Multifamily Investing Strategy: How Rise 48 Equity Finds Distressed Apartment Deals

Jeremy Dyer (00:00)
Everybody always wants to vet the deal. And I’ve never seen a bad pitch deck in my life. And so investors need to understand that you’re not investing in the IRR, you’re not investing in the projected equity multiple, because those are all just projections at the end of the day that some underwriting team assessed and the CFO approved. What you’re really investing into is you’re investing into the heart

the heart of the operator, right?

Scott Bursey (02:00)
Welcome back to the Real Estate Pros podcast powered by Investor Fuel. I’m your host Scott Bursey. And today we are injecting a massive dose of scalability and execution fuel straight into your real estate engine. Our guest, Jeremy Dyer of Rise 48 Equity is an absolute master of the high octane velocity multifamily syndication game. He’s built a massive portfolio through disciplined systems and a relentless

focus on value add opportunities. Get ready pros because Jeremy is here to show us how to execute big repeatable moves in the market. Let’s fire up the engines. Jeremy, welcome to the show.

Jeremy Dyer (02:41)
Scott, thanks for having me. Looking forward to chopping it up with you today.

Scott Bursey (02:44)
It is awesome having you here and for our listeners who may not be familiar with your journey. Please tell us, how did your career begin and what is your main focus now?

Jeremy Dyer (02:54)
Yeah, it’s a great question. know, it really, you know, it’s important for me to kind of give a little bit of context here. So I was really a byproduct of the 80s, like many of the listeners here, you know, grew up with divorced parents, you know, they both both worked full time. You know, I found myself, you know, being left up to my own devices before school after school, I ruled the neighborhood, you know, over the over the summer. So ⁓ I learned how to fill fill forward and fill fast and kind of clean up messes along the way, which really, you know,

put me in a position where I became this kind of byproduct of always wanting to achieve and conquer and kind of make a mess and clean it up later kind of a thing. So I kind of consider myself to be somewhat of an achievement addict, so to speak. I think if I was gonna write a second book, that would be the name of that book. But all that being said, I really had a challenge, grade school, junior high, high school, really trying to figure out.

you know, what I wanted to focus on. And I started learning more about kind of networking with others, you know, being a daily better version of yourself, you know, getting in sales roles and environments where I could really thrive in my desire to want to continue to expand my network. And so I made my way up through college, I got a technology sales job coming out of college. Year number one, I was the the rookie of the division. Year number two, I was the number one guy in the entire company out of over 6000

individual contributors. And for 20 out of 25 years, I remained in that pole position, which really allowed my wife and I to be in a strong position to be able to diversify outside of Wall Street into Main Street. It wasn’t difficult for us to max out the 401k. Really, the challenge was, is where do I put this excess cash, right? You having been able to achieve financial independence and be completely debt free at the young age of 23 years of age.

is when we built our dream home. We still live in that house today. Now I’m in my late 40s and I’ve been truly debt free since the age of 23. So we really found our way into real estate back during the global financial crisis where we were buying single family homes in the market that we live in for 90K a door, sticking 30K into those improvements and selling those properties for 200,000. Okay. Now that was going really well.

The only big mistake we made at the time is we should have never sold any of those homes because three, four years later, they were trading again for another 100K more than what we bought them for, which was where we were at in that market cycle and that kind of bust to boom again.

The challenge for us, Scott, on the active real estate side really happened in 2015. My wife and I decided to double down on children. We went from two kids to four kids. And if you’re reading between the lines, number three and four are yes, twins.

that we actually adopted from a place called Wuhan, China of all places. Most people are familiar with Wuhan as a direct result of the coronavirus, right? And so we adopted twins from Wuhan, China, went from two to four kids. And I really was in a position in my life at that point, you where the active real estate business was growing and thriving. The challenge was, is I had a nine to five and that nine to five was also then now occupying my five to nine.

and my older boys at the time, they wanted coach dad. They wanted dad to coach their hockey team, lacrosse team, baseball team, et cetera. And so we found ourselves in a position in all honesty, Scott, where I was tapped. My bandwidth was full, my quiver was full, and I had to step off of one of the horses and only ride one instead of two at the same time. So we pivoted from active real estate investing ownership to passive back in 2015.

from that point now moving forward, my wife and I have invested in over 75 different projects with a dozen different operators, a dozen different asset classes. We’ve been in investments where we’ve lost all of our money and we’ve been in investments that have been absolute and utter grand slam. So we’ve lived through the market cycles. We’ve learned how to vet operators, vet investment opportunities ourselves. Three years ago, I started telling my family and friends about the types of

passive investments that I was making. And lo and behold, I had a massive network of people that wanted to get in these deals too. And so I created what’s called the fund of funds for maybe some of your listeners that are familiar with that term fund of funds. It’s really a way to, you know, leverage your community of investors to gain access to a better return profile with the operator and be able to be legally and compliantly compensated for doing so.

And so three years ago, I started a little company by the name of starting point capital, a boutique private equity real estate company. And in three years, I was able to raise over a hundred million dollars from my own personal and professional network of people that have gotten to know, and trust me, you know, over the course of the last, you know, 25 years in the technology, you know, sales industry. And so that was going so well that I got back to that point again, that I was at in 2015 where now I’ve got two jobs again.

Right. I’ve got my tech sales job. I’ve got my boutique private equity capital, you know, raising company. And I decided to let go of the W-2. So now effective as of today, I no longer have a technology sales job because now I’m predominantly ⁓ both raising capital through my private equity, ⁓ real estate fund, in addition to being the VP of capital formation at Rise 48 Equity, where I’m at the sponsor level of the company.

Scott Bursey (09:08)
That’s incredible, Jeremy. What a journey. And I loved when you ⁓ illustrated how people do business with folks that they like, know, and trust. It’s so true.

Jeremy Dyer (09:20)
Yeah, I mean, you build that trust one drop at a time and you lose it in bucketfuls. I tell that to my teenagers, you know, all the time as they’re, you know, making individual, you know, life type decisions. But ⁓ the the skill set and the network is absolutely transferable. Right. And so a lot of times people are stuck in jobs that they hate. But what they don’t realize is if they had a little bit of competence, they could probably transfer those skills and that that network into something completely different. And that’s exactly what I did.

I mean, when I separated from the W-2 and I divorced the ⁓ nine to five, right? ⁓ A lot of my colleagues were saying, Jeremy, you’re absolutely crazy. You have a cash machine going on with your tech sales job. It’s not difficult for you to make an income and you’re walking away from something that you have built that’s enormous, right? The truth is, is that I loved the people, I hated the job, right?

So now I’m in a profession where I love the job. love buying real estate, ⁓ effectuating the business plan, evaluating deals, evaluating sponsors, right? And I love getting to know new investors that wanna diversify outside of Wall Street and into Main Street, but they just lack the time that is necessary or the education or the network to start a business from scratch.

or they don’t feel comfortable enough to go out and buy that four-plex, that six-plex, or scale up to 100 unit commercial multifamily property, but they still wanna get in the game and they still want to invest. They just wanna do it on the passive side and not on the active side, if that makes sense.

Scott Bursey (11:01)
total sense. And what really caught my attention about you was the way that you’ve been able to scale a high volume multifamily acquisition and value add strategy, turning operational excellence into massive competitive advantages for your investors. That’s not easy.

Jeremy Dyer (11:53)
Yeah, it’s totally not easy. And you’re exactly right. And by the way, just for the record, it was not easy when I was flipping single family houses either, right? Now we’re just flipping large commercial multifamily properties. Most of the properties that we acquire are going to be anywhere from 100 to 400 units in size, right? And so you can only imagine when you have, you know, two to 300 doors at an individual property,

and the property was built in the 1980s or 1990s, and the business plan is predicated upon renovating 100 % of those classic interior units to a new platinum or diamond level scope, right? It’s a massive operation, right? Which is one of the main reasons why we invest with and have.

a vertically integrated property management company and construction management company so that we can control all those variables that exist. can control to a certain extent the market headwinds. But the important thing is that we’re controlling all operations and we’re controlling all of the execution of the bit of the said business plan over the course of the duration of that investment, which reduces

risk for investors. always talk about there’s three major risks when investing in just about anything, whether that’s Wall Street or Main Street, right? Everybody always talks about investing in the jockey, not the horse. That’s cliche. I like to break it down into three buckets, right? Bucket number one is you’re trying to solve for mitigating operational risk. Number two, execution risk. Execution risk for what? The business plan. Well, what’s the business plan?

and how is that operator reducing or mitigating against that ⁓ execution risk. The third risk factor is the one that none of us can control, right? And that is market risk, right? We’ve seen a lot of market risk and a lot of headwinds over the course of the last several years with skyrocketing interest rates, a glut of new supply hitting some of the major markets across the country. We’ve seen a lot of in-migration. We’ve seen immigration.

getting turned on, getting turned off, all of that stuff definitely impacts the type of demographic that we’re catering to. And that is that B-class renter, which is predominantly defined as that workforce housing demographic, which is the largest demographic of the population in our country today.

Scott Bursey (14:26)
That was broken down with precision execution. Interested to know, Jeremy, about your book?

Jeremy Dyer (14:32)
Yeah, absolutely. So I thought I authored a book back in Q4 of 2024. The name of the book is the fundamental investors. So for those listeners that would like to know a little bit more about my journey, my story, my, you know, transition from active real estate ownership to passive real estate ownership, the lessons that I learned on both sides of that equation. In addition to that, what’s really important

as I mentioned before, is how to properly vet an operator.

Everybody always wants to vet the deal. And I’ve never seen a bad pitch deck in my life. And so investors need to understand that you’re not investing in the IRR, you’re not investing in the projected equity multiple, because those are all just projections at the end of the day that some underwriting team assessed and the CFO approved. What you’re really investing into is you’re investing into the heart

the heart of the operator, right?

Their ability to lead an organization, to cast a vision, to be able to operate with their head on a swivel during times over the course of the investment hold period where there’s going to be headwinds, right? There’s going to be challenges that come up. Investing in real estate is not a get rich quick investment strategy, okay? It’s also not, ⁓ it also comes with a tremendous amount of risk, right?

The rewards are awesome, right? When it comes to being able to invest in something that produces consistent cashflow, that appreciates, that provides for equity, that provides for tax benefits, that’s a hedge against inflation. As of yesterday, the new inflation reading is at 3.8 % month over month. Like inflation is still sticky, right? People are losing their purchasing power every single day. The dollar continues to deteriorate, right?

Well, where do you want to be during times like that? You want to be in hard assets, right? Wall Street’s a great spot too, but I wouldn’t keep all my eggs in one basket. I think it’s prudent for investors to diversify into both Wall Street related products. Talk to your financial advisor. I’m not one of them, okay? But also consider diversifying some of your portfolio or your net worth into hard assets beyond just the home that you live in.

Scott Bursey (16:51)
You just pumped ⁓ a mega amount of fuel into our tanks. Now let’s get underneath the hood. What is Rise 48 Equity’s strongest advantage when identifying underperforming multifamily assets?

Jeremy Dyer (17:46)
Yeah, that’s a great question. And this is a time period in the market cycle. We are where we feel like we’re in pole position. I always tell investors, I kind of feel like we’re the grim reaper out there, because we’re continuing to acquire deals that are at a very strong basis relative to, you know, where these types of commercial multifamily apartments were trading at just three to four years ago. Really, the strength of our company comes down to our ability to raise the equity and close the deal.

And as a direct result of that, we have a lot of attention from the brokers, ⁓ the local brokers in those specific markets in which we operate. And most people may not know this, but about 80 % of the transaction volume in any given market is controlled by about four to five brokers. ⁓ So as long as you have a good solid relationship with those brokers, when they present

deals that fit our buy box. If we choose not to pursue them, we’re constantly providing those brokers with feedback, which is incredibly important to them to be able to go back to the seller, obviously with that feedback of why we chose or did not choose to move forward with that acquisition. So the other component to that is it’s a good, a great thing to have solid relationships with your lenders, right? Because oftentimes the lenders know when there’s deals that aren’t performing so well, right?

And so having great relationships with local brokers and with our lending community to be able to secure deals that are distressed. We do not buy deals that are operationally distressed. We acquire deals that are financially distressed, right? Or there’s some major trigger event that’s happening in that operator’s life, whether it’s a JV equity dispute, or maybe it’s owned by a mom and pop owner, and there’s a death in the family. Those types of things, we’re really looking for.

you know, deals that have some level of financial distress or there’s a major life change in the seller’s life where they’re really at a point where they’re almost forced to sell, if that makes sense.

Scott Bursey (19:44)
Perfect sense and I concur. Deal sourcing is the bedrock of profit. Finding hidden value is how the pros win.

Jeremy Dyer (19:53)
Yeah, totally. that’s exactly right. And the other side of that discussion, of course, Scott, is having a conservative underwriting approach. And everybody says their underwriting is conservative, right? But how conservative is it? How well have you actually stress-test those financials, right? Let’s just pretend that organic rent growth goes negative again, right? Let’s just pretend that evictions

you know, skyrocket insurance costs, skyrocket property tax is skyrocket. Right. So there’s a number of different variables, you know, in different levers, you know, that somebody can pull in that underwriting model to either make the deal look like a home run or not. Right. And so it’s really important that you’re aligning yourself with an operator, you know, that, that, that is it in it for the longterm, right? They respect their brand. They’re here to be in business for decades. They’re predicated upon growth. You know, they want to.

you know, make sure that they’re, you know, really protecting and preserving, you know, investor capital as being their number one most important, you know, focus is how to protect and preserve investor capital beyond the fact that they want to provide that investor with an outsized return.

Scott Bursey (21:04)
What specific upgrade or amenity is yielding the highest return on investment in value-add multifamily projects today?

Jeremy Dyer (21:12)
This is a fantastic question and I’m glad you asked. Recently as an operator, we chose to pivot to more of an operational value add approach. The challenge right now in the markets is that you can’t acquire a commercial multifamily apartment community, fully renovated unit and expect to achieve a two to $300 rent bump per unit. Okay, that’s just not possible in a lot of the markets because of that oversupply, right?

and everybody’s kind of fighting for occupancy. It’s almost, you know, it’s a race to the bottom. There’s concessions being offered. So that type of strategy in this type of market does not work. That strategy worked really well back in 21 and 22. And that strategy of forced value creation through renovations will work again at some point, you know, as we come out of the current economic market cycle that we’re in, in commercial multifamily. So the strategy now

is a little bit different. It’s more predicated upon an operational value add where we as an operator can negotiate on behalf of our tenants, master ⁓ contracts with companies that provide renters insurance, valet trash, ⁓ cable and internet. And that’s given us a large boost at the property level to be able to negotiate these master contracts where the tenant is not negotiating.

for those types of services on their own anymore, rather we’re negotiating at the property or project level. So just to give you an example, okay, one of the big moves that we made is we partnered with companies like Cox and Spectrum and Xfinity, upon which market you’re in, to negotiate these cable and internet packages at the corporate level on behalf of the tenants. So our leverage allowed us to give the tenants access to a better internet and cable package

where they’re getting a premium service. So they’re not happening to pay all these separate streaming services for programs like Hulu and Disney as an example. So we’re giving the tenants access to a better package. However, our profit now per unit goes from, for example, $13 a unit to $53 a unit because we’re basically taking a larger percentage of that profit share because we’re mandating that cable and internet provider across

the apartment community ⁓ in exchange for the tenants getting access to a better service and us keeping more of that upside, if that makes sense.

Scott Bursey (23:40)
If I’m hearing you correctly, the greatest rewards come from recognizing market shifts before they become mainstream.

Jeremy Dyer (23:47)
Yeah, that’s exactly right. And the market is always shifting, right? And it’s easy to kind of look in the rear view mirror and see what happened in the past, but it’s a lot more difficult to speculate as to what’s going to happen in the future. And that’s why it’s incredibly important to be nimble in any market condition, to be able to operate with your head on a swivel, right? There’s something called yield on cost, which most of your listeners probably are familiar with if you’re not.

It’s very simple. You spend money to make money, right? Well, we’re in a market right now where it does not make sense for us to spend money on forcing value creation and spending money renovating a unit not to be able to achieve that rent premium until the supply starts to be absorbed. And we feel like we’re at the tail end of that supply. Demand continues. But with this operational value add approach, there is no capex spend.

We don’t have any capital expenditures expense to go after that additional profit margin.

Scott Bursey (24:49)
Just talking about the lending environment, Jeremy. How critical is it, you know, to look for debt structure before committing to a five-year hold period?

Jeremy Dyer (25:01)
Yeah, that’s a great question. Obviously, the debt side of this is very important. That relationship that we have with our individual lenders is strong, even though we’ve kind gone through some challenges in the market cycle. We’ve never missed a debt payment to any one of our lenders. We’ve transacted on $2.6 billion in total transaction volume, 67 units, almost 13,000 doors. And again, never miss a debt payment, have no deals in foreclosure.

We feel like we’re the grim reaper, we’re out there buying deals from other operators that took too great of leverage. But the way that we structure our debt is for maximum optionality and maximum flexibility, okay? So we secure three year loans with an engineered fixed rate in the money at 4.75%, which means the rate can’t exceed 4.75%. Whatever happens with the new Fed chair coming in,

the treasury markets, indexes, inflation, et cetera, that rate cannot exceed 4.75 % for three years. Now, some people might be wondering, what happens after year three? Okay, so you’ve got a couple of different options. Option number one is we can extend out the loan into year four and year five, and we have enough reserves built in on the front end of the deal in order to be able to be in a position to extend out the loan into year four or year five.

by buying a new interest rate cap at 4.75%. So that’s option one. Option two is we can refinance into a new loan and our debt service coverage ratio and NOI growth is strong enough for us to be able to refinance into a newer three-year loan or longer if necessary. And then of course option number three is we sell. The reason why we don’t leverage five-year agency Fannie Freddie is because we’ve

leverage those types of products before they do not work with our business plan. Our business plan is to acquire a property at a good basis, execute our business plan on time and on budget, and sell the property as soon as we can. So the challenge with a five-year agency loan is if you don’t hold the property for five years, you get hit with a nasty prepayment penalty, otherwise known as yield maintenance or defeasance, and that does eat directly into your investor returns.

And so why we structure the debt in the way that we do, again, is to give us that maximum optionality, that maximum flexibility so that we control when we sell the asset and we’re not forced to hold the asset a full five years in order to avoid yield maintenance.

Scott Bursey (27:36)
You’re clearly staying ahead of the curve. Jeremy, it’s now time for the money question. So let’s rev those engines up. And this is where you supply the high octane fuel for our listeners. For a pro who is transitioning from smaller four to eight unit deals into their first, well, let’s say a hundred plus unit syndication. What is the single most important system or team hire they need to

secure before they even start chasing property.

Jeremy Dyer (28:06)
Yeah, it’s a great question and it’s one of those ⁓ execution and operational risk type mitigation strategies. If you’re looking to go from a six or eight unit up to a hundred unit acquisition, you really need to strongly consider having your operations all in-house versus using third party. What I mean by that is third party property management, third party construction management. We’ve leveraged both of those third party and we chose to bring both ⁓

property management and construction management in-house. Why we did that is so that we, as an operator, now have control over the day-to-day, right? So we control acquisitions all the way through disposition or the time that we sell the asset. All on-site employees are our own in-house, W-2 employees on full benefits and their incentives, bonuses and compensation structure

is tied directly to the performance of that individual property, which creates a tremendous alignment of interest across the organization. So I would say if you’re looking to scale up, okay, from that four plaques into that hundred unit, you ought to strongly consider having local boots on the ground in that specific market that you’re choosing to own, operate, and effectuate that business plan. And I’d strongly consider that you look to having operations

in-house from a property management and construction management perspective.

Scott Bursey (29:37)
I appreciate you highlighting that. And this conversation has definitely increased the heart rate. Jeremy, for those of our listeners that want to follow your journey or collaborate with you, what’s the best way for them to reach you?

Jeremy Dyer (29:49)
Yeah, great question. I’ll just say that I’m fairly consistent ⁓ on LinkedIn for those that would like to connect with me there. Would love to have you do that. You can just simply find me there under Jeremy Dyer. ⁓ Secondly, grab a copy of my book, okay? The Fundamental Investor. It was a labor of love. I poured about 600 hours into writing that book and the thesis there is to give the investor.

or the active investor a chance to really learn more about my journey, my experiences, the lessons that I learned across the landscape of having been an active and a passive real estate investor for the last 25 years.

Scott Bursey (30:28)
Jeremy, this has been an incredible high octane session. Thank you so much for joining us today.

Jeremy Dyer (30:33)
Yeah, Scott, thanks for having me. was a pleasure.

Scott Bursey (30:36)
And to our listeners, we appreciate each and every one of you. If you got value from today’s episode, please subscribe. We’ve got a lineup of exceptional guests, just like Jeremy Dyer, who are making huge moves in the market. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.