In this episode, Jared Alexander shares his journey from working in the flooring business to venturing into real estate investing, particularly in multifamily syndications. He emphasizes the importance of vetting sponsors and operators, as well as the benefits of passive investing in real estate. Jared’s company, Optimal Equity Group, focuses on educating and guiding investors in real estate opportunities.
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What’s Covered In This Episode
- In this episode we’ll cover:
- The importance of vetting sponsors and operators in real estate investing
- The benefits of passive investing in multifamily syndications
- The role of Optimal Equity Group in educating and guiding investors in real estate opportunities
Connect with Jarod:
https://optimalequitygroup.com/
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Read The Transcript Here
Trevor Oldham (00:01.934)
Hey everyone, welcome back to the REI Marketing Secrets Podcast. Today on the show we have Jared Alexander. And Jared for our audience out there who is just learning about yourself for the very first time. Do you mind going into a little bit about your background and how you got started in real estate?
Jarod Alexander (00:17.325)
Yeah, Trevor, thanks for having me on the show here. And sure, yeah, I’ll give you a little background of myself and then, yeah, that transition into real estate. So for me, originally from Fayetteville, North Carolina, and I’ll tell you one thing, and I didn’t even realize this at the time, but when I was probably 10, maybe 12 years old, I saw my grandpa retire.
and move out to Arizona, which is where I’m currently living now. And he lived off, come to find out, he lived off the rental income of this commercial property that he had, right? So that’s how he retired at age 50, mind you too. And so from a little kid, that always stuck with me. And anyways, you know, but I grew up like, you know, I think how a lot of us are taught is, you know,
go to, you know, get out of high school, go to college and then, you know, put your, you know, work for 30, 40 years, put your money in a 401k and, and hopefully you have enough to retire. Right. Well, for me right out of high school, actually, so my mom, my grandpa actually owned a flooring company inside of that commercial property that he started. And my mom ended up taking it over anyways, long story short, I ended up working for her right out of high school and kind of going into.
going into that route in the flooring business. And so early on, you know, I started out installing, but then I learned about sales and started, you know, creating, making some real money, right? And fast forward to about 10 years ago, I ended up moving out to Arizona. And I mind you, that mindset throughout that process was just, all right, you know, how can I make money? You know, I probably wasn’t as responsible as I should have been at that time, but, you know, just learning and watching people along the way.
And then when I got out here to Arizona, I met a good buddy of mine, Randy Trevor, which we both know. And we started, you know, he started talking to me about a single family. I got introduced to that rich dad, poor dad book, you know, that, that purple book everyone talks about. And it just totally opened me up to a new way of thinking, totally changed my mindset about money, investing, you know, my, my goals in life and.
Jarod Alexander (02:36.909)
So I started, okay, how can I start creating passive income? So I got a sales job out here in Arizona, again, started having some money left over that I could invest. And I was like, what do I do with this? And so my goal was to start out in single family. Well, I did start out single family, but my goal was to buy about 50 to 60 houses to get to my number that I wanted to buy or to get to my number that I wanted to have that, my financial freedom number.
And then I bought my first one and I realized, you know, everything was going great for about three weeks. And then I had a $4 ,500, well, I had a $4 ,500 repair bill and that was a new sump pump, you know, some landscaping needed to be regrading because it was in Kansas City, Missouri. I never even saw this house, mind you. And, you know, I…
You know, and so, you know, and you know, when you’re going into this stuff that there’s going to be repairs and things that are needed, right? You factor that into the expenses. But essentially that just wiped my cash flow out for about two years, right? And I’m like, well, wait a minute, you know, and I still try to get some single family, but this was when the market was at the height. It was in 2020. And so.
Anyways, fast forward, I’m like, if I want to scale, I need to start looking at something different. And I tried, looked at short -term rentals. I was trying to do the BRRR method at the time, then went to short -term. Looked into storage a little bit and then fell upon multifamily actually going buy it to a new in -person meeting event. And for those just getting started out on this journey, I highly recommend check on Eventbrite or, you know,
networking events in your area that you can go to and start learning about this process and meeting people in this space. And there’s a ton of people that are just so willing to help. And that’s what happened for me. I thought I was wanting to be a full blown syndicator at first. And I’m like, well, wait a minute. I need to get some exposure to this. So I started out as an LP, which is a limited partner. So pretty much an investor in the deal and started out
Jarod Alexander (04:52.813)
with an operator, you know, I feel mommy mentioned rise 48 that I that, you know, they always talk about find somebody you know, like and trust. Right. And so kind of going back a little bit, Trevor, and I’ll pause after this to see if you have any questions. But I did about twenty five thousand dollars down on that single family home. Right. And now a year later, we ended up selling it and making making some money. Right.
But my first investment I did was actually through a self -directed IRA. So, you know, for those that don’t know, you can invest through your retirement accounts. But I did that first investment, which was 25 ,000, and I started getting a similar cash flow and I was completely hands off, right? And I still got the advantage of, you know, was able to take advantage of the depreciation, all the benefits of real estate without having to do the work.
And so that just opened me up to a whole new way of investing. You know, not a lot of people talk about apartment syndication. I’m not a lot of people talk, you know, know what that is, right? So, you know, fast forward, then I, I eventually, I did five or six more deals as an LP, loved this space so much. I started my company, Optimal Equity Group, which was formed to help educate others on how to achieve passive income through real estate, primarily apartment syndications is what we focus on.
Trevor Oldham (06:21.454)
Yeah, it’s perfect. And I really like where you mentioned initially your goal 50 to 60 houses. I always thought about that myself going out and doing the single family route. But I also think in my mind, like let’s say on a single family rental and making, let’s say it’s cash flowing good and it’s $400, $500 a month and you’re getting $4 ,800 to $6 ,000. Like you mentioned one big expense, whether it could be a water heater, it could be a furnace, it could be a leak in the roof that you have to be repaired. We all know that.
fixing a house is not cheap. And I always thought that to myself, I’m like one repair, like you mentioned, if it, let’s say in the beginning, it was cash flowing 200 bucks a month, so 2 ,400 a year, two years of cashflow is going to be wiped out on that one expense that you had mentioned. And I always thought that to myself, and I’d be like, it’s almost like then I have to work without getting paid for two years while I have to still upkeep on this property, let alone any other, any additional expenses have come through. And that’s what really drew me to more of the passive investing route.
myself is when I realized, okay, if I’m investing 25 ,000 in a single family rental or from investing 25 ,000 in an apartment syndication, maybe each of them spit off 200 bucks each, but one’s a lot less of a headache than the other one is going to be. And that’s what I really like about your point there. And what drew you more to the passive investing side, I want to talk a little bit about what drew you to say the multifamily side of these syndications. Is there any other asset classes?
that you have looked at, let’s say like yourself storage, your mobile home park, or you more just working within the multifamily space.
Jarod Alexander (07:54.637)
Yeah, yeah, great question and great points too, because you hit it right on the head, Trevor, with that single family. It was cash flowing $200 a month. And that’s, yeah, that’s that wiped my cash flow out for those two years. So, you know, it’s definitely important. And again, you factor that stuff in, but look at the numbers, make sure they make sense. But we’re looking to scale multifamily was the route to go, which to answer your question, Trevor, that’s what led me into this space is, you know,
For one, I look at risk, right? This is hard earned money that I’ve worked for and saved up for years, right? I want to make sure my money’s going to a good investment that is, I mean, any investment that you make is going to have risk involved, right? But how do I mitigate that as much as possible? And so, what led me to the multifamily is, these are the apartments that we’re investing in are workforce housing, right?
These are contractors, blue collar folks that is based on the employment around the area. So a lot of these are in great locations by highways, a lot of job growth. I mean, some of these employers are 5 ,000 plus employees, right? So you wanna have good occupancy rate and the area to support the job growth.
Right. Those are the key factors to look at when you’re investing in markets, job growth, population growth, the medium household income, things like that. So anyways, once I kind of learned and educated myself on that, multifamily and going back to this thing compared to single family, right? If I got a 200 unit complex and I got 10 people that aren’t paying the rent, well, I still got 190 people that are, right? In a single family, if I got one person not paying the rent, I’m getting 100 % of zero each month. And so,
That right there was a mitigating risk. And also, Trevor, it’s probably like this in your area, but in Phoenix, here where I’m at, the median house average right now is close to $500 ,000. It’s just under $460 ,000, $470 ,000 to just get started. And not a lot of people have the money for these down payments and things, so they need a place to rent.
Jarod Alexander (10:18.861)
Right. And then you, and then we can talk about, so that was just one factor. And then you can talk about forced appreciation, right? You know, unlike a single family, it’s not like, you know, it’s not comped around the neighborhood. It’s comped, you know, based on the, the net operating income that this property is producing. So we go in there now and we, you know, take over these, these are called value add apartments. So typically 1980, 1990s builds, we take over the units.
We, you know, increased or renovate that renovate the or take over the property, renovate the units, add flooring, countertops, stainless steel appliances. And we are able to force that appreciation because whenever the new tenant comes in, we can charge a higher rent. And it’s really just bringing it up to market. You know, what I like about RISE 48 too, is they don’t try to maximize the as much as they possibly can. For one, you got to be competitive. But for two, you want to provide a good living environment for these tenants and make it affordable.
Right. And so anyways, with all that, you know, well, and let me just put some numbers to that forced appreciation real quick. If you have a hundred, if you increase a unit on, say, a 200 unit property by $150 per unit, you increase that rent by $150 and say it’s about a five and a half percent cap rate, right? And you are able to increase that value by six, like,
just over $6 .4 million, right, by raising these units $150. Now that’s not even including if you got paid parking, you know, different amenities that you can charge for, you know, there’s other stuff to factor in there. That’s just by raising the rent. So it’s pretty remarkable on how much you have a lot more control over increasing the value. So this goes back to make sure you’re picking a good operator, because anybody can buy a good deal.
but you want a good operator to be efficient in their business plan, that’s gonna be able to crank out these renovations in a timely fashion and make sure they’re, and they got good property management that they can fill that occupancy rate so that is generating income. So those are some key factors that led me to multifamily and just more of the mitigation of my risk and my investment.
Trevor Oldham (12:13.838)
Mm -hmm.
Jarod Alexander (12:41.709)
And, you know, I mean, it’s real estate, too, the growth, right, opportunities there.
Trevor Oldham (12:48.494)
Yeah, I think that was excellent. And I want to touch a little bit on the vetting the sponsors aspect of it. I know you mentioned RISE48. I know they’re a very reputable company and I’ve heard really good things about them. I know we’re together in the deal through LFI and the tribe investing with Lone Star Capital. Similar, you know, heard nothing but good things about them. When you’re going out there and vetting these sponsors, is there anything specific, they’re looking at one, like, you know, looking at their track record, looking at what they’ve accomplished. And then conversely, is there anything that…
you might’ve come across a sponsor where it might’ve been a red flag. Maybe they’re, they have had capital calls. Maybe their numbers aren’t underwritten conservatively. Maybe they’ve had a hundred percent loss on some, you know, on some sort of property. Just curious if there’s anything they’re looking out for when you’re vetting these sponsors, whether you’re investing your own money, whether they’re investing someone else’s money into that sponsor. Again, whether the good things that you look for the not so good things that you know, might spook you away from a specific sponsor.
Jarod Alexander (13:45.741)
Yeah, no, great, great question. And, you know, for me, when I just started getting started out, I mean, I had my buddy, you know, kind of went to a couple of networking events. I really didn’t know much. Right. So I honestly, I went on to Google and typed in, what do I ask a sponsor before investing with them? Right. Like I had no idea. There was 20, 30 questions that popped out. Now, what I found, and this is what really, you know, made me feel comfortable investing with Zach and Rias 48. Because when I, I,
jumped on a call with Zach, he actually answered probably 15 to 20 of those questions without me even having to ask, right? He just kind of, you know, just went through the process. And then I started asking him, hey, you know, have you ever had a deal that you planned, you know, in your business plan that you were projecting this outcome and you ran into an issue or a problem and if you did, how did you handle that, right?
And so, you know, starting out, you don’t know what you don’t know. So you ask all these questions enough to, it made me feel comfortable with them. Like he took the time to, and I wasn’t no big investor at the time, 25 ,000, right? He’s got people writing him a million dollar checks, but he took an hour of his time with me and just walked through that whole process. And the nice thing with me being in Phoenix where, you know, he’s right down the road here as well, is my wife and I actually, after, you know,
two or three investments with him, went down, sat down with him at his office. He walked us through the whole thing. And it just spoke to his character, right? And so that was a big, I mean, that goes to that no like and trust factor, right, Trevor? You know, you can, again, anybody can get a good deal, but you want a good operator and you want somebody that’s gonna be a good steward of your money. And so, but some other key factors that I’ve learned after kind of being involved in this space is like,
There’s a lot of operators, Trevor, that we know that farm out their property management to the third party companies, which is great. But I’ve learned throughout that is if they got a big portfolio and they got somebody else that’s got a bigger portfolio with them, they’re going to spend more time with them compared to somebody else. And so what I like about Rise and Lone Star, which you had mentioned, is they have their property
Jarod Alexander (16:08.301)
management, they’re called vertically integrated. So their property management is in -house. So, you know, that means, you know, they have full control over that asset, you know, and RISE 48 actually has the in -house property management and they have their construction side as well, their construction team. So that means like they’re, they’re pretty vanilla in their process. They, you know, they have certain expectations to, for their employees. They got, I think over 200 plus employees now.
They have certain expectations for these property managers on their property management division side to live up to as far as filling occupancy, making sure there’s low delinquency, vetting these tenants, just things like that. And if not, unfortunately, they’re like, hey, we got a certain expectation. If you don’t meet this, then we’ll find the next person that does. And then on the construction side, they have…
You know, they have like whole, they buy wholesale. And so they just, they just, again, it’s very vanilla. It’s very simple. They, they have a construction warehouse. They have the cabinets. They have the same flooring. They have the countertops, which they buy in bulk. They do the same thing for every unit. They got different finishes, like, you know, they’re platinum and they’re kind of regular, depending on the units and the property.
but they do the same subway tile backsplash lighting, right? They keep it simple and they buy all these materials in bulk and anybody that knows contracting and like there’s a big fluctuation in labor costs to material costs, right? And that can make or break a deal. I mean, that can, I mean, you know, you raise the price of a unit per three to $5 ,000 that you weren’t expecting, you times that by 200, that makes a big significant impact on the cashflow and the income that property is producing. So.
Those are some key factors that I look for now. And then you mentioned, like, if somebody does have capital calls, I typically, that’s a red flag for me because there’s a lot of operators that haven’t done that. And it’s like, why would I do that? Why would I partner with them knowing that there’s other operators that have executed a business plan? Now, there are some, Trevor, that have paused distributions. Rise 48 is one of them, right, with these high interest rates. Like,
Jarod Alexander (18:28.941)
But again, speaking of the character, they got out in front of it. The communication was there. It actually did like a two hour webinar, just explaining that process, what they were doing, why they were doing it, right? Which as an investor, that makes sense to me. Hey, not everything’s gonna go perfect with an investment, but how are you doing to make sure, again, you’re being a good steward of my money and doing everything possible in your power to make sure I don’t lose money. And if that’s me not getting $152 check per month.
I’m okay with that, right? So those are some big things we look for. And then again, I invest my personal money, like with Riots, I’ve done five deals before I’ve offered them to my investors, because I want to make sure, hey, I want to get a peek behind the curtains. Same thing with Loan Star, right? I want to get a peek behind the curtains to make sure that they’re doing what they say they’re going to do. And anybody can put on a good show up front, but what are we really doing behind the curtains?
Trevor Oldham (19:28.046)
Yeah, and I definitely agree with them. There’s so many different sponsors I’ve talked to over the last couple of years where it sounds really good and then either you’re like you dig into their underwriting or you speak to previous investors and it’s just not that good. It’s very helpful. I know you’re a part of LFI and it’s just been very phenomenal using that group to vet and see different sponsors. But like you mentioned, even though Rise 48, they paused distribution on some potentially some of their deals, at least they got ahead of it. They communicated it and that’s like really what I’m looking for in a sponsor.
as well because I mean no one really could have predicted like how high interest rates would have gone in such a short period of time as that seems to be the common cause among the multifamily sponsors but if I have a sponsor and yeah maybe they did one capital call but you see some of these sponsors and they have like I’m not saying like rise 48 but say another multifamily syndicator they have like 10 different deals and every single one of them needs a capital call well that’s a little bit that’s a little bit concerning because the underwriting was poor on every single one of these.
Scenario so I do really like where you mentioned about that and even though rise again pause distributions But sometimes it does make sense in the given point in time But as long like for me as a as a passive investor I just want someone to make sure that they communicate that to me they communicate their plan because like you mentioned it’s almost like a marriage where if I’m giving my money to this syndicator it could be Especially now maybe five to seven year hold and sometimes even longer depending on how the market cycle is and depending on how it
how it turns out. So I have to really trust that individual where like, it’s not like selling a stock where I buy Amazon stock and I could sell it tomorrow and get my money back, whether I made a little better lost a little bit. It’s, it’s pretty much very illiquid. So you just have to make sure when you’re investing with the sponsor, you, you have that level of comfortableness that they’re going to take your money and, and be a good, be a good steward of it. But Joe, I want to talk a little bit. yeah, go ahead.
Jarod Alexander (21:15.725)
Well, and if I may real quick, just to add on to that, Trevor is, you know, one another red flag for me is if I talk to an operator that just doesn’t want to feel like is like rushing me out the phone or just doesn’t want to get me the time of day. Like that’s a huge red flag for me. So anybody that’s new getting into this and you’re just kind of vetting different operators and stuff like.
Trevor Oldham (21:30.158)
with you.
Jarod Alexander (21:40.461)
If they’re rushing me off the phone and they’re just acting like they’re too busy for me, well, what are they going to do after I invest $50 ,000 with them? Right? So that’s a big red flag for me. Going back to that character, right, Trevor? I mean, just these people that are going to… I want people to be a good store to my money, right? And like you said, this is like a marriage, right? You’re tied to these operators for three to five years or until these deals sell. It could be longer. So yeah.
Trevor Oldham (22:05.934)
Yeah, you made a good point there and I’m just thinking through something quick for our audiences. There’s like a sponsor who I talked to about a month ago and I really liked their offer and I really like what they had going on. But their investor relations person called me like, you know, the call was like 11 a and they called me like 11 10 a You know, 10 minutes late to the call and the call was only scheduled for 15 minutes. Didn’t extend the call. So we only had five minutes and it was almost like here’s our company. Here’s what we do. You want to invest with us. Let me know.
And I was like, didn’t even go to like into my background, like when I’m looking to invest, have I invested before just to, so like you mentioned where again, if I haven’t even invested with them before and they’re going to act like that, before I give them my money, it’s, you know, it’s not going to make me feel comfortable. But talking about that, curious how your company optimal equity works and really what you’re able to do out there for folks that are looking to invest in real estate and what you’re able to help them out with.
Jarod Alexander (22:59.821)
Yeah, absolutely Trevor. Thanks for the question there. And you know, so what we do is kind of unique is so, you know, again, I, like I mentioned before, I created Optimal Equity Group because, you know, I’ve, once I find something that, that I like, and then I’m like, wow, everybody should know about this. Like I’m the, I’m the sales guy to shout it from the roof type type of guy, right? Like, you know, I just wanted to, you know, help everybody.
at least know about these opportunities here, right? Because most people just, they know about 401k, self -directed IRAs, put your money in the stock market, mutual funds, bonds, things like that. Hopefully it grows, right? And once I learned about this and how you can really, I mean, you start looking at this compound effect of the generational wealth that can be created with this, I mean, it’s pretty exciting to me and mind blowing in ways. And so anyways, I started,
you know, my company to help educate others, right, on how they can get involved in these types of investments and participate. And so, you know, for me, I’m not an operator. So I actually, I’m able to vet the operators. And it’s kind of nice because I’m looking for experienced operators that are buying, with a track record, that are buying properties in emerging markets. So like,
RISE 48 has been in Phoenix, Dallas, and now moving into Charlotte, North Carolina, which I’m excited about because that’s where I’m originally from, or not Charlotte, but North Carolina, and I go to Charlotte every year. But then like Lone Star, that deal we did, Trevor, was in Dallas, right? So we are partnering with operators that, all right, for one, emerging markets, two, that have a track record, and three, that are going to be…
kind of what we were just talking about, a good steward of my money, right? I mean, and what’s cool is some of these operators have fixed rate debt, like RISE 48 has the bridge debt. And, you know, both of their arguments for what they’re doing are awesome. So it creates some diversification there. RISE 48 learned a lot with the high interest rates and how that climbed. Nobody saw that coming. I mean, they have these programs like CoStar and some of these other high.
Jarod Alexander (25:16.877)
High, very expensive software programs that are, you know, just spit out tons of data and economics against certain markets and stuff. And again, nobody saw that coming, but they learned from their mistake there, right? And so they’ve adjusted their model, adjusted their underwriting. And then, you know, I look for the communication. So anyways, all the things we just talked about inventing an operator, that’s what I do. And then I invest my own money.
right, to make sure, okay, hey, they’re doing what they say they’re gonna do. And then that’s when I offer that to investors to participate in the deals. And like, you know, a lot of these deals, we’re negotiating a bigger check amount. So I might partner with some other guys doing what I’m doing and say, hey, let’s partner together and we could bring instead of $500 ,000 to a million, let’s bring three to $4 million. And then we can negotiate, get better terms for the investors.
And, you know, with, you know, and some of the, it’s all different deal by deal, but, you know, more than likely, you’re going to get better returns by investing with me with no, no cap on the upside either. Right. And, and so, yeah, those are just a few things that stand out, but yeah, primarily I want to help, you know, my, cause it’s really determined and it’s, it’s fun, Trevor, cause I get to sit down and talk with people. What’s your why? What are your goals? Right. I get to explain my why, which is I want to,
Create time freedom to spend with my family and the people that matter most to my life, right? That’s very important to me. At the same time, I’m gonna work and I’m building a business that I can be remote. I’m the type, I can’t even sit still on the couch to watch Netflix on the weekends. So I’m the type that’s always gonna be doing something. But just have that time freedom and that flexibility with the passive income coming in on the back end and helping others create that same passive income as well as –
Trevor Oldham (27:00.174)
Mm -hmm.
Trevor Oldham (27:14.542)
Yeah, that’s absolutely phenomenal. And I wanted to ask you, if you could go back to say early on in your investing career, what’s the best piece of advice that you would give to someone who’s back in your shoes, who’s just getting started investing in real estate? What piece of advice would you give them?
Jarod Alexander (27:31.629)
Well, the first one is don’t wait, get started, right? Because I spent two years just kind of doing that, I call it analysis paralysis stage. And once I finally pulled the trigger that just got me over that threshold and I’m like, why didn’t I do this earlier? So that’s the first one, but I’ll give a two part answer to that. And the second one is find somebody that’s doing what you’re doing, that has had some success and then just follow what they do. Get in front of them as much as possible.
You are the five people that you hang around. So get with some people that are successful doing what you want to do. And now there’s, I’m sure Trevor’s talked about it on his podcast before. There’s tons of different asset classes. Like I focus on multifamily, but there’s storage, there’s debt investing. I mean, there’s just so much once you start getting into this space. So just determine, first off, determine your goals. I think it’s really important to have that on paper. What are you looking to achieve? What’s your why?
Right. And then, you know, almost start with the end in mind, find out how you can do that. What’s the number you need to hit? And again, find someone that’s doing that and follow what they do.
Trevor Oldham (28:41.582)
Yeah, that’s awesome advice. And Jared, last question of the day is, if our audience wants to learn more about you or Optimal Equity Group, where should they go to?
Jarod Alexander (28:50.605)
Yeah, so I’m on LinkedIn, just Jared Alexander, or you can go to my website, www .optimalequitygroup .com. And actually, if you go on there, I got a free ebook really explaining a condensed version of everything we talked about, how to, you know, my experience going through this, how to get started and the next steps there. So you can just, yeah, again, optimalequitygroup .com, you know, you can put some information in and we’ll send you a free ebook.
Trevor Oldham (29:19.47)
Awesome. I’ll make sure to include that in the show notes of today’s episode. And Jared, thanks so much for coming onto the show today.
Jarod Alexander (29:25.805)
Hey, thanks for having me Trevor. Enjoyed it.
