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Show Summary
In this episode of the Real Estate Pros podcast, host Erika speaks with Eric Nelson of Wild Oak Capital about his journey in multifamily investing. Eric shares how he transitioned from engineering to real estate, scaling his portfolio to over 1200 units in just a few years. He discusses the importance of clear communication with investors, the current market trends in multifamily investing, and the challenges he faced in property management. Eric emphasizes the value of mentorship and education for aspiring investors, providing insights into identifying profitable properties and navigating market risks.
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Investor Fuel Show Transcript:
Eric Nelson (00:00)
When it comes time to buy the deal and have the debt be taken seriously, if you’ve never done it, that’s a huge challenge. In fact, you’re probably.You’re going to strike out in 99 % of the time. If you have a coach or mentor, a lot of times they’ll say, okay, that, is a deal. agree with you. And a lot of times they’ll sign on the debt with you on your first one or two, because most lenders are going to say, what is your track record? What is your history of doing this? How much, um, what’s your liquidity?
Erika (02:00)
Hey everyone, welcome to the Real Estate Pros podcast. I’m your host, Erika. Today I’m excited to be chatting with Eric Nelson of Wild Oak Capital. He’s been making serious moves in the multifamily investing space.I’m glad to have you here.
Eric Nelson (02:17)
Thanks Erika, my pleasure to be here. Thanks for having me.Erika (02:21)
I think our listeners are going to love hearing about your story, your journey, how you’ve learned how to scale the over 1200 units while building a real freedom in your life. So let’s dive on in. First off, Eric, for our listeners who aren’t familiar with your world, can you give us the rundown and share what led you to real estate and multifamily?Eric Nelson (02:47)
Yeah, love to. Again, thanks for having me on. is my pleasure to be here. I started as an engineer. started ⁓ basically just graduated from college, got a job, was kind of doing some civil engineering stuff. And, you know, wasn’t too long into it, I was like, gosh, this is gonna be forever before I can retire. And part of it was that I just didn’t love, love the work, right? So if you’re listening to this and you love your job, that’s kind of a different story. For me, I really didn’t. I was like, how can I sort of…accelerate my way out of this. So, um, one thing that I did was I started a company that was also engineering and that gave me some freedom in some sense. mean,
sort of running a small engineering company. You can do what you want when you want sort of, but you still have to be there to make money. Um, and so that was sort of this thing I was always looking to escape. like, where, where could I make money and sort of literally do it from anywhere, be able to work some, not some travel when I want that kind of stuff. And so.
The driver was really retirement. It was really like, can I really stomach doing this for another 40 years? I mean, that’s kind of where I was at, you know? And so my wife and I started looking into basically side projects, I guess you could say. And if you Google, like I said in the pre-show, if you Google sort of like how to retire early, you’re gonna come to real estate pretty quickly. So my wife and I said, okay, let’s start looking into this. And I just started learning a ton. I listened to podcasts like this. I read.
so many books, listened to so many podcasts and YouTube and all kinds of stuff. I just kind of got really into it. It turns out I really like it too. So my wife and I bought a couple single family rentals. We bought ⁓ a triplex that we actually lived in for a while. ⁓ And then we bought a sixplex on owner carry, like a seller carry finance on really low down payment. And that kind of shifted my mind. And that’s actually a cool story we can come back to, but eventually I was like, hey, we’re out of money.
And I still want to do this, but I need to either partner or find investors or something, right? I was just like finding this way. So I found someone who’s doing syndication and who’s doing multifamily stuff. And so I hired him as a coach and that really transformed my world because he was kind of there alongside with me to help me figure out the business, what it looks like, what to do, what not to do. So that was really powerful. And so then that just sort of accelerated me into multifamily. Now there’s a lot of steps along the way, of course.
But that’s kind of the quick and dirty of the journey.
Erika (06:03)
That’s really, really awesome. Well, looking ⁓ at your journey, think the thing our listeners really want to know is to you, what was kind of the biggest moving piece that you needed to figure out to scale to where you’re at with 1,200 units? How was that process of building it out? How rapidly did you grow?Eric Nelson (06:28)
Yeah, I mean, it’s funny, like looking back, it felt slow because I’m the type of person that wants to move quickly, but it only took, I mean, we started in 2020 really kind of like, I guess, semi before COVID happened, I was traveling to the markets and kind of trying to figure this out. And then COVID happened and it was, it was like an odd accelerator in some way because we were all forced inside. And so what I did is I just spent all of my time learning about the business because, you know, I’m talking to brokers.transactions were still happening. They were just really slow. Then after COVID, what happened was there was so much money infused that everyone was looking to invest. And so it was kind of a unique time in the sense that like raising capital wasn’t really all that challenging to be totally honest. Now it’s on its flip side. Now raising capital is super, super hard, but back then it was easier. And so we were able to buy really good product at a really good rate. We were buying in the threes percentage rates.
and able to raise capital. And so we were able to move pretty quickly. So from 2020 to 22, we probably bought 800 units in a two year period. We grew, and I always say this in podcasts, say, you we sort of, our team grew by necessity, not necessarily by design. So as we’re like, oh man, I’m tired of doing this. Here’s an example. I started by myself. I was underwriting things by myself. So I partnered up with someone.
who was good at talking to brokers. And so he and I, he would talk to brokers, get the deals and I’d underwrite it. And then we were just making offers. But I had soon got really tired of underwriting. And so we were like, we need someone else who’s really detailed. That’s when I found my partner, Shane, just kind of by necessity. I was tired of doing it. He’s excellent at it, super duper fast. And so he kind of came on board as that person. It turns out we are now partners in everything we do, but that’s just kind of how it grew. And then after that we had too many projects to manage.
And so we needed another partner to help us manage those assets. so Bonnie is our asset manager. She’s super detailed and sort of manages all the assets. the team just sort of grew by necessity, but ⁓ long answer to say we’ve grown to 1200 units in about a five year period. ⁓ Which again, seems slow. We didn’t buy much in 2024. So really between 20 and 23, it was like zero to a thousand, which
Sounds super fast, but it did, felt like a snail’s pace because I was really looking to go faster.
Erika (08:53)
Got it. Well, with those with rapidly acquiring those deals, although you felt like they were they were slower. How how did you identify all those properties, you know, that they were a good fit, that you would get strong returns? What were you looking for?Eric Nelson (09:10)
That’s a good question. think, you know, this is actually a really important thing to talk about is when you’re starting in real estate, whether it’s flipping or whether it’s wholesaling or whether it’s multifamily, whatever it is, you really need to hone in really clearly on what it is that you want to do. And, and what I mean by that is when you, you go into this say, okay, I want to be a flipper. Great. There’s a huge opportunity for flips. Where are you going to buy? What are you going to buy? How are you going to flip them?You know, get very specific. That way when you call agents or when you send mailers or whatever, you know, I’m in Kansas city. I want to buy houses around a hundred thousand dollars. want to spend 20 to 30,000 on rehab. And I want to sell them for 160, just like around that. Right. For us, it was similar. It was like, we want to be in Tulsa or Arkansas. We want those two markets because we know we have good, good property managers there. ⁓ Tulsa specifically is where we started out. like Tulsa.
We have a great property manager between 50 and 150 units, B to C class properties, and we want 8 % cash on cash and let’s say 15 % IRR. And so when you’re underwriting the deal, you’re doing the math, you’re just going for that metric, right? Cause you’re, this sounds terrible too. You’re going to underwrite a hundred units at least or a hundred properties before you buy one. You’re just going to have to go through the motions of doing the math to understand what’s a good deal and what’s not a good deal.
So I think that’s why you sort of need either a group or a mentor or something if you’re doing this, because it just takes repetition to understand what a good deal is and what a good deal is not. And so we were looking for really, let’s call it B minus or C class properties in a very good neighborhood, the best neighborhoods we could find. And we were looking for at least 15 % IRR. And so the nice thing about multifamily is you’re buying a business. It’s not really emotional. It’s really not. mean,
I love it because we’re improving the property. We’re improving the place where people get to live. I love that part of the business. But when it comes to purchase price, it’s based on how it’s performed over the last year or two. And so you can just kind of do the math and say, here’s your NOI. Here’s the loose cap rate of the area. Here’s what it’s worth. And that’s kind of it, right? There’s other metrics involved, of course, right? Like interest rates and how you’re going to refi and all those things. But generally speaking, it’s a pretty simple equation.
Here’s what the NOI is, let’s divide it by the cap rate. That’s loosely what it’s worth. And then does that provide a return for our investors?
Erika (12:15)
Those are some really important things to think about. As you know, Eric, you were talking with me earlier about how multifamily was tough in 2024, but things have really shifted this year. So what are you noticing in the market and what do you have your eye on?Eric Nelson (12:36)
Yeah, I I think I think multifamily is taking a huge swing back in the right direction meaning we’re seeing a ton of very good deals I think rates have fallen a little and I don’t think it’s made a huge difference But it’s also just opened up people to say okay now I can sell for just a little bit more now I’m ready to sell the property at it at an amount that makes sense So in 24, it seems like people were just like throwing numbers out there like also my house for or I’ll sell my property for ten million dollarsIt’s only worth seven, you know? So they would put it on the market and take it back off. Now I think sellers are back to say, okay, I’m ready to sell because the rates have helped a little bit. I’m ready to get out of this, get my investors a little bit of return. And so it’s kind of made this shift into, okay, people are ready to move on to the next property or ready to sell at an amount that works. So there’s a lot going on in the market, but I think multifamily is a very, very good time to be in it right now. ⁓ Residential market’s totally different.
I think it’s super soft. think there is some opportunity there. There’s not a huge amount of inventory. So if you’re a good buyer and you have a partner who has cash, for example, so if you’re doing wholesaling, there’s some opportunity, I think. But I think right now, multifamily has a really good, I guess what I’ll say is it’s shifted completely since 23 and 24, which is really nice.
Erika (13:56)
Are there particular sub markets where you’re spotting the best entry point?Eric Nelson (14:02)
You know, I, like I said, I only look at a few markets. So we only buy in one market in Texas, Tulsa and Tulsa area, and then West Arkansas. And that’s it. So I keep my eye on those markets really, really hard. ⁓ I don’t love certain markets, to be honest. Like I don’t love Florida. I don’t love any of the Gulf coast. I don’t really like markets that get hit hard during recessions, like Phoenix or Vegas. A lot of people make a lot of money there. So don’t take my word for it. ⁓I just don’t like them because there’s so much risk involved. When you look at 2008, when you look at Vegas or Phoenix, for example, Phoenix got crushed in 2008 and I don’t want to be any part of that. There’s a possibility we’re going to see a recession at some point. I never want to predict. I don’t know. It’s amazing we’ve gone this long with that one, but it’s a strong possibility in the next five years, let’s say. So I don’t want to own a bunch of property in a market where it could literally
values could drop in half. And so that’s why I don’t love those particular markets. I don’t like markets that rely heavily on insurance.
So if you’re asking me sub markets, I always say this too. There’s hundreds and hundreds of markets that work. What I personally would look at is the center of America. The West coast is too expensive. East coast is too expensive. Very far North, in my opinion, I don’t love freeze thaw cycles. It’s just really hard on buildings. So if you’re looking in the middle and you, there are literally hundreds of cities.
that this model works. So if someone says, what’s the market? Like pick one out of a hat in a map in the dead middle of America, over a hundred thousand people, you’re probably going to find some multifamily properties that work. And so that’s what I like about the model. ⁓ I don’t think there’s any certain sub market per se. I also don’t, I’m just going to give you all my tricks here. I don’t love A-class properties. I don’t love really shiny new properties. Is it nice to own them because they don’t break as much? Sure. You’re just not going to make as much money. That’s a reality.
So I don’t buy those because in recessions people tend to move out of A-class properties and sort of lower the rent rate. For example, I also don’t buy D-class properties. I’m not a slumlord and I also don’t want huge rehabs. So I personally am like a C-class, B-class value add 1980s, 1990s construction. We’ll fix it up and make it better. Add playgrounds for kids, add programs that bring a community.
those kinds of things and that’s what really gets me excited.
Erika (17:04)
Yeah, maybe this kind of ties in to what you were saying here. But earlier you had mentioned with me that, you know, some of the challenge lately in this environment has been raising capital. So what would you say is your strategy for attracting and retaining investors right now?Eric Nelson (17:23)
I think the main thing, and this is true in any time, is just ⁓ clear communication. So ⁓ if your property’s not performing well, tell your investors that. Say, hey, it’s not going well, and here’s why, and here’s what we’re doing to fix it. If it’s going well, same thing, right? So the obvious answer is provide good returns. Like if you do what you say and you’re…You know, someone gives you $100,000 and then you give them 20 % on their money over five years, then they’re gonna come back. So that’s the simple answer. But it’s not always that easy because some properties aren’t gonna perform as well as others. So what I usually tell people is, if you have $100,000 and you wanna invest with us, what I would do is take 50 and invest in one deal and hold off and wait for our next deal and invest 50 in the next one. And that’s hard to do because raising capital is hard, right? So it’s hard to say, I’m gonna take half of that person’s money they wanna invest with us.
and ask them to wait or tell them to invest in someone else, but that’s the right thing to do. Provide a little bit of diversification, because if they put a whole bunch of money in one bucket and that bucket doesn’t perform as well as you think, that can really, you know, struggle, like can provide a struggle for them to really want to come back, right? So it just, end of the day is, is take their money and treat it better than you treat your own and do what you say you’re going to do to the best of your ability.
The market conditions are going to sometimes push certain things, certain weird ways where you, okay, things are going to perform better or underperform. We have one deal that’s like 40 % IRR. It’s just insanely good returns. And someone says, why? And I’m like, I don’t know why. I honestly don’t. It’s a nice property and kind of a sub market. It’s just done really, really well. People want to live there for no apparent reason other than that it’s just clean. We have other properties that are super clean. What I think are a good sub market.
And we have some vacancy issues, sometimes we have vandalism. It’s just, you never know, right? And so I guess what I’ll say is be clear and honest that there’s risks involved. At the end of the day, do your very best to treat people’s money with the most respect you can. And then again, the obvious answer is if you can provide good returns, people will come back. And so be extremely patient and buy right. That’s probably the main tip I could give is if you overpay,
you’re going to struggle to make returns. So just be ready to offer a hundred times and get two. And that’s probably about the rate at which we run. Um, something to that percentage, I would say we, I was tracking it for a while. At one point we’d offered, we’d underwritten 300 properties and we bought one. Just, that’s just how it goes because we were being extremely patient for that period of time. There were almost no deals in the market that were working. And so.
Patience is extremely important. If you’re gonna provide a return, make sure you’re buying the right deal.
Erika (20:20)
Absolutely. And I’m sure you’ve seen a lot of ups and downs with your experience in the market, Eric. You know, every operator has a moment where things get real. Maybe a deal went sideways or they had the pivot fast. Can you share one of those moments on your investing journey and what you learned from it?Eric Nelson (20:44)
Yeah, I’ve had so many I think I think that’s ⁓ thing to know is exactly what you said is Along the way things will go wrong. So it’s not really It’s not only if they go wrong. It’s it’s when they go wrong. And then how do you respond when they do? ⁓ I’ve had a couple and I can share a handful of these one would be a good example is I had a single-family property and Tenant didn’t pay rent and I was kind of like called them. They didn’t answer they didn’t answer and I was getting kind of worried honestlyAnd so I called the police and I said, yeah, your tenants in jail. And, ⁓ I was like, well, I don’t, I don’t kind of know what to do with this. Am I allowed to sort of break the lease? And I just, wasn’t prepared for something like that. Right. And it turns out there was more layers involved. And the answer was simply kind of like, no, you have to wait for that amount of time and then do the eviction process. And it was just a challenging thing because they were in jail. So it was just a really weird thing where I couldn’t re-rent the house.
It was sitting vacant. It was strange. I’ll give you a better example, a bigger one. ⁓ We had a deal that was 32 units and that’s a pretty challenging size to manage. our property managers was not performing. They just weren’t doing a good job. They didn’t seem to care. Not entering the phone, not getting back to email. They were just kind of like dropping the ball. So we had to let them go. And that’s a hard thing to do too. You know, just have to fire the property manager, move on to the next one.
Turns out the next one was even worse. the property over time just got worse and worse and worse. Vacancy got higher. And so we decided as a team, we’re going to fly there personally. We spent our own money to fly there and fix up a couple of the units ourselves, painted a bunch of the exterior, hired a third property manager, got really aligned with them and really clear about here’s what we want to do and sort of turn the property back around. And that was a super challenging thing because letting go of two property managers is expensive. One.
And two, it’s challenging to then sort of train a new manager to here’s what we’re trying to do with the property. And we all spent our own time, energy, money to go there personally and talk to the tenants and say, Hey, we know it’s, you know, they haven’t been here and we’re sorry. And we’re trying to find the right fit. And so then over time, we kind of got it back on track, but that was like, I mean, we had at one point it was like 60 % occupied and that’s pretty terrifying when you’re struggling to meet debt service. And so that was just one example of.
I don’t want to blame the property manager entirely, but I would say mostly their fault. Having to let them go twice in a row is just expensive and costly, but now that property is back on track. And it was tough because we didn’t tell our investors the same thing. Hey, we have to hold distributions for nine months, I think it was. And now we’re back on track. And I think, ⁓ what that taught me was, okay, we got to sort of just like put on, like, we just sort of like, okay, we got to put, we got to own it. We did this.
This is our property. We’re in charge of it. can cry about it we can do something about it. And so that was an example of that was really not a fun time. ⁓ but I think we sort of turned it around in the right way.
Erika (23:46)
Yeah, you sure did. got to work and made it happen, Eric.Eric Nelson (23:52)
Yeah, wasn’t super fun, but yeah, actually, I mean, it wasfun to go there and talk to tenants and fix it up, but the process of letting, you know, a manager go and going through all the, said, she said, and then a lot of the contracts involve, you got to wait 90 days and it’s just, it’s just really a big struggle. so, uh, going through that wasn’t fun, but you learn from it. You learn how to now, okay, I’m not doing that contract again, and I’m not doing that specific thing again. We’re going to let.
them go with this, we’re going to hold them accountable to this and you kind of learn from your mistakes, hopefully, and I hope to never have to do that again.
Erika (24:27)
For our listeners, Eric, who are thinking about getting into multifamily but haven’t started yet, what kind of advice would you give them? What do you want?Eric Nelson (24:35)
I think I’ve said this a lot on podcasts, but I think the key to getting into multifamily is having a good coach, a good mentor, or a good group, some kind of mastermind or some kind of group. Because going alone is nearly impossible. And it’s not that it’s not, it’s not that it’s not possible to find the deal or even make offers.When it comes time to buy the deal and have the debt be taken seriously, if you’ve never done it, that’s a huge challenge. In fact, you’re probably.
You’re going to strike out in 99 % of the time. If you have a coach or mentor, a lot of times they’ll say, okay, that, is a deal. agree with you. And a lot of times they’ll sign on the debt with you on your first one or two, because most lenders are going to say, what is your track record? What is your history of doing this? How much, um, what’s your liquidity?
You know, that kind of thing that will be hard to prove early on. If you’re alone, if you’re with a group and you have a couple of partners, or if you have a mentor, they can help you through those hurdles. That’s exactly what I did. My first two deals.
mentor sign on the debt with us. and it’s, it’s a pretty common practice, but I would say if you’re looking to get into it, number one is get educated, listen to podcasts like this, read a bunch of books, just get super duper duper educated. So you know what you’re Hi, buy a course, whatever it is that you prefer to do, however you want to learn, right? Then get a mentor or a coach or a mastermind or all of them. And that is the accelerant. If you know what you’re doing and you’re ready to buy.
You gotta have someone alongside you. That’s just my opinion.
Erika (26:06)
Yeah, that’s really solid advice there and I hope people really consider that. Well, Eric, it’s been great having you on. Before we wrap up, if someone wants to reach out, connect with you, maybe collaborate or learn more about what you’re doing, what’s the best way for them to reach you?Eric Nelson (26:25)
Yeah, you can email me at eric at wildoapcapital.com. I’m always happy to listen. I do have, ⁓ I do have sort of a mastermind that I run. I don’t want to pitch it too hard here, but if anyone’s interested to learn about how to learn about multifamily, I’d love to talk about them then, but just the easiest way is email. eric at wildoapcapital.com. I tend to answer all my emails. I love talking to people, so feel free to reach out.Erika (26:48)
We appreciate your time, your story, your perspective. Eric, we need more people in this space who are skilled and smart like you.Eric Nelson (26:58)
Well, I don’t know if it was smart, but it was fun. So appreciate that. ⁓Erika (27:01)
⁓Sometimes it’s the adventure, not the destination, right? For our listeners today, if you enjoyed this episode, make sure that you’re subscribed to the Real Estate Pros podcast. We’ve got more conversations coming up with experts like Eric, who are out there building fantastic real estate businesses. We’ll see you on the next episode.
Eric Nelson (27:08)
That’s exactly right.
