Caleb: Welcome to Real Estate Insights, where I sit down with top real estate pros across Utah and Idaho. I'm Caleb Adams, your host. My guest today is Mitch Rice, founder of Elkstone Capital Partners. Mitch brings us the commercial side of real estate. He's a syndicator who buys apartment communities and makes them dramatically more valuable. He's helped deploy hundreds of millions into real estate and recently added a $5 million valuation to a single property in under a year. I brought him on to pull back the curtain on commercial and multifamily real estate and show you how a regular person can get into it. Mitch, welcome. I've been looking forward to this.

Mitchell Rice: Thanks, Caleb. I'm excited for this too, man.

Caleb: Well let's dive into it. Can you tell us a little bit about your background and what led you to get into commercial real estate?

Mitchell Rice: Yeah, so one of the big things was at BYU I joined the BYU Real Estate Club. It's now an association. I remember when I joined that, I was expecting it to be a course on residential investing. And they were talking about apartment buildings and office buildings and self storage and all this stuff. And I like, What is this? 'Cause at the time I had no concept of commercial real estate. I didn't even know It was a thing, which is ironic because you drive down the highway and every building you see is commercial real estate. There's shareholders, there's investors, there's somebody managing that. so that's one of the ways. And then my dad was a passive investor. he would invest with hotel syndicators. So he went in on multiple Marriott deals. So I got to see him do that. And then I had to come up with a career for myself coming out school. I had read, all the real estate books, Rich Dad, Poor Dad. Loved it. I was thinking, okay, I'm gonna go buy a house.

Caleb: Such a good one.

Mitchell Rice: Yeah, so good. life changing for so many people, right? So my goal was to buy one rental per year, and my goal was gonna be residential. And then I actually stumbled upon this book by Grant Cardone. I don't love Grant Cardone, I'm not endorsing him in any way. But this book's called Creating Wealth, Investing in Real Estate. And it was a whole different twist. It was okay, rather than buying one house, go buy a third unit apartment building and do it at scale. So those are a couple of the things that kind of drew me to it. Go bigger, you know, more economies of scale, and we can jump into what value add means and what that looks like on

Caleb: And how do you feel like the book shifted your perspective? 'Cause I've heard some people say, commercial is it's like doing the same thing, it's just with bigger numbers. Is that true?

Mitchell Rice: I mean it's really different from residential, first of all, because residential is valued on the s the sales comparable approach. Your house or is typically worth what the house next door just sold for. it's a little bit different when you're dealing with a rental and investors look at it with their investment cap on per se. But commercial is valued on the income approach. So they use what's called the capitalization method or the cap rate method. So cap rate, say you have A million dollar property and it's generating 50 grand a year in net operating income. That's your income minus your expenses. That's what you're left over before you pay debt. so if you have 50 grand on this million dollar property, you have a 5% cap rate. Now let's say you you get in, you increase the rent, you cut your expenses, and maybe the next year it's make it's generating a hundred grand per year, but the million-dollar goalpost moves. The next investor isn't gonna get to pick it up at a 10% cap rate when you bought it for 5%. so the cap rate stays the same. So now you have that hundred thousand dollars. Now you're gonna divide that by zero point zero five. Now that property's worth two million just because you were able to increase the income by fifty thousand dollars a year. So that's the power of commercial real estate.

Caleb: yeah, such a different ball

Mitchell Rice: Mm-hmm.

Caleb: game from residential real estate. I remember I did work with some commercial real estate for a little stint there and I'd see operators or owners roll out some amenity, would bring in a little slice of revenue, like not very much, but such a difference to the valuation when you have three hundred or four hundred units.

Mitchell Rice: So like what you're talking about, like adding a dog park, adding Amazon package hubs, adding valet trash, like those little things, renovating your clubhouse, you know, putting in granite countertops, stainless steel appliances, all those things give the operator the ability to increase the rents. And yeah, it's a huge value add. So that that's what value add is in a nutshell.

Caleb: Appreciate you breaking that down for us. let's keep with that topic. what's the difference between a syndication and a joint venture?

Mitchell Rice: I think of a joint venture as less than five people. you don't have to go out and get an attorney. you're doing it with a couple of partners and you can justify that everybody has a role versus a syndication. Usually it's more than five people. You're taking money from investors who don't have material participation in a deal, so they're just cutting you a check so they're fully passive. When you do that, you have to follow securities laws. So the SEC Tries to protect the American investor. So as an operator, if you're gonna syndicate a deal, you have to file what's called a regulation D exemption with the SEC. there's two routes people typically go, five six B, which is friends and family. So it's me bringing a deal to you, Caleb because I already knew you. But if I had the deal and you and I didn't have the relationship, I could not share that deal with you. And five six B, you don't have to be accredited. So anybody can come into that deal. Five to six C, those are the ones you see on the internet. Somebody that's advertising means they can only accept accredited investors.

Caleb: Okay, I actually had no idea that having a relationship with you gave me an in.

Mitchell Rice: Yeah, yeah, exactly.

Caleb: everybody needs to get to know Mitch.

Mitchell Rice: and you might already have an in if you're accredited. Yeah.

Caleb: Yeah, yeah, that's fair. as an accredited investor, you got the doors open to you regardless. that's great. Do you prefer one or the other, joint venture versus syndication?

Mitchell Rice: I mean joint venture obviously makes sense for small deals and you could even do a joint venture on residential. You can go buy a fourplex. and maybe you just bring in one capital partner and you're gonna go do all the work and you found the great deal and you bring in somebody with the equity, like that right there is a joint venture. You don't need to file you don't need to get an attorney and you know I mean?

Caleb: Yeah, yeah, you just do your own work up of an agreement and

Mitchell Rice: Yeah.

Caleb: equity split and and run it that way. Okay. So it's fairly straightforward and easy. But when you're getting into bigger numbers like you are, you might have more than five people in the deal and so now we're talking syndication. That makes

Mitchell Rice: Exactly.

Caleb: sense. you mentioned this in your intro, but passive investor versus operator, where do you like to stay? What's the difference?

Mitchell Rice: so the terminology for this is GP and LP. That's kind of the lingo in this industry. So GP stands for general partner. and then LP stands for limited partner. The reason they're called limited partners is because their liability is limited. So usually if we're going out and getting a loan, we're signing for the loan, sometimes it's recourse, sometimes it's non recourse. That's your world. You know all about that. the LP, let's say the deal goes south, they cannot lose more than their investment. So if if we as the GP do something fraudulent or negligent or the property just tanks, or there's a lawsuit, nobody can go after the LPs besides their initial investment. that is the most they could lose. We are the ones on the hook. We're the ones liable. We're the ones doing all the work. so that's kind of how it curves up legally

Caleb: super insightful. so how did you get your start in this? Did you start as a limited partner to get to know the

Mitchell Rice: No.

Caleb: deals and then transition over or what did that look like?

Mitchell Rice: A lot people do that. I didn't because I again I had to figure out what to do with my career. So a lot of people get into investing because they have capital. I was the other way around. I didn't have capital. So I learned how to invest and get really good at investing other people's money for them. So I left school, I went and worked for the for profit real estate arm for the Church of Jesus Christ, Latter day Saints. every once in a while you'll probably see a news article about how many billions the church has. And it's true, they invest heavily, not just in stocks and bonds, but they do commercial real estate. They do apartments. They do hotels. so I was the senior analyst on the inside and I underwrote all the ground up development projects, presented them to their investment committees. That one was a little interesting 'cause we didn't have to raise any money. They had internal funds. And then they don't use any debt. So they do deals a hundred percent unlevered. so their returns are worse because of that, but That's their thesis. It's very low risk.

Caleb: Yeah, talk about a different experience though, 'cause that's not how the world operates.

Mitchell Rice: No, it's really not. It's totally different. And that's the reason I left, to be honest. After two years, I was like, wow, I've had an amazing experience. Every deal I was underwriting was like a hundred million dollar plus. Like these were big, big developments. but I wanted to learn how to raise capital. I wanted to build a pipeline of investors. I needed to figure out the debt piece because I didn't know how to underwrite debt.

Caleb: what good experience though, you know, to then go out and learn more about it. well let's talk about some specific deals. I follow you on LinkedIn and you've got your emails and you're talking about different things you're doing. I've noticed you've got, like the hotel to multifamily play. how do you do that? How do you turn an old extended hotel into a apartment complex?

Mitchell Rice: Well, if it's extended stay, it's a lot easier. For those of you who don't know, extended stay hotels are the ones you've stayed in that have kitchens in them. So they'll have a sink, they'll have a little two burner stove. You can actually live out of them for several weeks if you're on a vacation. those ones are a lot easier because they already have the plumbing and the infrastructure built in. the more challenging conversions are when they don't have that. So when it's not extended stay and we have to do all that. It's really hard to find the ones that work. Right now we're doing a conversion in Denver. It's a Holiday Inn Express. That one was the eleven story building. the biggest hurdle, the first thing you have to do is call the city and see if they're on board because they might shut it down in the first ten minutes. typically

Caleb: How far does calling actually get you? You know, can you take at their word or is there a formal process or attorney you gotta you gotta work through?

Mitchell Rice: Yeah. If you if you get the right person, your first call needs to be to the planning commission guys. And obviously they can't definitively tell you yes or no until you go through the planning commission process and you go to city council and you actually apply for the rezone because a lot of times you have to rezone these properties from hospitality use to multifamily use. Sometimes they're already zoned multifamily, Those are awesome. that's kind of how our Denver deal was.

Caleb: Yeah, that'd be amazing.

Mitchell Rice: But you still have to apply for the permits and a conditional use permit and change of use permit to change the use of the asset. But usually just with an initial call of the city, sometimes it takes a couple of calls and voicemails and a few days of trying to find the right person, but you can gauge the sentiment. You can gauge if they want more housing, if they need more affordable housing, if they're gonna play ball. and then if the sentiment is positive, then you underwrite the deal, you make an offer. If you, get it under LOI and everything looks good, then you start your due diligence. And there's a lot to do with conversions. Typically we have to install fire suppressions a lot of the older ones don't have fire sprinklers and that's always a code item that the cities require. a lot of other things that we have to do to get them rent ready but it's a lot of fun.

Caleb: So a lot of the listeners here are in the residential space. we're familiar with the getting under contract, typically thirty days to close, due diligence, all that. How does commercial change?

Mitchell Rice: I mean, the first thing I'll say is it's all negotiation, right? But typically it's quite similar. You go under LOI. LOI stands for letter of intent. That's a basically a non-binding letter of all the terms that both the buyer and the seller are agreed upon. Again, it's non-binding. Once you're under LOI, then you start working on the PSA, which stands for the purchase and sale agreement. That document is the binding document.

Caleb: That that's what you wanna get, right? So they're not like still shopping around

Mitchell Rice: Well and even with an LOI and commercial, most buyers request exclusivity. So even from the time you sign LOI, there are a couple clauses in an LOI that are binding. That's usually a binding clause in LOI. That way they stop marketing to their buyers. And that way while you're working on all the nitty gritty of the actual purchase agreement, it's exclusive. So I'm glad you brought that up. But yeah, once you get under PSA, then usually there's a seller disclosure deadline where the seller has to give you pretty much all the documents about the deal, all the financials. That takes time. And that's actually a really good tip for buyers. that can extend your timeline. So usually it takes a couple weeks for the seller to get you everything, and then that's when the clock starts. Usually you'll have 30 days of due diligence. usually there's a financing contingency that goes past due diligence. Once due diligence is done, obviously a lot of times the earnest money goes hard that you've put in, and then usually you'll have another thirty days to close. Almost every PSA will have extension options where if you're not ready to close, you can put a little bit more earnest money in and buy more time.

Caleb: And at what point have you raised the funds for the syndication? Does that happen you know, you underwrote the deal before the LOI or you guys during due diligence?

Mitchell Rice: I mean, the best raisers are always raising, whether

Caleb: Or both.

Mitchell Rice: they have a deal or not. the goal is once you've identified a good deal and you're kind of in those early negotiations, you're kind of telling investors, Hey, we found this deal, we just submitted an LOI, we have an LOI accepted. This could turn into a great deal. Stay tuned. and then throughout the whole process, hopefully your due diligence goes well, you don't find anything wrong with the property, you like it enough to actually go under contract. And you're kind of raising from the very start of just verbal negotiations to actually closing the deal, which is a couple month process.

Caleb: Gotcha. So it sounds like your business has gotten to the point where you have the funds to put up the earnest money and then you can decide, you know, if we're gonna be able to raise enough money for it or not.

Mitchell Rice: Yeah, and sometimes I I don't have the earnest money. So sometimes I bring in another GP who has the earnest money. so that's one way people can get involved with what I'm doing. If you're a high net worth person, I don't have a massive net worth just yet. So sometimes to call for for the loan I have to bring in what's called a KP. That stands for key principle. And we will give him some of the GP shares for coming in and signing on the loan. Most of the loans we do are non recourse. So as long as we don't commit fraud, they can't come after our personal assets. sometimes we'll bring in people for that earnest money. a lot of different ways.

Caleb: And for people who don't know, non recourse means they can't come after the asset itself. it's a loan that's not tied to the real estate.

Mitchell Rice: Right, I'm glad you brought that up. sometimes we do, sometimes we don't.

Caleb: what's been the most surprising thing to you throughout this process over the years?

Mitchell Rice: the most surprising I think I'd say the most surprising thing is just how much sheer effort and time it takes to get these large deals done. It's not all sunshine and rainbows sometimes these deals take half a year from start to finish. from the the initial negotiations to actually closing. It could take six months. And you haven't even started yet. Like that's just buying the property. And now you have to go manage the property.

Caleb: Yeah, and then you gotta add the sprinkler system, you gotta renovate.

Mitchell Rice: Right. So you're in it for the long haul if you're in commercial. I mean, some syndicator strategy is like quick flips, essentially like a fix and flip, but just on a bigger scale. almost every developer who's building something from the ground up, most of those guys aren't intending to hold stuff for 10 years. They're building it, they're leasing it up, and then as soon as it's leased up, they're selling so they can cash out and go develop their next deal. so some GPs and sponsors think about it. that way. typically with acquisitions, it's just less risk if you underwrite for a longer hold period. There's less that can go wrong. That's how we look at deals.

Caleb: So Elkstone Capital you guys are holding them for a bit longer.

Mitchell Rice: Yeah, yeah. The

Caleb: What's the anticipated hold period?

Mitchell Rice: I mean the hotel conversions are a flip in a way, but we're usually not selling, we're refinancing. So once we've gone in and changed the asset type from a hotel to an apartment, the cap rate compresses. So like we're buying these hotels at like twelve percent cap rates. Once they're leased up as apartment buildings, now they'll trade at like six and a half versus for five and a half percent cap rates. And that just creates millions and millions of dollars of value. But usually we're not selling out. We're refinancing, we're returning capital back to investors and then we're keeping them in the deal. And then we're holding for another five years.

Caleb: So for those of that are listening familiar with the BRRRR method from bigger pockets, is that similar to what you're doing with these hotel conversions?

Mitchell Rice: Exactly.

Caleb: Yeah, amazing. Just burn and churn. Buy, pull equity out, go do it again.

Mitchell Rice: Yep. The deal we're doing right now, there's not gonna be a early refinance event. we're gonna have to hold it for five years and then we'll either refinance or sell. That one's a three hundred and twelve unit apartment complex. We're buying it for fifty two million. So a hundred and sixty seven thousand a door. And it's brand new. It's built in 2024 It's got premium amenities. There's nothing there's there's no value add. There's no physical value add on this. It's just operational value add. So we think the rents are a little bit below market. Because it's just come out of lease up. So when you're trying to lease up a property, can't be picky about your rents. Usually your rents aren't top of market. So there's what's called a lost lease. And then they haven't finished implementing bulk internet, which is where they basically install internet on the whole property. And the internet provider gives it to them at 40 bucks. They charge tenants 60 bucks and they make a spread, and the tenants are still saving what they would have if they got an individual plan. So there's a couple Items like that where we're able to increase the income a little bit. We think we can operate it better 'cause we've got two other properties in the same city. so that deal's quite different, but really cool and and we're still underwriting to strong returns.

Caleb: that's amazing. also nice to get a new property, right? Then your maintenance costs are ideally not as high.

Mitchell Rice: Well yeah, you couldn't build that product that we're buying today to build that. It would be in the two hundred and ten to two hundred and twenty thousand dollar per door range. So we're buying it way below replacement costs. in commercial you do look at sales comps like just to know on a price per door, are you at market? Are you below? Are you above? So there's like five good comps in the past two years that have all sold in between a hundred and eighty five thousand a door up to two hundred and ten thousand a door. We're at one sixty seven. So not only are we below the cost to rebuild, we're way below the competition. So we know we're getting a good deal on this.

Caleb: Man. Well, thinking in terms of here in Utah, where the average cost of a home is north of five hundred thousand, and then here you are buying something at one hundred and sixty seven thousand a door. That's amazing. Well, I want to talk to two categories of people. One, the normal person and how they get involved, and then agents listening. So let's start with normal people. Someone who's only ever owned their home, how do they get involved as a limited partner with you in Elkstone Capital?

Mitchell Rice: Sell the house, sell everything, come invest with us. No, I'm just joking. That's a horrible, horrible idea.

Caleb: Sail off into the sunset.

Mitchell Rice: In fact, it's the opposite. focus on increasing your income first. if all you have in the bank is a hundred grand, probably not the right plan to come give that to us. Use that hundred grand to go make more money first. and then when you have a hundred grand, I always tell people invest what you're not afraid to lose. Because there is risk in these deals. that is another one of the things is these are big deals, so the bigger mistakes, the bigger the downfall, right? we haven't lost investor capital to date. but we've had challenges. some deals have gone really well, Others have struggled, they're not gonna hit pro forma. They're not losing money, but Every deal isn't perfect. So my advice for investors is whether you're looking at one of our deals or another syndicators, protect your money. Don't make rash decisions. if you don't understand the numbers yourselves, don't do the investment. Like you need to understand it. make the the GP and the sponsor sit down with you, show you the model, walk you through the back of the napkin math, help you understand. how your capital's gonna return to you. Ask them what the risks are. again, don't invest what you're afraid you couldn't live without. It's gonna break your family. I'd say that's some of my best advice.

Caleb: Yeah, that's great advice. What would you say are the average returns or range for someone to expect in a commercial deal?

Mitchell Rice: So pretty much the higher the returns, the higher the risk. So like our hotel to apartment conversions, we're under adding to a twenty five percent annual return when all said and done. That's not what they're actually getting each year. cash return is different than IRR. Internal rate of return looks at your return across the whole hold period and it accounts for time value, money. It's gonna look at all the positive and negative cash flows, and it's gonna look at your exit value. Cash on cash is an annual snapshot of how much cash you're actually making per year. so when we're converting a hotel, we prep our investors, we tell them, hey, you're not going to make any cash return for the first couple of years. Then hopefully you're going to get a big fat refinance close to all of your capital back. And then you're going to get a little bit of cash flow each year for five years. When all is said and done, looking back, your IRR is going to be out to be about twenty-five percent a year. and that's a freaking awesome return. And investors love it. But there's more risk. There's construction risk. There's lease up risk. So now contrast that with the deal we're doing right now. Brand new, doesn't need anything done to it, very low risk. We're underwriting to like a fifteen IRR. It's a little bit better now because we just got a discount. we retraded the seller, which means we basically went and asked for a two million dollar discount and he gave it to us. And part of that is because our loan proceeds came in lower than expected because treasuries have gone up, interest rates have gone up. And again, this deal's coming out of lease up, so they scrutinize they can't look at a trailing twelve financial because if you look at wh the whole T twelve, the income sucks because twelve months ago, they were in the seventy percent occupancy range. So they have to look at the last three months, which is called a T three, and then they have to annualize that. So there's just a lot more

Caleb: Mm.

Mitchell Rice: scrutiny on the numbers. So that's why we retraded him. Because they came and were gonna give us less debt. So to still hit that 15% IRR, we needed a little bit better of a purchase price. but on that deal, we're looking at a 15 IRR and then on cash and cash return. Again, the the first year or two, we're preparing our investors for that to be a little bit low, you know, in the four percent range, but that should grow and we're expecting it to be about seven and a half percent on average per year across our five year hold period.

Caleb: I love how you broke that down. And quite honestly, that principle of IRR versus cash flow, it's all acronyms and lingo, but the way to break it down is long term vision versus short term. I feel like that's lacking in residential real estate. When we're explaining mortgages to people or even helping first time investors, if you can take a step back and look at this from a ten year or even just a five year perspective. That's where the numbers really make sense. real estate doesn't make sense from just, well, what is it bringing in the door each month? and so when people compare, I'm renting right now, maybe I'll buy, but they only compare the mortgage to rent, that's the wrong way to look at it. You gotta look at it from, ten, twenty, even thirty years out. that's how people get wealthy in it. Not to mention

Mitchell Rice: Yeah.

Caleb: all the tax benefits, right?

Mitchell Rice: Yeah, so if you know, you're gonna buy a house and you know you might be moving in two years, probably better to keep renting unless you're gonna be committed to keeping that house as a rental when you move. and that's a great strategy. So I 100% agree with you, Caleb. And you asked

Caleb: Yeah.

Mitchell Rice: you asked how residential agents can get into commercial. So we do do a lot of commercial brokerage as well. that's been on the syndication side as a GP We give our investors typically 100% of the returns on the property up until some preferred return. Usually it's 8% And we don't participate until we hit that. And then even after that, usually we're not participating a ton. Maybe it's an 80-20 or a 70-30 split up until some other hurdle. Let's say it's a 15 IRR. And then after that, we start to participate a little more. but for a lot of times as a general partner, besides our acquisition fee we take up front, we don't get comped. So to kind of stay alive, I've done a lot of commercial brokerage. I've done car washes, retail, office, apartments, land, bars and restaurants, you name it. So that's probably a podcast for another day. But if any residential agents out there have an opportunity to do commercial, reach out to me. You can either refer it to me or we can work together and I'll educate you and teach you how to do it.

Caleb: for the agents who are wanting to completely go from residential to commercial, what would your recommendation be?

Mitchell Rice: the best way honestly would be would be to keep doing residential and get a commercial deal. don't just quit cold turkey. Cause it takes a lot of agents, sometimes a year, to do their first commercial deal. It's just a whole different ballgame. It takes longer. more moving parts.

Caleb: And when you say commercial, we're not talking about just like commercial leases. We're talking about like

Mitchell Rice: Yeah.

Caleb: selling a commercial building or acquiring.

Mitchell Rice: Yeah, or helping somebody buy one. So oftentimes that's how commercial agents have to start is on the buy side. somebody wants to get into commercial because you don't have a track record or report to go out and convince somebody to list their building with you and give you the chance to sell it. So you gotta go hustle and build your track record by helping people get into the game. honestly my advice is don't just quit cold turkey, pick up one commercial opportunity, learn how to do it while you still have an income stream somewhere else. You're gonna learn a ton. You're gonna decide if you wanna continue on with it or just not even do it, period. and who knows? Yeah,

Caleb: You'll know enough to make a decision.

Mitchell Rice: and maybe you crush it. Maybe you get your first deal in three months and you're like, All right, let's just go all in. And then you quit your residential and go all in on commercial. But it takes more time to get deals done. That's the biggest thing to plan for.

Caleb: as long as you can account for that lead time to close something, then you're sitting well.

Mitchell Rice: Yeah, like I've got a deal right now, under LOI for I can't say the exact number, but somewhere between four and five million. got a car wash portfolio again, I'll say in the six to nine million dollar range. I'm giving a very big range here, that's gonna go under contract any day.

Caleb: Still good ranges. I think most people would be fine with the low end of that range, so

Mitchell Rice: Yeah, so those deals closed, it's gonna be a great commission, but it takes your heart and soul to get them done.

Caleb: let's pretend we could wave a wand and we've got you on the podcast here five years from now. Where do you hope you're at?

Mitchell Rice: I want to be an LP. that is why I'm doing what I'm doing. the whole goal is to eventually be a full time passive investor. So I have more time and freedom, and I really think that's the gold standard. So anybody who's an accredit investor and who's flushed with cash is in a really fun spot. If we go find a great operator, you don't have to worry about the investment. And yeah, ride into the sunset.

Caleb: So what's the goal with timeline? When do you think you can be full time LP?

Mitchell Rice: It's gonna take a long time. I love the game. I love working with people and trying to get deals done and it's funny. I'll spend six months to and I'll finally get a deal done. and I envision myself celebrating at the end of the road when when the deal goes through. And then usually I don't. I oftentimes don't even talk about the wins. And I'm already just focused on the next. so I don't know. there's a lot more passionable things to do to give back to the world than real estate, but this is a means to an end and to do that.

Caleb: You're providing affordable housing for people and there are there are some great feel good aspects to it. where are you seeing opportunity and risk in multifamily? Where do you see the market headed? we'd love to hear your thoughts.

Mitchell Rice: It's a hard question to answer because commercial real estate again, there's like twelve different asset classes, twelve different food groups. Anything from data centers to hotels to even just raw land, like land development. So it's so hard to answer, but for multifamily at least, one of the risks is just interest rate risks. so interest rates for apartments are typically built off the five or the ten year treasury and so that's gone up sixty basis points just in the last couple of months. where we could have gotten a loan at five point two percent interest through Fannie Mae six months ago, today it's close to six percent. So that makes deals harder to pencil. the way to mitigate that is don't do floating rate debt right now. Like do not like get fixed rate debt.

Caleb: Very risky.

Mitchell Rice: Yeah, and that's what crushed so many operators because back in twenty twenty two at the peak, interest rates were so low, so many people did floating rate debt. Just not having the vision that interest rates could go up by three to four percent in one to two years, and that's what happened and all this guys got crushed. So that's one of the opportunities is a lot of those deals are going back to the lenders and the banks. so it's finding those deals that are in distress that becomes an opportunity. But we have to mitigate that today for ourselves.

Caleb: if rates do continue to go up, we'll see more opportunity with unfortunately the people who weren't smart a couple of years ago. but you guys where you're finding these fixed rates and underwriting them well, in multifamily, there's still plenty of opportunity

Mitchell Rice: And the one other thing I'll say is it's a great time to buy multifamily. real estate private equity firms back in twenty one and twenty two. I remember that's when I was first getting into the industry. I was working for a local fund down in Provo called Peg Companies, and people were buying deals at like low four and high three percent cap rates, which is just bonkers. if you did that with cap rates expanding the last few years, you all those groups severely overpaid, severely overpaid. I would rather be on a buying rampage today, like that fifty-two million dollar three hundred and twelve unit project we're buying right now, we're buying it at a six almost a six point four percent cap rate. And if we had bought that four years ago, it would have been like a four cap. But because of that, if interest rates do go down, we can refinance. We'll be cash flowing even more. we just love that basis. There's less that can go wrong.

Caleb: Well, appreciate having you on here today, Mitch. Where can people find you and how do they get in contact with you to either send a deal your way or invest with you?

Mitchell Rice: yeah, I'll just throw out my phone number (208)260-2570 and my email is Mitch@ElkstoneCapitalPartners.com and send me a message, text me or send me a LinkedIn request and tell me you listen to this and something you liked if it was helpful. And let's connect.

Caleb: Reach out to Mitch. He's awesome. He's got great things ahead. And Mitch, thanks so much for being on.

Mitchell Rice: Thanks, man. I appreciate it. It was fun.

Caleb: That's a wrap on this episode of Real Estate Insights. A huge thank you to my guest for sharing their time and playbook. I'm Caleb Adams, mortgage broker here in Utah and Idaho, who loves connecting great agents with great people who need them. We'll see you next time.