How to Raise Capital for Real Estate Deals and Find Multifamily Opportunities in Today’s Market

Nick Elder (00:00)
It takes a lot of time, and you got to shake a lot of hands. Maybe that’s obvious, maybe it’s not so obvious, but just because you have a good deal does not mean that equity is just going to flock to your deal and invest. ⁓ It’s going to take a ton of relationship building, and you got to put yourself out there and let people know you’re doing deals, and you got to really communicate how you’re protecting your investor capital.

Scott Bursey (01:56)
the Real Estate Pros podcast. I’m your host Scott Bursey, and today we’re sitting down with Nick Elder from Ironton Capital. Nick’s firm is consistently at the forefront of identifying and executing on unique investment opportunities. Nick, thanks for being here.

Nick Elder (02:12)
Thanks for having me, Scott.

Scott Bursey (02:13)
It is our pleasure. For those that may not be familiar with your journey, can you give us a rundown? How did your career begin and what are you doing now with Ironton Capital?

Nick Elder (02:24)
Yeah, so my career began, unlike maybe a lot of other folks, I don’t have a real estate background. So my career began when I moved out.

to Denver post-college in 2016, joined the world of pharmaceutical sales, navigated the healthcare industry until about 2022, and at which point I got laid off from my position, which is very common in the world of ⁓ healthcare sales, medical device sales, pharmaceutical sales, et cetera. And I was really faced with a pivotal decision. Was I going to continue?

this career path of pharmaceutical sales, which I wasn’t really passionate about. wasn’t amped about it. I didn’t really see a ton of upside beyond what I was doing. And it wasn’t really something I saw myself doing for the next 30 years. So the pivotal decision I made was, I going to continue to interview for that? Or should I? I really love real estate. I bought my first house in 2019. you

got a taste of just the financial impact on me personally from doing such a thing. So I was kind of reflected on my house hacking experience from the first house that I bought. I then bought a second house. Eventually by 2023, I sold my first house. So just realizing the overall financial impact that had really gave me the passion that I think that I needed to pursue real estate. So when I was facing that pivotal decision of either going into pharmaceutical sales or going into real estate,

that I was gonna pivot entirely, go to real estate. So I went out, I got my real estate license. I thought I was gonna be a commercial real estate broker, learn that way, and then gradually navigate myself to the principal side where I’m operating my own deals or maybe I’m joining another firm, private equity firm ⁓ that’s doing a lot of what I want to do. ⁓ So I got my real estate license and then a gentleman who was a general partner at Ironton Capital at the time. This was in November, 2022.

They had just launched the firm that year and asked if I’d be interested in coming on board and invest in relations to help raise capital for the firm and scale the firm. it was kind of a no brainer for me. was like, well, I don’t want to go be a commercial real estate broker. It’s just not, you know, really, I kind of saw that as a transitional step into the private equity side. So this gave me an opportunity to skip over that transitional step and get to right exactly where I wanted to be, which is in the private equity side. So I joined

I went from pharma network connected with the right people, put myself in the right position ultimately to get myself to where I want to be, which is where I am today. There’s always growth to be had. I’ve got a long career ahead of me, but

I’m confident that I’m right in the position that I put myself in and that I want to be in moving forward.

Scott Bursey (05:13)
and putting yourself in the right position is critical. Nick, I want to start high level. Given the current economic climate, what is Iron Capital’s general outlook on the commercial real estate market for the next 12 to, well, let’s say 18 months?

Nick Elder (05:17)
Yeah.

Yeah, I think everybody’s gonna say it’s a great time to invest at the end of the day. mean, we look at the last, we primarily deal in multifamily. So about two thirds of our funds are multifamily. The rest is industrial, self storage, residential. But so I’ll speak from the lens of multifamily. 2020 to 2022, right before interest rates jumped up, the market was just…

It was euphoric. First time developers, they’d never developed a project, but they were able to go get a loan from a bank to start their project. Syndications became prominent. lot of people got into, there were a lot of boot camps going around that you too can ⁓ create a syndication company and make a bunch of money, right? I mean, it was just highly euphoric during those time periods and banks were really happy to lend. Unfortunately, what that did is as interest rates jumped up, a lot of those operators, they got stuck in these three year

loans, three years later their interest rates about to go from three and a quarter to six and a quarter or seven percent. And simultaneously they didn’t increase their income enough to be able to do any cash out refinance proceeds. So they’re having to inject capital into the deal just to get through a refinance and it’s also a really bad time to sell. So I think right now is a great opportunity of multifamily because interest rates have been high. So everything that we’re underwriting

were fixated on interest rates remaining this high. We’re not assuming or being speculative in nature that they’re gonna decrease when factoring in the returns in our underwriting model. Additionally, from those early years, because so many construction projects got started, they were all delivered at the same time. So a major headwind that hit the market was excess supply. I’m in Denver, so Denver saw, we’re still trying to absorb a lot of that supply and we’re seeing rent decline anywhere from 10 to 20%.

depending on where you’re at. Simultaneously, you’re seeing two to three months of free concessions. So nobody’s hitting their pro forma in that regard. So anybody I think that’s started a project in the last maybe year or two.

or is gonna be starting a project today, I think we’ll be releasing their inventory into a supply constrained environment. Because as all that supply came into the market from 2023 to 2025, we also saw plummet and new construction starts because lending got more difficult, less deals penciled, and only the best operators with the most extensive track records were truly able to get favorable financing from lenders. So I think we’re gonna be heading into a supply constrained environment and trying to communicate this

all of our investors and let them know that I think now is a fantastic time to invest in real estate for those exact reasons. And I’m sure that if you asked anybody who lived through 08, 09, whether they wish they would have bought more real estate.

they probably would have said, man, that was a golden opportunity I missed out on. I should have doubled up and bought as much as possible seeing where things are at today. So communicating that to investors, I think there’s a ton of opportunity right now in commercial real estate. think there’s a lot in multifamily. And if you’re an operator that’s positioned to take advantage of a lot of this distress, I do believe you’ll be rewarded in three, four years.

Scott Bursey (09:21)
That’s very clear perspective. And Nick, you’ve always been very strategic about asset selection. Are there any specific sectors or locations you are currently overweighing? And I guess conversely, what are you viewing with caution right now?

Nick Elder (09:40)
Yeah, you know, we’re always looking at, you know, are there states where there’s, you know, two obvious things? Is there continued net positive migration into that market? That’s the first and foremost important.

And then the second thing, probably equally as important is, is their job growth. So we’re not interested really in any market where obviously people are moving out. You know, that’s, that’s not anything that we’re interested in. know there’s going to be weakened demand if people are continuing to move out or if jobs or corporations are moving out of those markets as well. So Iron Gen Capital, we invest nationwide in our real estate funds. And those are really two of the driving factors that ultimately ⁓ dictate where we’re looking.

in those markets. We’re also looking at markets with chronic under supply. We know if there’s chronic under supply and they’re not building enough, there’s always gonna be demand supported for that investment class.

Scott Bursey (10:33)
Focusing on those robust areas makes complete sense. Let’s talk about the Iron Capital Strategy for a moment. How are you positioning your investments to manage risk in a potentially volatile interest rate environment?

Nick Elder (11:23)
Yeah, I mean, we’re looking, we’re always looking at what is the downside to our investors right now? ⁓ You know, and again, we’re, we’re assuming that things are not going to get better. We’re assuming that things may remain static or maybe get worse. We don’t, nobody knows what’s happened, going to happen with interest rates at the end of the day. You know, maybe they go up, maybe they go down, but we’d rather ⁓ protect our investors capital and assume, you know, maybe even more conservative than we, than we once did or than anybody once did. Right. So we’re looking at, know, what happens if rent growth does not go up?

What if that remains static? What if interest rates remain stagnant as well? Does the project still make sense based on these variables that ultimately dictate a property’s valuation? So we’re looking at things like that. We’re not being overly optimistic. We’re not jacking up the variables like rent growth. We’re not declining cap rates to assume that the property is going to get better over time. Again, we’re assuming that things are going to remain pretty status quo in that market.

Scott Bursey (12:20)
I appreciate you walking us through the capital stack strategy. Now, a core part of what you do is sourcing capital. Can you walk us through how iron capital approaches capital formation for new deals? ⁓ Especially in a tightening lending market.

Nick Elder (12:30)
Yeah.

Yeah.

Yeah, absolutely. you we have, we really have two products. We have a real estate growth fund, investors.

Who want to target more growth of their capital they can go into that fund. It’s about a four to six year fund We’re targeting about 16 to 20 percent, but you’re taking risk. You’re taking risk in new construction projects You’re taking risk and heavy value-add Projects you’re where you’re taking something that’s already significantly distressed and you’re trying to bring it up to market rent, right? So there’s risk a lot of execution risk in a fund like that I’d say those funds have been a little bit slower because people don’t know what the next five

year hold five years hold with AI coming in they don’t know if they’re even gonna have a job in a year so I say that’s a little bit slower that’s why we have an income fund

that provides zero correlation to the stock market and the volatility that ensues from that. And then zero correlation to the real estate environment, which is heavily dependent on where interest rates are today. So ⁓ really what we’re doing is we’re trying to gear our strategies and find strategies that our investors can access that often does not have any correlation to some of these other markets. So trying to help investors build a diversified strategy with their investors.

investment portfolio, one that not only has correlation to the real estate market, but also is uncorrelated to those markets that do have some volatility from time to time.

Scott Bursey (14:04)
So that’s so insightful. So it sounds like the focus is on stability and long-term relationships with patient equity over chasing the fastest or most conventional money.

Nick Elder (14:07)
Yeah.

Exactly. Yeah. I mean, it’s, you know, we’re doubling down on relationships right now. You know, of course, you know, just across the board, you know, there’s challenges, you know, and so we’re really as investor relations professionals, as we’re releasing our quarterly updates, you know, we’re offering up our time to go through, try to explain some of the challenges, explain the good things that are happening, what we think is going to come. So really it’s a great opportunity right now to step up in transparency, openness, and clear reporting.

And that’s what really focusing on right now.

Yeah. And that’s what builds the trust and builds those relationships and gets referrals over time. I’m always having my investor relations team set, you know, look, it’s important to go out there and get investors. We’re always in a game of sourcing new investors. We can also get a lot of investors from referrals of our existing network. So how do we leverage those things? And then also we can do that by making sure we’re just a transparent and communicative group when it comes to the performance of our funds. So there’s many other things we’re focusing on, but really stepping up on that ⁓ transparent

and communication. We did that so well. We’re just continuing to compound on that even further.

Scott Bursey (15:19)
And those relationships are so key. When you look at a potential acquisition, what is the single most critical non-financial metric or factor that needs to align before you decide to move forward?

Nick Elder (15:23)
Yeah.

Goes back to what I was saying earlier, it’s really population growth and job growth. mean, two fundamental ⁓ factors that influence how a market is gonna do in the long run. If there’s continuing to be people that are moving there because jobs are growing and the population is growing, I mean, those are clear cut non-financial metrics that we’re looking at.

Scott Bursey (16:35)
couldn’t agree more. Now, what sort of groups are you currently in? If you could expand on that a little bit for us,

Nick Elder (16:42)
Yeah, so Investor Fuel, we’re part of the Investor Fuel group. I believe it’s been close to a year now or approaching. We’re part of another group called Collective Genius, and the founder of our company is involved with a group called Capital Alliance. So, know, masterminds, the former two are masterminds for, you know, real estate investors who are doing a ton of volume every single year. So getting in those groups has been just immensely valuable, not even just

in upping your knowledge from a real estate standpoint and see what other groups are doing, but also just from attracting talent, scaling organizations, and really learning more from the trial and errors that those groups have done over time as they’ve gotten to the success that they’re at today.

Scott Bursey (17:26)
couldn’t agree with you more there either. We often hear about value added strategies. What does a successful value added execution look like from Iron Capital today? And how has the process evolved over the last couple of years?

Nick Elder (17:41)
Yeah, so Ironton Capital, we’re a fund of fun. So just to take it a step back, we’re not necessarily, you know, managing the construction process directly. We’re not managing the property management groups directly. We’re going on behalf of our investors to find the groups to invest in directly. So, you know, our value proposition is that we can take a

diversified fund of about five to 10 investments, bundle that up in a fund and provide access to our investors to those high quality institutional type investments for a minimum of $50,000. Whereas they would otherwise need a million dollars just to get access to. So I think, you know, what our focus really is, is ⁓

making sure that our investors really understand the due diligence that we’re undergoing, right? So because we’re not managing those processes directly, because we’re a nationwide firm, we want to go to these groups that already have that established track record and decades of experience. We don’t need to reinvent the wheel. We just need to find the groups that are already doing those things really well. So our investors rely on us to really for that due diligence that we’re doing on their behalf and protecting their capital.

Scott Bursey (18:48)
Thank you for breaking that down and thinking about technology. What role is data and predictive analytics playing in your due diligence process? And are they, know, where’s the innovations going that you believe are truly transformative right now, I guess.

Nick Elder (19:07)
Yeah, I mean, artificial intelligence is a huge thing. I mean, you can reasonably do market analysis and maybe 10 minutes or less where it was, it would otherwise take you maybe a couple of days. I mean, you can go to a Claude chat, GPT perplexity, whatever your chosen platform is. And you can run some, you can run again, market data. Uh, you can even use some under, you know, you can run it through underwriting data and get to a desired decision in almost minutes today. So I think that.

that’ll only continue to, ⁓ we’ll just continue to improve upon that as AI gets more and more sophisticated. I use it every single day. I’m sure anybody else you talk to probably does it the same in various capacities. ⁓ So I think those are the opportunities, the people that can make decisions more quickly, the people who can get access to deal flow.

and make snap decisions based on their specific criteria. I think those guys, they can sift through deals a lot faster than maybe some other people. And the way that they’re gonna be able to do that is through technology such as artificial intelligence. And so I think the people that leverage artificial intelligence more today, will be leap years ahead of the folks who are not integrating that into their strategy today.

Scott Bursey (20:20)
And Nick, I gotta ask you, for our listeners who are aspiring sponsors or fund managers, what is the one piece of non-obvious advice you would give them about successfully scaling an investment firm like Iron Capital?

Nick Elder (20:34)
It takes a lot of time, and you got to shake a lot of hands. Maybe that’s obvious, maybe it’s not so obvious, but just because you have a good deal does not mean that equity is just going to flock to your deal and invest. ⁓ It’s going to take a ton of relationship building, and you got to put yourself out there and let people know you’re doing deals, and you got to really communicate how you’re protecting your investor capital.

and trying to mitigate their downside risk as much as possible. ⁓ don’t wait until you have a deal to start raising capital. Raising capital is an everyday process. It’s simply a relationship building process and that never stops. ⁓ And it doesn’t start when you have a deal, it starts today.

Scott Bursey (21:18)
Once again, excellent breakdown. Nick, if someone is interested in learning more about the investment thesis at Iron Capital or following your work, where should they go?

Nick Elder (21:28)
Yeah, they can go to irontoncapital.com. ⁓ That’s where we have all of our available offerings at Ironton Capital. If they want to book a time with me, they can go to irontoncapital.com/nicktime so they can do that. ⁓ Additionally, they can follow me on LinkedIn. So they can easily look me up on LinkedIn and I try to put out a lot of content.

I engage with a lot of the folks that follow me and who I follow as well. if they want to stay up to date with what’s going on, they can go to our website or they can ⁓ come follow me on LinkedIn.

Scott Bursey (21:58)
Nick, thanks for joining us today.

And thank you to our listeners. If you got value out of this episode, please subscribe. We have more conversations coming up with operators just like Nick. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.