Zero to One: How Tanner Lough Built a Property Services Business Into Real Estate Wealth

Tanner Lough (00:00)
That you can do it too? You know, I’ve made every mistake in the world, man. I’m telling you, there’s not a whole lot of things. You know, there are exceptions, but that somebody can look at me and say, well, I went through that. So you don’t know what it’s like. Well, I’ve been through, you know, my fair share of the ups and the downs. That the hardest is zero to one. If you can go from zero to one and you have to work at it.

Scott Bursey (02:01)
welcome to the Real Estate Pros podcast. I’m your host, Scott Bursey. And today I’m joined by someone I’ve really been looking forward to chatting with, Tanner Lough who’s been making serious moves in the property services and facility management space.

Tanner Lough (02:07)
.

Scott Bursey (02:16)
Every investor knows that a deal is only as good as the team maintaining it. Tanner has built a reputation across the state for bridging the gap between deferred maintenance and peak performance. If you’ve

ever wondered how the pros keep their portfolios running smoothly, this conversation is for you. Tanner, welcome to the show.

Tanner Lough (02:38)
Howdy, man. It’s good to meet you. It’s good to see you now.

Scott Bursey (02:40)
Yeah

It’s awesome having you here. And if you could share with our audience your story, how did you start your career and what are you focusing on now?

Tanner Lough (02:54)
So certainly my career got started is I worked for a company called, it was a wonderful company called Professional Property Management for a long time, several years. And I rose through the ranks of that company to ostensibly manage all of their offsite portfolio, all of their offsite apartment buildings and different properties.

You know, I had a half a dozen, you know, to eight guys reporting to me. handled all the inventory. And if that, certainly if that wasn’t enough at night, ⁓ you know, with my wife and I at that point wanting to start a family and I’ve always been a sort of a workhorse. I started cold calling people with properties for rent on Zillow because, know, that’s how I got my start and that’s what I was managing at the time. And,

You know, you get to a point when when you’re calling, you know, you’re using your script, you know, you can just kind of sort of watch the football game or, know, you can do various other things. It becomes automated. And my callback rate was huge because there’s a there was such a huge need for not calling your necessarily your local plumber or electrician or HVAC guy for a 20 or 30 or 40, $50 problem. The callback rate was was.

ginormous on that to the point where the business at night on the weekends was starting to generate more income than my job was. So my wife and I sat down and had that conversation and eventually, you know, she, she certainly pushed me to take the leap into, you know, being in the business ownership. And then from there we’ve, we’ve, it’s, you know, you know, it takes a long time, over the, you know, the last certainly several years.

We’ve snowballed it into what it is now of, you maintenance, ⁓ single family houses, commercial apartments, and now we have facility agreements and different maintenance contracts. mean, now we’re several hundred properties we maintain, if not a thousand, that we’ve gone to and maintain, whether it’s outbound calls or service contracts and those kinds of things to specifically tailor towards investor landlords.

You know, that is our bread and butter. We’re not sort of just general contractors where if you call us because you need a new kitchen, our stuff is specifically tiered towards that value proposition and that relationship between us and the landlord. And we’ve certainly scaled it that way. And that’s the value that we bring to investors and landlords, that kind of thing. And that’s certainly, and that’s just, you know, sort of one pocket of what we do.

Scott Bursey (06:32)
very well said. What do you think are some of your core strengths right now?

Tanner Lough (06:39)
The core strengths

So that’s interesting. then, well, so I’ve laid out the value proposition for the business and what our strengths are now. And we have, and I reference this other pocket of what we have of our own ownership. You know, along the way, you know, the goal of the business is to take that money that’s on that balance sheet and put it in your own pocket. So then we take that money, that cashflow, and we ⁓ invest in different opportunities, whether we’re a part of ⁓

you know, we’re part of a syndication of partners that we go and we invest and we end up building new construction apartments into ⁓ senior living facilities, those kinds of things. And then also, you know, we’re getting into, you know, new construction commercial development. And over the next 18 months, we’re locking down some property that we can build our own, you know, internal new construction apartments. And that’s really the value add.

and what we drive is certainly for us, and that’s the core strength in the secret sauce, the competitive edge that I have, that my wife and I, that we have as a team, to buying properties because, I mean, look, with the interest rates expanding, the return on investment, certainly contracting, where do we find value in what we’re buying? Well, we love buying properties.

that when we look at the P &L, we see extremely high maintenance costs because they’re outsourcing, you know, it costs them $2,700 to fix a water heater. It doesn’t cost us that. It doesn’t cost us, you know, $160 to have a plumber come out to fix a leaky P trap or $300 to fix a faucet or whatever else. So those are the properties we’re identifying and inside of our funnel of all the opportunities that we have to buy, we’re looking for the properties because that’s where we can compete.

We can’t compete with the big guys that have lots of money that are, you know, I have several clients that own property because there’s different ways you can structure it legally. know, having holding companies and management companies where you can use real estate to depreciate your active income or have passive losses that offset your passive gains, those kinds of things. And how do we compete with those guys that have very high net worths in active income?

that are buying properties if they cashflow a couple hundred bucks a month they’re fine with that because they’re you because they have a great career and they’re using that to offset their income. So where do we compete? Well it’s in the sweat equity. That’s where we can compete. It’s driving down the maintenance costs, driving up the value of the properties, driving up the net operating income of the properties through lower expenses and those kind of things.

Scott Bursey (09:42)
That’s awesome it all started with property maintenance but it really evolved to a whole lot more.

Tanner, let’s talk about the hard truth. What are the pros doing right now that the amateurs perhaps are missing?

Tanner Lough (10:37)
Well, on the sliding scale of pros, there’s levels to real estate, big, big gaps between the levels. So, you know, I have ⁓ friends that maybe their family owns, you know, a couple hundred million in real estate. And then I have, you know, other people that specifically are buying one type of property over another. You know, so you want to go to the

the set, you know, the extreme spectrum of the high net worth, I’m seeing these syndication deals where these mega new construction developments still raise money from, you know, 20, 30, 40, 50 people to build out huge, ⁓ you know, to build out huge new large scale developments. You know, what’s really popular, especially around here is, you know, the data center things.

and what in the secondary tertiary effects of that where it’s, you know, they’re, putting up a lot of people. know that are big money players. They’re putting up what are called flex spaces, but they can, but they can also, you know, I don’t know. You can’t, you certainly in my opinion, I wouldn’t go that route because you better put up some serious money and have some serious time to wait for that development growth. you know, you’re, you know, you’re looking at, know, all this information is public.

You can see the 10-year plan of any municipality. They have a master civic plan. You can see if this particular farmland in the next five years, 10 years, when they’re going to get their roads paved, utilities, sewer, water, gas, when all the utilities are going underground to that farmland, it’s all public information. And so certainly the big players are buying up farmland that they know in five or 10 years, they’ll be able to plot it out. Like I know one guy specifically that buys farmland.

that he knows will the utility he pays a premium for it, but he knows utilities are coming in five years. So his company, what they do is they put in, they wait for the road to be paved. All the utilities be brought up to the site. They plot it out. They zone it out or rezone it and plot it out and ⁓ do the dirt work, get all the site prep done. And then they sell all the plots to DR Horton. You know, that’s their whole, that’s our whole gig is, is just site prep things.

you know, and that’s certainly, and then the other people that I’m seeing are, are really crushing it or the, know, I have several friends, blue collar friends that are in the trades. let’s say they’re an electrician, they’re a plumber. And on the, like how I started is on your nights and weekends, you look for a house with, if you’re an electrician with major electrical issues and you go in there and you fix it and you sell it.

Same thing with plumbing. You could have tens of thousands of dollars in bills to ⁓ repipe a sewer stack in a house. But if you rent the excavator yourself and you go out and dig it and you repipe it, it’s just the cost of material for you. then, you’re ostensibly getting paid on the sale. You’re just not getting a paycheck. And then HVAC guys are crushing it right now because there’s a national building code where ⁓ multifamily spaces can no longer share the same return error.

or you know, got to isolate your mechanicals anymore where, you know, that could be a 10 to $15,000 bill per unit, but they can go in there and they can install their own mini split. They can install their own HVAC systems by, you know, they replace out HVAC systems that are still halfway decent, that still run and work. They can go in there and put their own duck and put a used system in there that’s still good and capture the upside of that equity.

on the refinance or the sale of that property, they’re making big money on that. And you’ll notice a theme that these are all competitive advantages that people have.

Scott Bursey (14:44)
us.

Very, very well said, very well described. What markets are you operating in, Tanner?

Tanner Lough (15:35)
So we’re in the Des Moines market. We’ve got projects and things going on all over the city to Ankeny and Waukee, West Des Moines, Johnson, Urbandale, all the up to the east side of town, your Bondurants, your Altoona. We have projects going on everywhere. then plus, at the point now where we’re buying five houses this month,

to, you we closed on one already. I just saw the lawyer text me a little bit ago about getting a purchase agreement signed for the other four. ⁓ And now, you know, we bought that property in Altoona probably 12 days ago and I run a really tight ship. So we went from zero to buying ⁓ this dilapidated property to 12 days later, it’ll be, you know, that.

that property will be turned. It has a new roof, new HVAC system, new driveway. It’s got all new interior kitchen cabinets, countertops, paint, trim, mean, the whole works of the inside. And we haven’t decided yet. I think the realtor actually texted me a little bit ago, depending on what the sale of the property is, we may have a 1031 that we can take the profit of that property to put it into. We haven’t fully committed to one thing or another, whether, because we can’t just…

We don’t want to just sell it and capture that income because then what do do with it? We’ll keep it as a rental and we’ll refinance it and pull the equity out. We like to see 200 bucks a door. ⁓ So when we’re refinancing, we’re evaluating that, just how much can we strip out? And that’s after everything, after all the expenses, the homeowners insurance, the capex stuff, all of our maintenance reserves, everything, all the expenses, we like to see a cashflow of 200 bucks a door.

And that works for us because we can take that equity out. And the benefit is, is I’m 31 now. We also have time that we can have these properties paid, you know, we can have these properties paid down and keep the snowball going.

Scott Bursey (17:44)
Very good point, excellent point. And Tanner, what caught my attention about you was the way you’ve been able to position yourself as a strategic partner for the long-term investor. That’s a tall order, especially with the current market headwinds we’re facing. What’s been the anchor for your business that allows you to stay consistent and predictable in an industry that usually feels like a roller coaster?

Tanner Lough (18:12)
Well, two strengths. I’ve developed over the relationships I’ve developed over the years, we’ve sort of weeded out and we just, have the clients that we really love and are on board with the mission. Our baseline clients and what we have now are not your investors that need to wring out the towel. Primarily, these are people with high income, high net worth.

that buy rental properties as either to offset their active income or to diversify their portfolios. Their top tier worry is not if a leaky P trap cost $150 or $175. And that trust comes over years of relationship building and talking people through things and always being available.

⁓ And then, and then, and I forgot where I was going. What was your question again? I forgot where I was going by second point.

Scott Bursey (19:14)
Basically, you know, the anchor behind your business.

Tanner Lough (19:18)
yeah. And then the second one is, is I’m never worried per se about getting slow because how I started. mean, if you ever get slow, you pick up the phone and you call. You know, like picking up the phone and calling people for rent on Zillow. can, I can drum up more work than I can even, I can even fathom just by picking up the phone, dialing, asking for referrals. The, the, the consistent stream of income. If you

If you treat people right, if you act in their best interest, what you’ll learn in life is people want to know that somebody has their back. Oftentimes, real estate is the best way to pass on wealth, in my opinion, because of the golden goose theory. Like when I die, my kids don’t just hit the lottery. If they want the golden eggs, they’ve got to take care of the goose.

They have to feed the goose. They have to water the goose, take the goose to the vet. You have to take care of it if you want the golden eggs. And a lot of people realize that. And that’s why you certainly see high income, high net worth people involved in real estate very passively because it’s a way of diversifying their wealth and passing on their wealth. There’s no other way to do it, especially if you…

Other than with with real estate in my in my opinion So that’s been the anchors being able to call people make relationships and always be open doing things like this and just you know I’m certainly way outside of my comfort zone You know, we’re not really my wife and I aren’t super active in the social media I don’t I don’t know we might have a social media for our business. I’m not sure But being able to just have people’s backs and be there for them

And is the way if you if you just take care of people and act in people’s best interest, ⁓ the work the work is there. I mean, then that’s and that’s our anchor.

Scott Bursey (21:12)
Yes.

Absolutely.

Absolutely. Always a winning recipe. And I commend you for taking that stance. Tanner, every elite operator has a defining moment where the strategy, you know, met the reality of the market. I’m talking about a contract that hit the wall or a pivot you had to make in real time. Do you have a battle story that shaped how you operate today?

Tanner Lough (21:50)
⁓ A battle story, ⁓ my business has always gone on pretty smooth. I have this open relationship with my clients of like, hey, my relationship with you is not worth a couple hundred dollars. If you get the bill and there’s a problem, just call me and I’ll either explain it to you or we’ll figure it out. So I can sleep at night knowing that what I send is fair, what they’re receiving is fair, and that they know that they can call me.

I mean, battle stories, I mean, it depends on which direction you want to go. But I don’t have any litigious things or contract agreement because, know, lot of stuff, and I may be overlooking things that happened in the past that now when you look back on just really weren’t that big of a deal. But maybe in that time, they were a huge deal. But anymore, we’re pretty sound on who we work with.

And what we do is I don’t have that problem or that worry anymore.

Scott Bursey (22:53)
And quite frankly, that’s a testament to how you maintain your operations, your business plan, the way that you have ⁓ built your business. Now, I know a lot of our audiences either earlier in their journey or looking to level up. And I think they’d benefit from hearing this from you. When it comes to building relationships and growing your network, what’s made the biggest difference for you?

Tanner Lough (23:23)
man that old adage is you’re the sum total of the people around you is extending your neck out is being in the rooms that you don’t belong in. It’s reaching out to people that you have no business reaching out to them. It’s doing things like this. It’s extending that comfort zone and having a knowledge base that when you do meet these people, you can provide real value to them.

Scott Bursey (23:48)
Absolutely.

Tanner Lough (23:48)
You know, on certainly,

you know, the huge operators that now I’m friends with started off with a worry and a question of how do I handle this? And I was there and lucky and blessed at the right place and time to be able to answer those questions. So there’s a bit of luck, you know, that’s drawn into that.

Scott Bursey (24:09)
you took that opportunity and prospered with it. And hey, that’s the key. And what you just mentioned is not just good karma. That’s a bulletproof business strategy. Interested to know, Tanner, in your experience, what is the one expensive mistake you see most maintenance business owners making right now that two pros have completely outsourced from their operating style?

Tanner Lough (24:17)
Yeah, certainly.

You know, a true expense has got to be…

As you’re buying the latest and greatest new trucks, adding, adding debt to a business. I don’t have any debt on our business. Now there’s debt on the personal side of real estate, but those things are cash flowing and they’re being paid down. We’ve never taken a distribution from any of our properties. It stays there to either pay down or to snowball into the next one. We take the active income from all Iowa maintenance.

And that’s what we live by. know, we talked earlier about this pantheon of men that I’ve had around me that’s really shaped and molded who I am. And one of them lives by the adage of you work for your lifestyle and you invest for your net worth. So we’ve always lived by that. The biggest mistake is as you’re growing, buying the latest and greatest things, whether that’s, you know, instead of buying a used dump trailer,

for five grand, you go out and you spend, you know, 17,000 on a piece of equipment instead of, you know, the most successful people I’ve been able to, I’ve been lucky enough to meet whether in any industry, you know, they, they quasi dump trucking is a little bit different cause you need new trucks, but, but when it comes to, you know, the dirt work business, buying a used bulldozer or buying a used truck and then learning how to fix it yourself.

Scott Bursey (26:15)
Sure.

Tanner Lough (26:15)
It’s saddling the business with debt because I sleep easy at night. I don’t have to worry about a banker calling me on the business side of things because I have six figures in debt because I needed the latest and greatest trucks with all the advertisement and all these things. We’ve just grown naturally over time. And when it gets busy, you rise to that occasion.

You work the 80, 90, 100 hours a week to get yourself back to a more stable strategy. I can’t say that enough of, I’ve seen so many operators on the service side of business go out of business because they make a little bit of money one year or one quarter and they think, and they’re scared of paying taxes. So they go out and they buy a brand new truck that they can depreciate, a brand new piece of equipment that they think that they’re appreciating. Although you’re still cutting the check.

You so you know it’s not like the government is giving you the $70,000 to go buy the new truck Instead of buying a truck that’s 10 years old that suffices and works just fine and paying for it with cash And you know that’s one thing you’ll learn about me too is you know I do have this sort of 10 % Dave Ramsey. That’s like right here I’m sort of in the middle. I know guys that super accelerate

debt pay downs and I don’t think that’s exactly the safest strategy because when you’re low on cash but you’re high on equity, if you start missing mortgage payments, even if you’re high on equity, they’ll still foreclose on you if you start missing payments. So it’s good to have cash in reserve. But then I’ve seen on the other end of the spectrum of people that just launch capital and debt to the ceiling to try to grow. And there’s a case that happened not too long ago with a guy here.

that was building out 40 different properties and all of a sudden all the vendors went to get paid and his doors were closed. And good luck if you structure the company the right way, even with the right contractual agreements, you won’t get paid because the business filed bankruptcy and if that individual did everything right, you can’t pierce the veil to come after their personal assets, only what’s in that business from my understanding. So when you collapse that entity, you’re

You know, you’re you getting paid is not existent anymore. So I’m a certainly a hybrid between those two where I do what’s best for my family and my security level. Cause only one thing matters to me and it’s how I sleep at night. I sleep good. And I’m, I’m at the right debt ratio. And when that gets to be a little much, we take that snowball and we start paying down some debt. You know, we, we like to put down big down to, we don’t try to do.

Scott Bursey (28:53)
and cl-

Tanner Lough (29:05)
the minimums when it comes to down payments on properties or those kind of things. I want more cash flow from being stripped from the properties. Because that’s also one of our more ultimate goals is I’m not looking at my life looking at being a gazillionaire. We have a goal of income that we’re on track to make when I’m 40 that can retire.

myself, I already retired my wife, that I can also retire. So it’s a cashflow number that I can generate generational wealth with because those cash flows will come up. My son and my daughter will eventually take over and they can build their own legacies with that. it’s also trying to match

what our family goals are, what my wife and I, what our family goals are, and what we feel comfortable with. So as operators, we’re not getting the knock on the door because we missed one month of payments because the work was slow.

Scott Bursey (30:20)
Absolutely. And it’s surely evident that the way you’ve structured your operations works very well for you. Tanner, what’s the one part of your story you hope really sticks out for our listeners today?

Tanner Lough (30:36)
That you can do it too? You know, I’ve made every mistake in the world, man. I’m telling you, there’s not a whole lot of things. You know, there are exceptions, but that somebody can look at me and say, well, I went through that. So you don’t know what it’s like. Well, I’ve been through, you know, my fair share of the ups and the downs. That the hardest is zero to one. If you can go from zero to one and you have to work at it.

because you have to find your secret sauce in how you can compete. You have to work from zero to one because then once you have one under your belt, you can go from one to two pretty easily. And then once you have two under your belt, you can go from two to four pretty easily. And then four to eight, eight to 16, 18 to 32 fairly easily in time.

Scott Bursey (31:29)
Absolutely. All right, before we wrap, if someone wanted to reach out, connect with you, maybe collaborate or learn more about what you’re doing, what’s the best way for them to reach you,

Tanner Lough (31:40)
my wife and I, I mentioned this earlier, are fairly, are fairly private. We’re not super on social media or that kind of stuff. If you have any questions you want to get, if you’re an investor operator within Des Moines, have properties and you want to reach out and have a conversation. you know, we can put my email in the show notes or whatever it is. It’s, my first name Tanner and then it’s at iowamakeready.com. You know, that’s probably the best way to best way to reach me because.

You know, not on my phone super, you know, a lot anymore. I’m either, I’m either working, I’m hunting or with the family. You know, that is how I’ve structured my lifestyle is to be in one of those three categories at all times.

Scott Bursey (32:24)
Well, listen, Tanner, I appreciate your time, your story, and your perspective. We need more people in this space who are doing it the right way. Thanks again for being here.

Tanner Lough (32:36)
Yeah, I appreciate it. should do this again. mean, there’s a ton of topics and we can get super granular on some and two. So I’d be happy to do this again. This was a remarkable experience and you’re a great guy. Appreciate it.

Scott Bursey (32:48)
The door will always be open for you. And for those of you tuning in, we truly appreciate you. If you found a gold nugget or two in today’s conversation, make sure you’re subscribed. We’re committed to bringing this level of executive clarity on every episode to help you stay ahead of the curve. We’ll see you in the next show, everybody.