest)
No, they just had a couple of hundred thousand dollars that they had accumulated. They were in their mid thirties, they were both successful W2 employees and they had gotten the. They had gotten the HGTV bug and they said I'm going to go flip houses. And then they realized that that was a pretty hard thing to do, and it was that they couldn't find a deal, which is ironic at the time, because there were plenty of deals still available at that point, like with HUD, home Stores and the MLS even had them. You really didn't have to do all the marketing at that point, but they struggled, it was a barrier to them and they couldn't overcome it. And yeah, so they just had the money there. I mean, a couple hundred thousand dollars is significant, especially 15 years ago, even more so than today.
18:08
Right right, but yeah, they just accumulated the money through hard effort.
18:12 - Preston Zeller (Host)
Nice, yeah, I mean that's easy to assume that the money's going to come from someone with really deep pockets, versus just like a like the mom and pop investor. You know, somebody just has the money Right Was the second one like that too? The the bounce house fundraise.
18:39 - Rich Lennon (Guest)
It had a couple hundred thousand dollars. It was similar to that. And even today, 15 years later, I'm still using both of those people's money for my lending business. And they yeah, that's it, they didn't have that much money. I will say another way I got money is I've been doing that for a long time, but I educated people along the way of hey, because at that time, people are still recovering mentally from the 2008-2009 Lehman Brothers crash and you could say, hey, real estate is a better asset. Would you like to move your self-directed IRA over here? Then you can lend it to me. And so I educated several of my borrowers to that, that methodology that's really interesting.
19:30 - Preston Zeller (Host)
Actually, I started going down a similar path in 22 and we were going to do that for apartment buildings. We were started working with the custodians trying to set up, you know, live educational programs. I was something I was doing with my dad, but to teach people how to roll their 401k, maybe. If you, why don't you explain for a moment how that works from the self-directed route for someone who is listening and has probably, you know, maybe no idea how that stuff works?
20:02 - Rich Lennon (Guest)
Yeah, ok, absolutely. So. You can do lots of, lots of different types of transactions in yourself in an IRA. There are a lot of rules, so there are prohibited individuals and prohibited disqualified individuals and prohibited transactions. So you do have to use the rules, but in the same way that you use an LLC as an entity in which to flip a home in, your IRA is an entity and you could flip a home in there. You could follow the rules. But to do that you have to self-direct it right. So to do that you have to self-direct it right.
20:37
A lot of people will have it at something like a Fidelity or a Schwab, or they had a 401k and then now they have control over their 401k because they've retired out of their W-2. And you can move that money to a custodian in a similar manner, for which you moved it to Fidelity, you can move it to a self-directed IRA custodian. I don't know, there's like 20 of them now, maybe 25 of them across the United States. They're heavily regulated, they're essentially a bank and they hold the money and then you direct them into the investments that you would like to see, and for me it's always been real estate, just because I'm passionate and I love and I understand real estate, and so people can use that money to loan money, which is a very easy transaction in a self-directed IRA.
21:22
But you could also own rentals in a self-directed IRA. You can flip a home in a self-directed IRA, and it's not just IRAs. Health savings accounts are the same way your kids' Coverdell's, their education savings accounts Coverdell's you can also do real estate investing in those, and, of course, you can move and create a lot of money that way, and, assuming you're in a Roth, it's totally tax-free, and if it's not in a Roth, then it's tax-deferred, and so you can certainly build up those entities fairly quickly.
21:53 - Preston Zeller (Host)
Yeah, and I think the key rule, at least as I understand it, is like you can't take a direct benefit from the IRA.
22:02 - Rich Lennon (Guest)
Yeah, that is the big one. And so not just you can't directly, but your business can't directly benefit it and, like your spouse can't benefit, and then linearly, like the ascendance, like your mother, your grandmother, your great grandmother, and descend it. So your kids, your grandkids, your great-grandkids, they're all disqualified because the IRS wants to make sure that you're not passing on money tax-free. That's the reason for it and that makes sense. So you do have to make sure you follow those rules and the number one rule is exactly what you said you cannot personally benefit from it. But I think that's great. I think you learn, because so many people in our business they're living almost flip to flip or paycheck to paycheck, or rent collection to rent collection.
22:49
When you're dealing with your IRAs you're learning hey, what's the long-term stake here? I can't touch it really, tom, 59 and a half. Therefore, if I'm 37 and a half, I can't touch that money for 20 years. It gives you a different perspective on how you grow the money. It happens in a different manner and I think it's a skillset that's really important. Then the IRA helps you learn it by not allowing you to deal it yourself. Patience is out. Yeah, patience, patience, you to deal it yourself. Patience, is that what yeah?
23:17 - Preston Zeller (Host)
Patience, patience. Deferred, uh, deferred, uh. Graded and not deferred. Okay, what's the word I'm thinking of? Um, delayed gratification, delayed gratification, yeah, yeah, delayed gratification.
23:29 - Rich Lennon (Guest)
But I think I think about like I use this self I use the subject too as a as a good example of why the IRAs are so.
23:36
Because when we're an operator and we're going to do a subject to, and you know, we got to come up with like twenty thousand dollars in cash, right, so you got to catch up the mortgage, catch up the taxes, give them some money to move, give like you. You end up having an expense there and to take that out of your day to day operational capital is very difficult in a business. You're like I need that money to do the mailings next month and but when it's in the IRA, you can put that $20,000 in and that $20,000 might earn you like 70 and 80% returns because you're leveraging that property and there's just so many and you can't touch it anyway. And so now you learn how to grow your money at really fantastic returns and so deals that maybe weren't available previously in the LLC business now become available in the IRA business. So your business really doubles. And I think a lot of people think of it as if I do an IRA, I'm taking food off the table, and in reality it doesn't work out that way over time.
24:39
Opportunities that you didn't know existed.
24:41 - Preston Zeller (Host)
Yeah, I've become aware of.
24:44
Yeah, I see what you're saying. You start to look at the market and opportunities differently than just the hand to mouth sort of aspect. That that you can get into, especially if you have like lifestyle creep Cause you're like, unless I get another $40,000 check, I'm screwed this month. Okay, so back to your story. So you're acquiring these properties. I love that. You have this obviously very competitive mindset from years of soccer, rugby in college, teaching kids across all ages to be competitive, so this is like just part of your DNA at this point.
25:29 - Rich Lennon (Guest)
Yeah, that's fair.
25:30 - Preston Zeller (Host)
Yeah, so that sounds like it that, and working in nuclear reactors.
25:35 - Rich Lennon (Guest)
Yes, yeah, and that competitiveness has won me some friends and lost me some friends over the years you know it, it does, it does, that's for sure.
25:44 - Preston Zeller (Host)
Um, but okay, so you know what is? I want to work up to 2016 because you had some really pivotal things in your life. Then is there anything that we haven't covered between when you started getting homes to that 2016 period? Like, maybe walk us into that?
26:01 - Rich Lennon (Guest)
I was just head down and just grinding, and so 60 hour work weeks were the norm and, you know, maybe 80 hour work weeks at a time you say, hey, I want to. I want to start a real estate investor for my freedom.
26:14 - Preston Zeller (Host)
Well, it's passive.
26:17 - Rich Lennon (Guest)
It's passive yeah, like I don't, you know so and of course, the drive to just do more and more and more. I had put the mental goal. It was a stated goal.
26:28 - Preston Zeller (Host)
I wanted to buy 10 homes a month, like that was the goal and that was what I was kept racking it up, just like yeah, yeah and.
26:36 - Rich Lennon (Guest)
Yeah, and I'll tell you I never got there. I just want to be clear. I never got there. The most I ever did was eight and I don't know why I set that goal. I was at a mastermind later and someone asked me and they said that's the stupidest goal I ever heard. And I was like, wow, that kind of hurts. And but he was totally right, cause it was just arbitrary, it didn't mean anything. And now my whole life was dedicated to do this thing. That really wasn't very well thought out and so, yeah, in those years I was grinding towards an imaginary goal.
27:09 - Preston Zeller (Host)
Well, and you had three kids at this point right, yeah, three kids yeah.
27:13
So I mean, I'm a dad too. My kids are kind of like in a preteen era, but I think that's this is a dilemma. If you're a dad listening, there's that like you look at your kids and you know your wife and you know, or whoever you're married to and strive to succeed. But then at what cost? Are you like not being there? Yes, did you have any of that? I mean, you must have with long weeks where you're like am I really here?
27:45 - Rich Lennon (Guest)
Yeah, it really was, and you know, my wife was working at the time as well still, and so we had like a full-time nanny. And you know, looking back, I have some regrets. I have some regrets. She's a wonderful lady. I have some regrets. Wonderful lady, um, still know her, still part of the family, but doesn't really do that for us anymore and yeah, I feel like I missed out on some stuff and so I have some regrets there. But, um, I also am okay that my kids saw me working really hard and they're like okay, is driving hard and this is what it takes to be successful, and I've been blessed that now I can do it at a better clip. I've aged, I'm smarter and I'm older. Now I can't work as hard and but yeah, there are some regrets there, but there's also some positive things that come out of it. So I think that's life, though I think that that's how it plays out.
28:37 - Preston Zeller (Host)
Yeah, and I think there's. I mean, the consensus I always get is I mean, unless you're just like truly, you know, like a negligent parent or something, I mean you're always going to have things at the end of the day that, uh, you're like. I mean I wish I did that better, differently.
28:58 - Rich Lennon (Guest)
Yeah, I think that's natural.
29:01 - Preston Zeller (Host)
So, um, okay, so you're working long weeks. You know you get into that 2016 time period, like what walk us through. I don't even really know what. What happens then for you.
29:13 - Rich Lennon (Guest)
Yeah, so in 2016 and I'm a I'm an engineer, so I am pretty good at numbers, I am pretty good at paying attention to the books. But in the fall of 2016, I realized that I was short about a quarter million dollars come February.
29:35 - Preston Zeller (Host)
On taxes or not on taxes.
29:37 - Rich Lennon (Guest)
It was. I didn't separate the money well enough and I didn't know what my money was and what other people's money was, and I assumed that all the money in the bank account was mine. And when you're buying at that time, I was buying three, four, five houses a month I'm getting um. My borrowing style was I would get all the money for the renovations at the closing table, which, as a lender, I don't do, for this exact reason, and I you know it was. You just don't realize how much money, for example, you're leaving inside the rentals. You know it wasn't until a real analysis of the books later in 2018 that found all the money and where the money was, and it was basically distributed out within the rentals because the BRRRR was not a perfect BRRRR and in every one of those deals, I was leaving $10,000 or $15,000 or whatever. And when you're buying and keeping 25 houses a year, then that starts to add up, and so I didn't understand that that wasn't my money.
30:42
Thankfully, I figured it out with enough time to react, but I thought that I had ruined my life and I was like, oh my God, I'm going to default on all this money, and I was really panicked over it and thankfully, I had a good friend who had been in the business a long time. He lived in Florida and I went. He was, uh, he was one of my money lenders. I mean, first thing I did when I realized it was going uh, there was a problem was I contacted all my money lenders and said, oh shit and um, excuse my language. And so, anyway, I flew down to his house in Florida and this conversation changed my life and I was sitting around the table with tears in my eyes because I feel like I have failed everything.
31:27
And I told my friend and his wife the story of what was going on and, I kid you not, they started laughing at me. They like busted out, giggling, laughing. I'm like I'm going to punch you in the face, like what are you talking about? And they had the experience and the knowledge that they're like well, rich, you've got some assets here, you can move the assets around here and this is how you can manage this situation and you're not going to be short $250,000 all at once. You need to get these projects completed. Their advice was like you need to stop buying houses immediately, which is great advice when you realize you get in trouble, you stop buying. If you continue to buy now, you're actively creating a Ponzi scheme.
32:08
And so I was blessed to be around some smart people who poured into me. They could see the playing field in a way that I could not see the playing field and that was a big moment. I saw things differently coming out of that. I saw, hey, it's stupid to want 10 houses a month. It is stupid that I'm going to keep every single house that is a rental and I'm never going to liquidate it and just because I want to have more houses than my friends, and that's a really stupid way to look. And so they gave me some advice to, to, to reorganize the portfolio and it freed up the capital that I needed and I got through it and uh, but yeah, I feel really blessed to have had friends like that and uh, have those types of conversations.
32:57 - Preston Zeller (Host)
Yeah, I think it's a pretty common theme, at least on this show. But just talking to people in general, where it's like there's some moment where you wish you had had that kind of oversight well before then, because it would have prevented you from getting into trouble. I know I've been there too, or it's like you know you just assume you're right about whatever 06.25.
33:21 - Rich Lennon (Guest)
Yeah, experience is what you get five minutes after you know 06.35.
33:25 - Preston Zeller (Host)
Yeah, yeah, that's a good way to put it 06.36 yeah, and um yeah, so what was? What was the main thing? I guess, if you could break it down a little more, where you know what specifically you did, that sort of freed your mind but also, like you know, alleviated the risk that you thought you were having there.
33:51 - Rich Lennon (Guest)
It was really a version of profit first right. So I know that profit first. A lot of people know what that is now. It wasn't a thing back in 2016, but it was.
34:01
I was operating out of just a couple bank accounts and now I operate, even though I'm not buying those homes anymore. I'm more of a lender. I now have like 20 bank accounts and it's because when the money comes in, the escrow money for this thing goes here and then the money that is Rich Lennon's money to take home and spend on his mortgage, it goes over there and separating that money and making sure that you're pulling the taxes out and things like that. The good news is, when you're buying all those homes is there's not a lot of tax obligations because of all the depreciation, but organizing the cash flow on the way in and physically separating it out and having firm guardrails on when you can and cannot touch that money. So even till today, almost 10 years later, if I am doing a renovation project, I stick the money in one account. Then I pay the bills out of another account and then move the money over penny for then I pay the bills out of another account and then then move the money over, penny for penny, into my operating account and that way I know how much money does Rich Lennon have and then how much money is Rich Lennon holding, but in reality is other people's money. And those guardrails, um, were essential and no one ever like my.
35:16
My wife was a corporate, very good at corporate America, but I never really did corporate America and so there was never really any training around how to do this stuff.
35:27
It was really like I was a soccer coach kind of guy and then I built a business around it and now I'm moving millions and millions of dollars and there was no training for that, and so I was uninformed and yeah that, yeah, I definitely a mistake was made and I'm real fortunate to have seen it early enough, I think, fortunate enough to be humble about it and go right to the lenders and say, oh my God, what do I do? I need some help. And then, putting my ego aside and doing what needed to be done to make it right, and by the actual time that spring came that I thought that I was going to be dead broke, I'd actually solved the problems and was back to buying houses again. I only stopped buying for four to five months as I got everything organized, and so it ended up being a very uh, small brief bump in the road, and that's what my friends were laughing about at the coffee table with me. Uh, but at the time it was a mountain I couldn't see over it.
36:28 - Preston Zeller (Host)
Yeah Well, I mean willing to ask help, um, you know being, uh, having humility about that situation, I mean all that kind of stuff, right, I mean that's a good on you to do that because there are people, a competitive person, yeah for sure, yeah, um, well, yeah, cause there are people right, like where your competitors would be like I can't admit defeat, I can't admit defeat, right.
36:50
And then, um, you know, and we, we see that those types of things happen in the headlines, where they're like it's hubris, right, yes, so it really is Okay. So you had what probably seemed like an eternity ended up being only like four to five months. What happened after that?
37:12 - Rich Lennon (Guest)
I just started buying houses again yeah, started buying houses again, um, you know, and so I bought really heavily again from 2017 till 2019, and then it towards the end of 2019 um, I was burnt out. I think that would be a fair way to say it. I've always kind of been a one-man show. I had 14 VA employees at the time yeah, I meant to ask.
37:35 - Preston Zeller (Host)
So you were, yeah, mainly one guy, and then you had a lot of VA assistants.
37:40 - Rich Lennon (Guest)
Okay, now, at one point I had a local office manager at one time at a local project manager that ran all the flips, and so I certainly had local employees over the years. You know that's a totally different podcast that you can talk about forever. All that goes into stuff like that. But I had put a number in the sand when I started the journey and I said I want my net worth to be worth that and I hit it in 2019. And I could. You know, cause you have to do all the bank stuff all the time. They always want an update every single year about what you have and what your assets are, et cetera, et cetera. And you know about what you have and what your assets are, et cetera, et cetera. And you know. Eventually, you know we had met that goal. And so when COVID came around, I said, okay, I'm just going to stop buying houses.
38:27
So it was really in February or March of 2020, right when COVID was happening that I said you know what I'm, I'm, I'm just done. I don't want to do this anymore, and so, over the course of the next six to eight months, I shut down the business. You can't do it right away.
38:40
You get a bunch of projects coming up or whatever. So I had, I went down from 14 employees, now I have three, and um, you know the money, the money started piling up. You know, when you're in that many projects, a lot of your money is out working, it's on the streets, and so when you stop, it comes back. And now your bank account. All those years you had no money in your bank account. All of a sudden it piles up and it's sitting there and I had been lending for a while in my self-directed IRAs, but I started lending larger amounts of money and you know I I did some calculations in 2020 because we couldn't leave our house and I realized that my rental portfolio, while a very impressive wealth number, was really only earning me a 5% or 6% return on my money, and that was not going to get me to the arbitrary line in the sand that I grew for the next wealth level that I wanted to get to, and lending has been a good vehicle for that.
39:35 - Preston Zeller (Host)
What was the first number?
39:36 - Rich Lennon (Guest)
if you don't mind me asking, I wanted to get to and um. Lending has been a good vehicle for that.
39:37 - Preston Zeller (Host)
What was the first number of? If you don't mind me asking.
39:40 - Rich Lennon (Guest)
I wanted to make it to eight figures. I wanted to, I wanted to make it to eight figures and um and uh. I think that you can do. I think you can do that in a decade in single family homes. You're going to have to work, you're going to have to grind, yeah, but I don't think that you can then make it to nine figures with that same model. There aren't a lot of single family home real estate people who are worth a hundred million dollars based on that. That doesn't that doesn't really exist.
40:06 - Preston Zeller (Host)
Yeah, you probably have to diversify quite a bit. Yeah, yeah, no, that's a. Well, you know, I I think it's good to. I mean, it sounds like you knew sort of that.
40:21
You didn't you never intended to be like, hey, I want to grow to 50, 100 employees and have multiple locations and go to different states, like it sounds like that was never really part of the plan right, that was not no yeah, yeah, which is a good thing to know, because I think people can be gung-ho on that direction of like uber expansion right into different markets and then you, you, just you, different markets, or okay, real estate is so, so nuanced on a local level it is, and I in when I was buying homes.
40:55 - Rich Lennon (Guest)
If I was on a journey to get to 10 and so to do that I started, I was like, oh, I have to go outside my region, I have to go outside. I'm in the richmond virginia area, I have to go, I have to go beyond that to to meet my goals, and it was always outside that region that I had the big losses, you know because, I didn't understand the market well enough.
41:17
Uh, it was hard to get a contractor in a new air Like you had to go through. Oh, I have to go through four roofers now, like I in Richmond. I know my roofer.
41:25 - Preston Zeller (Host)
They're like who's this guy calling me up from outside the city?
41:29 - Rich Lennon (Guest)
You know I'll be there next week and I'll charge you $85,000 for the you know 200 square feet of shingles. So it was, it was always, and that's why I only land local as well. And I only do that because I learned as I went farther and farther away from my home. The return was smaller and smaller and I took some losses and I was just like I don't need to do that, so I stopped.
41:57 - Preston Zeller (Host)
Yeah, it's pretty. I mean, it's pretty tough to underwrite some in a market where, like you, don't have some foundation there.
42:06 - Rich Lennon (Guest)
Yep, you're relying on the local real estate agent to give you a quote on the house that they want to sell and you know the numbers. You know are what it is that they will get the sale for. They have no vested interest. Their transaction for you. And they have no invested interest to. To make sure that that's correct.
42:26 - Preston Zeller (Host)
And you never had a real estate license.
42:29 - Rich Lennon (Guest)
No, I did not. My wife has one now. I made her get one in. I can't remember I made her get one in. I can't remember maybe 2016, 17, 18, kind of that time period. We were spending so much money on real estate agents when we sold the houses, and my experience with real estate agents is, although generally positive, they always wanted me to make the decision anyway how much should we list it for no-transcript? And so my wife will tell you that she is the laziest real estate agent that ever existed. Um, cause, you know we do the work behind the scenes for her and we only she only lists my own properties.
43:13 - Preston Zeller (Host)
Got it. Yeah, I think that's a model that a lot of people do. I mean, you know, even in our world of products, we have a lot of agent investors and you know, did you ever creep? For me, it was all about going faster, so I was like oh, I'll just buy.
43:40 - Rich Lennon (Guest)
I'll buy two more homes this year and that will far outpace what I can buy with the title company.
43:45 - Preston Zeller (Host)
Yeah.
43:46 - Rich Lennon (Guest)
I can earn with the title company.
43:48 - Preston Zeller (Host)
What? Okay, so 2020,. You start shutting things down. What is it? Early 21? Then that you're like I'm going to get into more private money, lending more. Like that's going to be the thing. Like what was that?
43:59 - Rich Lennon (Guest)
like Well, it was I. I was. I did start to deploy the money in 2020, by mid 2020. I was really deploying the money and I ran out of money. You can, you know, if you're my average loans about $200,000. So you just run out of money eventually. And so then I started to fractionalize the notes.
44:19
I went back to my old lenders and I said, cause I lend my money at about 20% and I? I went back to my old lenders who lent to me on the flips and they were getting 10%, and so I would. I offered them. I said, hey, I'll go into these loans 50, 50 with you that you put a hundred grand in, I'll put a hundred grand in, but you're only going to get 10%. And so, by arbitrage, I get the 20% of mine with my own money and then I get their 10%. So I would make 30% returns on my money and I could deploy them and tranches of a hundred thousand dollars at a time. And so I just fell in love with that.
45:00
That I mean, to do a loan really takes me about three to four hours from beginning to end. So it's about an hour of underwriting at the beginning, about an hour of the payoff and making sure the wires are correct at the end maybe an hour on the draw, somewhere in the middle, and I was making 30% returns on my money. And so I began to liquidate my portfolio in 2021 because I had been buying right for 10 years and certainly it's been on a run since 2011. Now, of course, it's been on a further run since 2021, where I first started selling them, but I continue to sell off my portfolio. I'm going to sell three or four this spring that when the tenants move out, I don't even really renovate them anymore. I just move them and put them on the market and then I take the money and then I move it into the lending business, and that has been fantastic.
45:47 - Preston Zeller (Host)
Well, and so you kind of hinted at this. But did you have a property management company on these rentals?
45:57 - Rich Lennon (Guest)
We did it internally, so I did it from the Philippines, so we property managed and we still property managed because I still have what most people would consider a large rental portfolio.
46:08 - Preston Zeller (Host)
How many is that?
46:11 - Rich Lennon (Guest)
I don't like to give out that number. It used to be well over 100. I would say it's less than 100 now. Well over a hundred. I would say it's less than a hundred now. Um, I have more moved into the note space where I have more paper now and it papers, just a mortgage and note. I have more paper now than I have a rentals and um, so it's been really, uh, changing that asset from a hard asset of the rentals to the paper. And, um, I was told early in my career by a very old man at the bottom of a boat in the Caribbean that I would do that. I told him he was crazy and wrong.
46:42 - Preston Zeller (Host)
Wait what? Yeah, back up for a second here yeah, fair enough. Is this the beginning of a book?
46:48 - Rich Lennon (Guest)
Yeah, it's fair enough. I got a lot of my education from real estate groups and one of them would rent not rent, but they would go on cruises and there'd be a hundred to 200 investors that would go on the cruise and it was always in the Caribbean and then we would educate ourselves on the classes that would be going on during the day and then we would go on excursions and I met a gentleman early and of course, I'm super competitive. I think I know it all and I'll have a whole bunch of rentals, thinking I'm the bomb and I'm like well, I got all these rentals and he's like you're not going to have those rentals in 10 years. I'm like you're an idiot.
47:22
He's still a very good friend. He's a very good friend and I tell him often I was like you are so correct, Because I think you go through that journey and then you find out paper's just easier, it just doesn't take as much work. Now I truly can spend that time with my kids and my family.
47:37 - Preston Zeller (Host)
So, yeah, walk us through that then. Um cause, I think people listening are probably going to be like what on earth is transitioning from hard assets to the paper even mean yeah, what do you mean by that?
47:49 - Rich Lennon (Guest)
Well, I, mean you take the rental and you sell it, and so if you sell it and it's got just easy math, it's got $100,000 worth of equity in it, and so now you have $100,000 in your bank account. Now, when it was in the rental, my $100,000 was earning me, on average, $5,000 or $6,000 a year in return, and so that is a 5% or 6% return. Now I take that same $100,000, but it's in a bank. Now I lend it out, and when I lend it I send it to the title company and it goes to purchase the house and in exchange I get a piece of paper in the form of a note promissory note that I'm going to get my $100,000 back, plus the return on it. So now that $100,000 went from earning 5% or 6% interest to now it earns 30% interest, and so my internal yield on my wealth really grew fast, you know, and so I've been transitioning out of those rentals so that I can make more money at a higher rate of return with the lending.
48:50 - Preston Zeller (Host)
Yeah, these are annualized return rates. Right, yeah, that's right, yeah, awesome, yeah, I, you know, I think that's um. Just to me it's an interesting aspect of real estate because I know the like. You know, a rental, a single family home, is only going to cashflow. So much so, then. But then there's all all the you know depreciation, as you mentioned, and a lot of tax benefits for sure.
49:13
Yeah, people do the cost, segregation and all that kind of stuff. But you've found an interesting way to works with your plan and I think that's the key thing. Works with your plan what you are striving towards. Like if your goal was to have hundreds of single-family rentals because you love have you know the the idea that, because you want to help families rent homes, that's great, um, but but if it's like you pointed out, it's just kind of an arbitrary thing. Yeah, you're going to disconnect from it at some point.
49:52 - Rich Lennon (Guest)
Yeah, and I wouldn't have believed that early in my career. I wouldn't know. You're crazy. But you know when, when, when you, when you start meeting some of those wealth goals, you really do start to analyze your life and say, ok, I'm good, I don't ever have to work again, I'm not that person, I'm still the competitive person that I was before, so I will continue to do it. But your priorities change and you really start to evaluate like, oh, I'm doing this for freedom, but I really don't have freedom, and yeah, so I made a pivot and I've certainly been very happy with that pivot.
50:25 - Preston Zeller (Host)
Yeah, nice, so awesome. You went from what Five, six percent annualized returns to 30 percent annualized return rates, effectively through your, your heart. Is it hard money? Is that what you're doing?
50:40 - Rich Lennon (Guest)
I call it private money lending.
50:42
I think, that people who have my see my interest rate would call it hard money lending. But and I always equate, the difference being it's my money and that's what makes it private. And so if there's a problem like I'm a phone call away, I'm not some hedge fund somewhere that is beholden to a board that now is going to have to come foreclose on you. I'm a real person, I'm in your market, you know me, I've been in your market for a long period of time. In that regard, it's very private in that things can be done and worked out. At this point, I've made a couple hundred at that price point and um zero foreclosures in four years five years now.
51:23 - Preston Zeller (Host)
Yeah, and so, and you're all in the Richmond area, right? Yeah, okay, yeah yeah.
51:28 - Rich Lennon (Guest)
There's a few outliers. They tend to be friends in other States. But uh, 95% of the business is right here in Richmond and the surrounding areas.
51:36 - Preston Zeller (Host)
And how are people finding you to get this private money lending?
51:44 - Rich Lennon (Guest)
I do no marketing, so I had the advantage. I was in the market for a period of time. As a real estate investor I also run probably the largest. It's not a REIA, but it is a RIA. But it's not, of course, the official RIA, but I run a real estate investing group. I've done it for a while. Honestly, I don't get a lot of business out of that RIA. I end up speaking in front of the room all the time and all the business is done in the back room while I'm not there. But it does. Now. The title companies, the real estate agents, they all know me as a lender and, um, I go speak at uh real estate agents offices from time to time, try to educate them on things, and then that's where the business just kind of naturally filters in.
52:31 - Preston Zeller (Host)
Yeah, so you go, you, you go give value in the community. But it sounds like yeah, I go.
52:36 - Rich Lennon (Guest)
People don't understand how it even works. And so if you go and educate them about how it works and you can say oh hey, mr and Mrs Real Estate Agent, you can have another client which is a real estate investor and this is how you get them the money. It's not your typical mortgage broker, it's somebody either myself or like me, and then you just educate them on the opportunity and they're grateful for that and then they just use you. It's as simple as that.
53:02 - Preston Zeller (Host)
Yeah, awesome. So what's what's next for you? Like, what do you? What are you working towards? I mean, first of all, actually rich congratulations on making it to where you've been in life.
53:14 - Rich Lennon (Guest)
I appreciate that.
53:15 - Preston Zeller (Host)
Yeah, I mean I think you know people underestimate the work that does put in. There's no, you know, I'll say this a lot, there's no silver bullet. Shortcut is hard work. You know that kind of stuff, um, and you just kind of really went through that. So I mean, I think it'd be, I'd love to hear you know what is kind of next for you.
53:37 - Rich Lennon (Guest)
Well, I am a bit of a contrarian and I don't believe in the way that we teach finances in the United States, and I do think that there is an intentional lack of education on this subject, and so now I have a podcast. The podcast is called Growing the Money, where I teach people how to grow their money, and that's a combination of taxes, and I talk a lot about lending and and how you can actively grow your money, and I'm very passionate about it. It's a game and so therefore, it allows me to be competitive, and that definitely fills a box for me. But, yeah, I teach people now how to do what I do.
54:19
I think people are kind of fascinated by the story when they hear it, and, of course, everybody's attracted to 30% returns, and it's 30 to 50% returns. By the way, you can earn 50% just by fractionalizing the note a little differently, but once you get so much money, your goal is to move your own money. So I don't, you know, my goal is not to move other people's money, is to move my own. But uh, yeah, people are attracted to that model.
54:43 - Preston Zeller (Host)
Yeah, I, I, I love what you said. That, um, I fully agree. We are intentionally not taught good finances and it's. It's interesting. My, uh, my kids go to a charter school and my one of my daughters is in a, you know, gifted, talented classes. But it's interesting because in her gifted and talented class, which you have to, you know, score like 98% percent above percentile and you know one of the the tests they do, they're teaching them stock trading. Interesting, yeah, but I'm like why isn't that just hot? Yeah, you know, um, and that that school does a bit better. But on the whole, yeah, it's like. You know people, myself included. Even I had a. I grew up with a dad who was in finance. Um, he was doing mortgage brokering for commercial, but I, you know, I just maybe it just skipped by me, but it took me a while to really kind of wrap my head around a lot of that stuff.
55:46 - Rich Lennon (Guest)
So I didn't really get into finance until I was in my mid thirties and I I similar to I did not have a father that was in finance. I had a father who was, like like myself, a serial entrepreneur, and he passed away early and he never really understood finance, and so that was a legacy that I was born into, and it really wasn't until my mid-30s that I realized that money is just a game. And then, as soon as I figured out that it's just a game and you have to know the rules, I'm like, I'm in and fit my fit, my personality very well.
56:19 - Preston Zeller (Host)
Yeah, yeah, and I think people can have these like strange emotional, um, uh, emotional things about money. Like you know you, you sort of like personify money as being one thing or another when it's just a tool and, like you said, it's like a ball is just a ball and has a kind of different function depending on which game you play, but know the rules, like you said. So, anyways, where can people find you?
56:52 - Rich Lennon (Guest)
Rich. Yeah, you can find me at richlennoncom, so you can reach out at richlennoncom. Yeah, you can find me at richlennoncom. So you can reach out at richlennoncom. If they're interested in lending and you're interested in kind of my thoughts on this type of thing, I have a smarter wealth blueprint on there. You can just book a growth call, a 30-minute growth call. I'm happy to talk to you about how to grow your money and I have a podcast. So please check out the podcast. It's Growing the Money. It's on Apple, it's on Spotify, you can find it everywhere.
57:31 - Preston Zeller (Host)
Awesome. Well, thanks, rich, I appreciate your time today, yeah.
57:35 - Rich Lennon (Guest)
Preston. I really appreciate it, I really enjoyed it.
57:38 - Hope (Announcement)
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