Value extraction to value creation where I’m adding something to my community. That has been a major shift, but more importantly, that is scalable. Moving towards the lipstick jobs is the path. It’s not about the path of least resistance. It’s about the path of scale. How can I do a lot more and be a lot better? And once we started saying no a lot more, we started accomplishing a lot more. Figuring out what your why is. Why do you do this every day? What’s the major goal? And then leaning into decisions that only serve that purpose. And the rest of the deals can be noise. I don’t have all the time in the world that I get to just hop on the phone and tell everybody all the time, “Here’s how you do it. ” But within our community, as people ask questions-

What’s going on, guys? Jared, thank you so much for coming on the podcast. I know you’ve done a ton of deals in Southern California. I’m curious to know what got you into real estate in the first place.

Yeah, so I’m a college dropout, and I think that there’s a lot of us in this industry. In my junior year of college, I was talking to Buddy and I was kind of torn. I had done a lot of my upper division classes first. Somehow they let me do that. And so I had a lot of boring stuff that was scheduled for the next year and a half and decided that I wanted to get in the workforce before I finished a degree. And so anyways, I was talking to my buddy and he was telling me about mortgages he was working in. And he’s like, “Yeah, my buddy’s 26. He’s making 350 grand a year.” And I’m like, “It’s a job for me. I like that. ” And so dropped out of college, went and started working for a mortgage company. And on the applications, I started noticing something.

I was seeing a lot of people making low to mid six figures, but they had a net worth of four or $5 million. I’m like, “How does that work?” And well, they owned a lot of property. And so my family had a little bit of experience in rental properties, a few here and there, but it was not a wealth driver for them. And so as I kind of started putting that together, I was like, “You know what? That’s my job. I’m going to own stuff.” And then I set my intention on that and market crashed. And then there was this once in a lifetime opportunity to start getting involved in real estate. And the part of California that we’re in was really ground zero. It was one of the two most affected markets in the nation from the foreclosure crisis. And it really set me up for an interesting look at the macroeconomics of real estate investing, like investing in markets that are too hot, speculative investing, things like that.

But then also what the fundamentals of investing actually looked like. It’s the drywall, it’s the pool of renters that you’re going to be … Where are their jobs? All of these different little things that matter when you’re trying to figure out how to scale an opportunity and what the most basic fundamentals are. I got to see all of it right up front. Front row seats is a 24-year-old kid and I cannot unsee it.

What was your life like before stepping into real estate investing? As far as the quality of it, as far as the enjoyment of it, if you can think back to those days, what was that like?

I was young and hungry. Hamilton, young, scrappy, and hungry. For sure, it was that. And so I don’t really have a life before real estate investing because I was, I mean, 24 when I got into it, I guess. So I was so young and I was married. You can see my picture above me of my family. And my wife and I had our first kid, I was 21 and she was 20. And so yeah, I mean, just we were already rolling. I had two kids by the time that I started investing, but I was very aspirational. In my mind at the time I had really big goals. I was going to become a millionaire.

The Austin Powers, a million dollars. And I wanted stability, but I wanted to lean into excitement, and I did it with a fire hose. And so it was amazing and scary all at once. But it’s funny because I was cash strapped like anybody else that’s trying to get started out in the world. I was working 70, 80 hours a week, but I actually still work 70, 80 hours a week on and off, but mainly I do it now in passion and excitement and I don’t have to work those kinds of hours. My brain is always just like click, click, click, click all the time. And so I love it and it’s fun now, but I’ve dredged through a lot of sludge to get to the point where I’m leaning into that excitement all the time now.

That’s awesome. And what does your business look like today?

Yeah. So today I run a company called Middle Housing Partners and we are a build to rent investment company. So we source capital through joint ventures and through private equity. And so we formed our own private equity fund about a year and a half ago. We buy single families, vacant lots or multifamily properties, and we add anywhere from three units to our biggest project right now is 44 units, but we do all of that in- house. So we have our own design team with engineers and architects. We have our own construction, license and crews, and then we have property management, we take care of the acquisitions, we have an escrow company. And so basically from start to finish, we have the pieces that are required for us to scale that opportunity. And then we also run an educational community where we teach other investors how to run the same playbook that we actually run in our own business.

And that has taken us from tens of deals to hundreds of deals. And yeah, so that’s really it. Our whole focus is that middle housing space, which is between the ADU to the small cottage cluster.That’s kind of our special spot in the world here in Southern California.

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Why do you think so many investors maybe not overlook, but don’t utilize the ADUs or adding multiple units on there? Because I feel like it’s not talked about as much.

I think there’s a lot of reasons, but in California, it’s either because the laws now support it so well. So it’s either fear or ignorance or apathy. And so it’s like, I do this other thing already and maybe that’s not apathy, maybe it’s strong choice that I do so well at the thing that I do. But I think for a lot of investors are like, “Oh, dude, I know how to rehab a house, but that’s not the same thing as building something.” Well, I’m going to tell you something, it basically is because I rehabbed a ton of houses in my career and it is different, it’s more, but it’s not that significantly different. And then yeah, the ignorance piece of that is just not quite understanding how powerful that these laws are. So California’s ADU laws now are second to none in the nation, and actually they’re more aggressive than most.

And so it should be done. And there is a lot of value there, and we have done hundreds and hundreds of them now over the last four or five years, and this is a major part of our purpose. We want to do enough of this and institutionalize it in a way that capital markets are attracted very well to this opportunity to make it easy for other investors to come in and plug this product into our communities because it is deeply, deeply needed. California is underhoused by a ton. For every three houses you see on the street, we need a fourth. It’s that wild. We have 14 and a half million houses in California and we need three and a half million more. So it’s wild, but that’s also why we have six of the top 10 most expensive rental markets in the nation. Six. And so Riverside, where I live, our metro area is more expensive than New York City’s metro area.

And so ADUs are a really great look at how to solve that problem because they leverage an existing resource. They make it so that people get to go back into the communities that they were born in where they feel like they belong and they’re profitable.

What do you think the most common misconception is about what you’re doing with the ADUs and adding other units?

I would say that the biggest misconception is that it’s a hack, that this is a granny flat kind of situation where it’s like, okay, cool. And it’s not. It’s a fundamental shift in the way that housing is built and the way that communities look at adding people to their communities. And so the shift in California, it’s not an ADU in a backyard. You were able to achieve three to four more units on a property in a residential zone in California, but statewide right now. And because the need is so deep, this is a new industry. I don’t want to pull any punches on that. I believe in the next two years that half of the housing in California will be ADU, SB-9, which is a duplex law, which is second primary on a lot, or townhome 10 unit developments. And right now, the numbers support me.

20% of the units in California right now are built through ADU laws, 20%. However, the laws just got good in the last year. It’s been slowly progressing. Now it’s very clear that you can do four units on every lot. Now it’s very clear that if you have a vacant single family lot, you get 10 or 12 or 14. There’s lots and lots of opportunity and micro development is what we call what we do. It will be half the market. There is no question in my mind and the margins are amazing.

And the shift from going from value extraction where I’m trying to make something pretty and try to see how many dollars I can get somebody to pay me for the improvement, technically I created value, but really the major asset already existed. I just made it pretty. So value extraction to value creation where I’m adding something to my community. That has been a major shift, but more importantly, that is scalable. That’s going from millions to billions. It’s a completely different thought process. There will be multiple billionaires made out of this product line in the next five years. That’s what’s going on.

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Again, that’s 10xtv.co. Jared, I want to talk about deals and deal size. I think a lot of people, when they get into the business, like you said before we started, they kind of go after any deal they can get their hands on versus focusing on the really good deals. What’s your take on that and what’s your opinion on an investor that’s just getting into the business, just trying to get a deal?

Yeah. I didn’t really have a mentor in this business so much, and so that’s a double-edged sword, but I did take … And still, honestly, it’s a pattern that has kicked my butt and my pattern recognition is good. Apparently it’s not good enough. So what I would say is that, especially in the beginning, moving towards the lipstick jobs is the path for me from a flipper perspective. I won’t flip anymore, but I think sometimes the best deals that I’ve done are the ones that I didn’t do, and the deals that haunt me, and I’ve fallen into mini pits in litigation right now on something that I flipped four years ago and did … Actually, it’s so funny. I did a really great job, very well disclosed, and then a problem happens after the fact. There’s just hired licensed contractors, permits, engineers, all the things, and it still can happen.

And so what I would say to my younger self is like, look, just because a deal made pencil, if it’s not in your area, don’t do it. It’s going to be a lot more lift. And even if it looks like 150% return of what you would normally make, what’s the increased stress level? What’s your control over it? More wraps of something that’s easy is going to do a lot more to build your credibility, to build your muscles, to build your neuro pathways, all the different things that make me a better investor versus getting into the position where I’m learning the same lesson again and again, which is if it’s a little bit too far, it’s much harder. If it’s a little bit too big, it’s much harder. I don’t need to take on the extremely difficult things. What I have learned in the business that I’m in now is there’s certain deal profiles that I can add three units in the backyard and I could go much, much faster, or I could do a 10-unit deal.

And we’re moving into a lot more of those, but then you’ve got to compare the wins. And if the win’s not a high multiple, I can do a lot more three unit deals in the time that I can do a 10-unit deal. And so if I rent and repeat it three times the same pool of capital, I was better off doing my three-unit. And so I would just lean into the thing that I know that I’m really good at and the kindest thing that I can do to myself is learn how to say no.

And that is something that I have really leaned into over the last couple years. I am rejecting deals on a daily basis right now that will pay me a relatively decent amount of money that’s relatively light lift for my team. However, it’s still opportunity cost. I still have to focus every day on what is going to bring the best return to my company. And it’s not about the path of least resistance, it’s about the path of scale. How can I do a lot more and be a lot better? And once we started saying no a lot more, we started accomplishing a lot more.

It seems like it’s a lot more simplicity and being more picky, it seems like.

Yeah. And the same with capital partners, right? Just because somebody has a lot of money does not mean I want to deal with them, truly. I mean, I have been in that position multiple times in my career where the lift with the investor was too much. Even though they had a ton of money, I would rather pay a little bit more for my capital or have a little bit worse deal with somebody that is hands off or somebody that is flexible or altruistic or whatever the thing is that makes our relationship and life better with them. And that has been a really major shift for us as well. And it really kind of comes back to scarcity. When I would take a bad deal that maybe it looked attractive, but it was a little too far out of my area, it was really like, “Oh, where am I going to find another one this good?” I don’t know.

There’s a bajillion of them. Look harder. Do what you should do, not what feels easy at the moment. And so I really think that that is for anybody that’s looking to scale a model, it’s figuring out what your why is. Why do you do this every day? What’s the major goal? And then leaning into decisions that only serve that purpose. And the rest of the deals can be noise, really, truly. I am now turning down seven-figure deals that yes, there are seven figures, but then we don’t have equity participation because when we’re doing deals that we have equity participation, I’m making a similar amount of money on the front end for my entire company, but then on the backend, we’ve got 30% ownership.

My company still only has so many resources. We just do. We’ve got 19 on design. We don’t have 42 on design. If I have 42 people on my design team, then I could do a lot more deals. That’s a constraint right now. So with that constraint, which deals am I going to choose? And I always have a belief system now that I will find another deal tomorrow. And if I really want to try super hard, I can find one in the next 15 minutes. And so when I do that, do I have the bandwidth? Do I have the resources and what’s the best use? And today I’m on a 10-year plan. All of the decisions that I’m making right now, I may make a decision that’s not going to last for 10 years, but it’s towards my 10-year plan. And so for anybody that’s looking to build a large company, I think that that’s a major question that we have to ask ourselves.

We’ve got to step back and say, “Hey, how does this serve my 10-year goal?” And sometimes it’s just cash, right? It’s like, “Hey, no, I need money right now because I got to make payroll next week.” Okay, freaking great. That’s awesome, but at least I know what decisions I’m making and for why. And so that’s kind of the way that I look at that now. And if I knew then what I know now, which is what, that’s why I love to get on stuff like this because I really can’t speak to anybody else. I can only speak to my younger me and be like, “Man, Jared, I wish you knew this five years ago. That’s what I do. ” That’s why we run our microdevelopment mastery group because it’s like we literally have lost seven figures in the last five years while we’ve been making eight figures, but we’ve stepped in so many pits that we’re like, people don’t have to step into.

I don’t have all the time in the world that I get to just hop on the phone and tell everybody all the time, “Here’s how you do it. ” But within our community, as people ask questions, we’re like, “Oh, no, don’t do that one.” But now I’m giving advice to people that are coming intentionally. Yes, they’re giving us a little bit of money, but really I’m like, “Hey, you sidestepped that pit. You just saved 50 grand that I already lost,

But

You don’t have to lose it. ” And so that’s our thought process is we really want to be able to be helpful to people that are walking on the path that we’ve walked before because there is pain that’s just not necessary. And I love Mr. Beast says this and I just think it’s great. And he’s like, “Consultancy is a cheat code.” So we believe that. We pay for consultants now. We are not shy. We cut checks like nobody’s business to figure out things that we don’t know. And there’s a lot of things that we know that we don’t know.

Yeah. What is the main mistake that you see investors make that you feel like is super easily avoidable, the most common one that you see?

So speaking specifically to what we do, like to the development aspect, it is to try to find the cheapest resource first and be like, “Hey, I just need to get my … I’m doing plan sets. What is the cheapest person to do my plan sets?” And they get a referral to an architect or an engineer. In our space, planning is half the battle.

So I will say the same thing about the construction resource too, but bottom line is how can I get it done as cheaply as possible, especially in a build to rent model, but honestly, in a build to sell model too, it’s going to haunt you. Though you’re saving money upfront when really you’re costing yourselves a lot of money on the back end because your legal bills, the callbacks, the pain that you’re going to experience in the future, you’re not getting rid of the pain, you’re just deferring it, but it comes back with interest. And so I think that that is a major place where people early in the process make mistakes. If you’re going to choose a design resource for this kind of product, go to a practitioner, figure out who they use all the time. And they are probably going to be more expensive than you thought.

$3,000 a plan set is too low. Somebody is doing it for that price because they’re figuring it out on your back. I mean, that’s just what it is, or they don’t have any value, or if they have value, they just don’t know about it yet, and then they’re going to be so swamped that they’re not going to get you done. And so there’s lots and lots of pieces like that, and we made all of those mistakes.

We made all those mistakes. And then same thing with construction. We see horror stories all the time, and we experienced them and helped other people experience horror stories. We did a lot of this for our investors, and we hired crews that were not good. And then we learned things along the process with cities that weren’t good, that ultimately cost a lot of time and money. And that’s part of the learning process. If you want to be an innovator, if you want to be first, you’re going to fall in the pits. What I would say is if you hire experienced people and the people that you’re moving into are practitioners, it may feel expensive. The difference between 3,000 and $10,000 for a plan set seems monumental, but on a $250,000 investment, it is not. And if you move faster, you have a better, more rentable floor plan, and you have a crew that builds it, that is actually going to finish, and they’re going to finish in four months instead of nine months, and you’re not going to have to fight through the whole process, you won big time.

Yeah. When it comes to the word success, everyone’s got their own definition for it. Everyone’s got their own way of striving for it. How do you define success in your life and how do you strive for it every single day?

I love that question. I am going to do my best not to be emotional. Money is not a great motivator for me. And I like money, I need money, that’s fine. But I have started, especially in the last year, really moving into my purpose. And it is the best motivator. And so I would say, Tony Robbins says this, but discipline fueled by purpose is power. And so that is a great motivator for me. I typically wake up at 4:00 AM and I spend two hours before I start working out just moving into my own creation, like figuring out ideas that I have, putting them together, getting my day organized. I’ve only been doing that for the last nine months, but what I have figured out is that the goal is me. I am the goal. I am the masterpiece, the work of art. I have to learn how to be better me and how to … If I want to move into a multi-billion dollar company, which is where we are moving, that is what our group is doing, but I have to improve me.

That’s how it works. And so I have goals. My goals are much bigger today than I ever thought that would be possible in my career, but from my perspective, I have developed a set of principles that I live off of, and those things have become very important to me. And when I screw up, I’ve screwed up because I’m not following my principles and I have to apologize to myself. I have to apologize to my people. I am never too proud to be wrong And at the same time, as I look at those things and as I live by those principles and I look at where my goal is, it makes clarity very easy on what I’m trying to achieve. But it’s always leaning back into me. It’s like, how do I get better? How do I be more empathetic? How do I have better vision?

How do I share that vision better? How do I speak better? How do I learn better? All of these things. And so I would say that for anybody that is on a journey of trying to set big goals, turn inward. And it’s amazing. There is so much great information out there. So much is achievable. And I know I’m in my infancy as to where possibility leads. There is just so, so much out there.

But when I am in that space, when I’m in that head space, I am happy. I am in growth mode. I feel much more loved. Things are expansive. And it sounds so airy fairy, but the truth is that’s where I create the most. That’s where the most money is made. That’s where the happiest times are felt. That’s where I show up for my family the best. All of those things. And so I would just say to younger me, “Just work on me. ” That is the goal. And financial things come with that.

I love that. Let’s say you were to start from scratch. The whole business goes away. You get to keep your knowledge over the past many years you’ve been in the business. Business goes away, you’re going to restart from scratch. What would you focus on first to rebuild?

I would focus, knowing what I know now, I would focus directly on rich people problems. And I say that in a little bit weird thought process. Most rich people problems, from my perspective, are making what they already have work for them better. And so at first, my goal was to help people that I thought were kind of like me. And like, “Well, hey, they make a couple hundred grand a year, so that’s enough that I can help them get to the spot where they make a lot more with their money.” I was solving for the wrong constraint because really my goal was to grow my company and to add units and add value to the world. That was a constraint versus going in and talking to people that had a lot of money and just were putting it in an 8% kind of a yield.

And like, “Oh, well, if you tap into that, you can deal with one person 10 times more and that becomes scalable very quickly.” And so I take my skillset and I get to employ it a lot faster and do a lot more. And I may not be solving the problem for the one lower accredited investor as much. However, I am creating a lot more housing units and I am solving a much bigger problem for my company by doing that. So focusing on those right relationships, identifying what the problem is in the market and where the solution is, but definitely leaning into who my capital partners are in a much better way and being more targeted towards how do I scale the thing? And then I could go from zero to a hundred units and five times the speed and that is the goal.

Yeah, for sure. Jared, where can people learn more about you? Where can people find you? If someone is interested in stepping into the ADU space, where can people learn more? I know you said you have kind of a mastermind, if you will, on it.

Yeah. So look, we are valuable to people that want to invest in California from the perspective of teaching them how to use our laws. If anybody wants to scale in California, our mastery course and community is the best resource for that at the moment for that specific thing. If you want to be an apartment complex guy, that’s just not what we do. But if you want to use ADUs and SB9 and all these laws and put them together and figure out the best way, microdevelopmentmastery.com is our spot. Jared Jones on LinkedIn, I talk about middle housing a lot and what the need is, and that’s more of an overall thought. And then on Instagram, Middle Housing Partners, we talk a lot about this stuff as well. And there’s a lot of really impactful things that I have been learning and collaborating on with other people over the last little bit.

But if somebody wants to become an operator in the space, that’s the spot. If people just want to leverage, which I think that that’s what most of this community is, and I think that’s amazing because we need it. We want to attract people to the opportunity. We think it’s amazing.

But if people just want to leverage the opportunity for money, our private equity fund for accredited investors, the returns are asymmetrical. It’s a very cool opportunity right now for this narrow window of time in California before the rest of the market really figures out how to operate this, the wins are much bigger than they will be long term. And so from that perspective, California ADU Fund, but you can connect with us on any one of those places. We’re just excited that other investors are executing on this or starting to learn how to execute on it, and we’re just happy to be a voice in the space that’s really making some sort of movement and change in the way that housing gets

Built. That’s awesome. That’s awesome. Jared, thank you so much for coming on. Everyone, thank you for …