August 5, 2025 • 32 mins
Episode Resources:
Download A Free Copy of the Book: irontoncapital.com/reunderground
Email: lonwelsh@irontoncapital.com
Mobile: 303 619 0633
Clark St Digital helps you grow your real estate company with:
- Amazing Overseas Talent who cost 80% less than their US equivalents
- Done-For-You subscription services
- Done-For-You project services
Go to ClarkStDigital.com to schedule your free strategy meeting.
Additional Resources:
- Clark St Capital: https://www.clarkst.com
- Clark St Digital: https://www.clarkstdigital.com
- Podcast: https://bit.ly/3LzZdDx
Find Us On Social Media:
- YouTube: https://www.youtube.com/@clarkstinvestorsacademy
- LinkedIn: https://www.linkedin.com/company/clark-st-capital
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Ed Mathews (01:09):
If you are getting value we've had some amazing
guests over the last severalmonths and if you're getting
value out of it, I would greatlyappreciate if you could follow
us and maybe share our show witha colleague that helps us grow.
So with us today is Lon Welsh.
He is the managing director ofIronton Capital and he works
(01:30):
with real estate brokers as well.
As I've just discovered aformer strategy consultant.
I'm not going to make him.
We're not going to get intomanagement consulting because
that's one of the hats I used towear, but we may get into
technology just a little bit,because he knows more than I do.
So, lon, welcome to the show.
Thank you for joining us today.
Thanks for having me.
Yeah, truly my pleasure.
So, for those folks who haven'tdiscovered you on LinkedIn and
(01:53):
the other places that you haunt,why don't you tell us a little
bit about you and your firm andthen we'll get into it?
Lon Welsh (01:59):
Yeah, just a quick nickel tour.
I was in corporate finance fora couple of years, went back to
business school.
I worked as a strategyconsultant for eight years at
Deloitte and then Accenture.
I've been investing for justabout 25 years now, started when
I was still a consultant.
Left consulting in 2002 to gointo real estate full-time.
Sold real estate for a coupleof years, decided to launch a
brokerage called your CastleReal Estate in 2004.
(02:21):
Grew that to be the largestindependent in Colorado, with
about 750 agents.
Built a title company with apartner.
Sold the brokers to a privateequity fund about three and a
half years ago.
Title company to Compass threeand a half years ago.
And then I launched Irontonabout three years ago.
What I found is that I was anactive investor, probably like
an awful lot of your listeners,for a couple of decades.
It was getting hard to finddeals that make sense.
Ed Mathews (02:47):
So I've switched to passive investing and with the
private equity fund I started, Ican help other people be
passive investors too.
Yeah, congrats.
And Ironton is a rapidlygrowing firm.
Even in.
It's interesting and one of thereal.
One of the things in preparingfor our conversation today I
really wanted to understand iswhere are you finding the deals?
And obviously you're findingoperators, not deals, but it's
still a process, because we'veswitched to a similar strategy,
(03:09):
mainly because we went to gotrade up and sold off a bunch of
assets with the intent offinding new, larger assets, and
we were successful in somerespects, but in others we were
like, oh boy, it's day 30 in my45 day, 1031 exchange and I
don't have anything that I likepicking up the phone and calling
operators that I know and trustto see if I could deploy the
(03:31):
capital with them.
We were able to find deals,land those deals.
It's really stressful.
Lon Welsh (03:34):
No doubt about that.
There's three of us full timeon investment committee that are
just out trying to find thingsand then doing initial
underwrites and then flying outto visit the properties and meet
the sponsors and double checkeverything.
Probably about a third of ourinvestments are repeat of
sponsors that we've worked within the past, that we've had
success with, and once you'vebeen a successful investor for
(03:55):
them, that's not a pain to workwith.
They usually have a friends andfamily list that they'll
contact before they broadlydisseminate a new investment
opportunities and the very bestones they're totally filled just
by us.
Nobody else even sees them.
So that's probably about athird.
About a third is just randomstuff that comes into the inbox
and it's just like a lot ofboiling to get to the good ones.
On that, Back when I was acommercial broker selling
(04:16):
multifamily, I had a designationcalled a CCIM, a Certified
Commercial Investment Manager.
So I'm not active anymore but Istill have access to the CCIM
database we started with.
Every CCIM in Georgia thatspecializes in multifamily
introduced ourselves hey, do youhave an interesting transaction
?
Makes a ton of sense.
But the lending requirementsare different, where your buyer
needs more of a down paymentthan they used to Do.
You need a capital to partneron the equity stack.
(04:37):
Explained what we did and thenwe called everybody in South
Carolina.
We called everybody in Floridawe're working with everybody in
North Carolina.
We called everybody in Florida.
We're working with everybody inNorth Carolina.
It's just a lot of calls.
I wish I had a slick answer,but it's just a lot of work.
Ed Mathews (04:48):
Yeah, it turns out this is actually a hard job,
right, and people like you andme and our backgrounds dialing
for dollars, as they used tocall it.
They may still call it that,but I haven't done that in a
long time, but the fact is thatthere is nothing replaces a hard
work and b a network ofrelationships, right?
Lon Welsh (05:09):
yeah, the network is actually my biggest driver in
the real estate.
There's really no substitutefor it.
If you can't be on the phonetalking to people mostly all day
long, it's tough for peopleliving at this.
Ed Mathews (05:18):
You can't market your way to find deals.
You can occasionally, but thosedeals are sometimes.
They're okay.
If you want real meaty dealsthat are going to perform like
they would if you were runningthem, there's really only way to
do that, and that's embracingthe fact that this is a team
sport.
Okay, so let's talk about yourbuy box.
You mentioned Georgia, southCarolina, north Carolina and
(05:41):
Florida, I believe, and sothat's a pretty large area, and
so I'm curious about the typesof properties you tend to target
.
Are you a value add player?
Do you look more for luxury Aand B class?
What's your target?
Lon Welsh (05:57):
Good question.
From a geographic standpoint,we've actually invested in about
15 different states.
They're mostly the Sunbeltstates.
Our biggest criteria is we wantto see a high degree of
employment growth, because thattends to drive everything
downstream.
About half of our investmentswill usually be new construction
and the other half will bevalue add.
We don't do any buy and holdwork.
There's plenty of REITs that areoutstanding and it's tough for
(06:18):
us to compete with that.
And then, from an asset mixstandpoint, a typical fund will
have about 30 different assetsin it, usually with about 10 to
12 different sponsors.
So usually about two-thirds ofthose will be multifamily and
the rest will be industrial.
Every once in a blue moon,self-storage not too often and
there are some segments withinhospitality that we like.
So what we want to try to do isbring really good
(06:40):
diversification across a numberof different axes to our limited
partner so that they can have areally broad portfolio, and the
payoff for that is last fallthere was two hurricanes within
a couple of weeks that hit Tampaand we had an asset there and I
was able to sleep pretty wellat night knowing that 3% of our
portfolio was in Tampa and it'sgoing to be flooded when I woke
up in the morning, but the other97% would be just fine.
(07:01):
And man, that's a whole lotless stressful.
We are all prostituted in onespot.
Ed Mathews (07:06):
Yeah, sleepless nights, right, and you bring up
a point that I ask most of theinvestors that I meet who
operate in the Sunbelt.
Let's talk about insurancebriefly.
Obviously, even our insuranceup here in the Northeast and we
haven't had a direct hit of ahurricane since I think I was a
sophomore in high schoolInsurance companies are looking
to diversify their own risk, andlittle guys up here in
(07:29):
Connecticut, where I am, get alittle bit of a surcharge From
what I've heard in talking withyour counterparts as well as
several insurance brokers.
Insurance has been a prettyrough road over the last two,
three years.
Lon Welsh (07:42):
Oh, it's really been a headache.
So the projects that we boughtin, say, 2020 through the first
part of 2022, when the rateswere a little bit on the lower
side and the insurance rateswent up quite a bit, that's been
a negative hit to cash flowthat wasn't anticipated and a
lot of times the contingenciesweren't sufficient to offset
that.
So that's been a negative hitto projected returns.
But what we've seen in thestuff that we've bought in 23,
(08:04):
24, and this year is that we'reunderwriting on a much higher
base for the insurance premiumsand we forecasted in higher
rates of growth in the future.
What I'm hearing from somepeople is that we might be
getting close to the apex andmaybe it'll stabilize and if
that's the case, we've been tooconservative in our underwriting
.
We've put too much reserve intofuture years, which is a great
(08:29):
thing.
Taxes, I think, would beanother analog that would follow
that same cost trajectory and,to a lesser extent, the
underwriting that you're doingnow.
Not only the benefit of buyingon a higher cap rate than you
would have in the past, you'vealso got a much fatter OPEX
stack.
So there's a lot more room forerror in the stuff I buy today
than, say, four years ago.
Ed Mathews (08:42):
Sure, absolutely.
And so I heard capital reserves.
Is there anything else thatyou're doing to?
No one has a crystal ball, butyesterday I was reading the wall
street journal website aroundtwo o'clock two, 15, actually
and I saw huh, fed, didn't.
Fed kept rates soon.
Yeah, they did a nice job withthe soft landing, but I would
(09:03):
love to see rates at least chipdown.
That said, rates arehistorically right down the
middle in terms of the median ofwhere they are over the last 50
years in that seven, seven anda half range.
So I can't really complain alot.
I like 3%, 4%, we all do.
It was nice, made me look a lotsmarter.
That's got to be a challengewith managing a private equity
(09:27):
fund, because do you havemultiple funds and one fund is
targeting development andanother fund is targeting more
cashflow oriented assets, orlike, how do you manage that,
knowing that you take on a 200unit development project and
you're probably two years awayfrom any cash flow, at least 18
months and possibly three yearsfrom some level of stability and
(09:51):
break even and possiblyprofitability?
And I'm curious, how do youmanage that with your partners?
Yeah, so for the limitedpartners, we really have three
offerings.
Lon Welsh (10:00):
We have a short-term income fund that pays about 8%
and it's got a high degree ofliquidity.
We've got a short-term incomefund that pays about 8% and it's
got a high degree of liquidity.
We've got a medium-term incomefund that pays around 11 to 13,
depending on how much youinvested with us.
It's locked up for a year, 90days notice, so not bad
liquidity, but not as liquid asthe short-term.
And then we've got our long-termgrowth funds and our goal with
the long-term fund is thatthere's no income, or as little
income as I could possiblymanage to, and it's all capital
(10:25):
gains, and that's usually abouta five-year horizon.
I usually try to coach peoplethat will try to get most of
your equity back by the fourthyear and most of the profits
will be in year five and six.
If they're selling an apartmentcomplex and they want to be
passive with us, we could put asmuch as we have to into the
medium-term income to replicatethe cashflow they were living on
from owning this real estateproperty, and then the rest we
can put in the long-term fund toreplicate the long-term
(10:46):
appreciation they had.
But synthetically I canrecreate just about any scenario
a client needs just bybalancing across the two.
Ed Mathews (10:53):
Oh, okay.
So I have half a million bucksand we're going to allocate 150K
into the long-term fund, 150kinto the medium term and 200K
because I've got kids in collegeand I'm going to need that
money I got you.
That makes a lot of sense.
I'm curious about the shortterm.
Is that more of a debt fund oryeah?
Lon Welsh (11:12):
it's a hard money fund, so probably have a lot of
real estate investors that arefamiliar with hard money.
Our business partner on that.
It runs about a $270 millionfund.
It's around 300 loans.
So we're just a tiny slice ofevery single one of those.
Ed Mathews (11:26):
Nice.
One of the things that wasparticularly interesting to me
when I'm meeting with people arelike why are you loaning out
money when you could be buyingreal estate?
I said here's the thing In somecases not all, but in some
cases I would like to be JohnSutter of the fame where he was
the first millionaire in thegold rush back in the mid-1800s,
(11:47):
and the reason being is that hewas selling the shovels and
sticks.
In our world, when real estatepeople are digging for gold,
capital is that tool, or atleast it's one of them, and so I
would much rather facilitateyeah, and we're not getting the
same returns, but they'resix-month gigs, nine-month gigs,
(12:08):
12 months at the absoluteoutside, and we're able, like
you were saying, to be able toprovide liquidity, which is
unique in the real estate world,where you deploy capital into
some sort of real estateinvestment and you're probably a
year plus, in some cases,multiple years away from having
access to that capital again.
Lon Welsh (12:29):
Absolutely.
One idea for your listeners toconsider in our medium-term fund
is underpinned by medicalaccounts receivable, and medical
receivables are not impacted byinterest rates wars in Ukraine,
if we run a deficit or not,because people are getting car
access no matter what and it'sreally valuable to have part of
your portfolio.
Be not correlated to the realestate markets or the drivers of
(12:49):
the market, because I'm veryheavy in real estate and when
interest rates go up, that's nota favorable thing for me and
when they come down, as you werealluding earlier, like we're
all cheering.
So try to get a coupledifferent asset classes.
Not all have your eggs in onebasket.
It's not a bad idea.
Ed Mathews (13:03):
So what other asset classes are you using to
diversify your funds?
You, so what other assetclasses are you using to
diversify your funds?
Lon Welsh (13:08):
You know that's really it.
So the short-term fund isprimarily the hard money loans,
the medium-term fund is based onmedical receivables and then
the long-term fund is equitypositions, not debt positions.
Okay, a variety of eitherdevelopment projects or rehab
projects.
Ed Mathews (13:23):
So I'm intrigued by the mid-term one then.
So when you are investing inmedical receivables, are you
simply?
Is it a factoring type of aplay, or like how does that work
with?
Lon Welsh (13:38):
Yeah.
So our coach EP that we workwith on this, it's actually a
two component solution.
For larger claims, thephysician or the medical
practice is going to want to doall the work themselves on the
billing and paperworkadministration side.
But for small claims say$30,000, it's just not worth
their time to do it.
So what we do is we completelytake over the claim.
We give them about a third ofthe value of the claim.
So it's factoring in the sensethat we're giving them an
(13:58):
advance against receivable butthey don't have to pay us back.
We're just taking the claimover and we're doing all the
paperwork from here on out.
The challenge is, if you're justselling money, which is what
factoring is, then it's just aknife fight to see which bank
can provide the best terms.
We're providing a businesssolution, so then the terms
don't need to be as attractive,because we're solving a
different problem entirely andwhat we like to do is have a
(14:19):
basket of about 100 of thesemedical claims from a
physician's office or a clinic.
We'll advance on about 95.
We're only advancing a third ofthe value and they're all
cross-collateralized.
So we anticipate two or 3% willbe fraudulent and then we've
got 97 other claims in thebasket we can go collect against
.
So it's as if you had a partnerwith a hundred paid off real
(14:40):
estate investments that came tous as a bank.
We did a 35% loan to value on95 of the rental properties, but
they're allcross-collateralized.
If you didn't pay the mortgageon one, I could take any other
property I wanted to get paid.
Ed Mathews (14:50):
Oh, it's pretty darn close Now.
Are you so the entity that youare billing yourself?
Is that the patient, or is thatthe insurance company?
Or is that-?
Lon Welsh (15:01):
Insurance company.
Okay, so usually it's going tobe in a state where there may be
it may be contested.
Is it you with Geico or me withState Farm that's at fault for
this accident?
I don't know which of the twoof us is going to pay for this
medical claim yet, but meanwhiledoctor needs to get paid and
needs to move on to the nextpatient.
They need cash flow.
So we solve that and we solvethe paperwork problem.
So it's a really great niche.
(15:22):
One of the guys on ourinvestment committee.
He started at Goldman Sachs andthen he ran a $2 billion family
office.
Then he came to us and therewas a relationship that he
brought with him.
They only work withinstitutions.
So we've raised just under $30million for these guys so far
and we've got a $100 millionallocation, so I'm very grateful
to be doing this.
Ed Mathews (15:48):
Yeah, it's a fascinating play.
It really is.
One of the things that I'malways interested in is and
let's see if we can get into ourlightning round into the final
five.
I'm always fascinated by thefact that people that are
successful like you, where themortgages are paid, the college
tuitions are taken care of,there's probably no car payments
Every Monday morning you wakeup and go to work.
That tells me that there'ssomething else driving you, and
I call that purpose.
I think a lot of people do so.
(16:09):
I'm curious what is yourpurpose?
What is that thing that getsyou bounding out of bed on
Monday morning and heading overto the office?
Lon Welsh (16:16):
I'll tell you a quick backstory.
I've written 13 books, five ofthem on real estate investing in
Colorado, and I've done a bunchof training classes over the
last two decades for people onwhy should you invest in real
estate.
I'd have 20 people in a classand at the end one of them would
say, yeah, I want to go buy anapartment building with you.
And the other 19 would tell meI'm too busy.
I'm an attorney or an architect, I'm taking my kids to soccer
parties.
I can't buy real estate, but Isure love the idea.
So when I launched the passiveinvesting company, I really had
(16:38):
formulated a solution to 19people instead of one person.
No-transcript.
Help them do that in a taxadvantaged way Not as good as a
1031,.
But the other use case is allthese dentists, physicians,
(17:00):
chiropractors, architects,attorneys that have got their
entry-level high network.
They're between one to fivemillion.
They know they need to havesome exposure to real estate,
but they don't want to have theburden of running an apartment
building themselves.
We're a way to give that partof their financial portfolio a
sense of peace of mind that I'mdiversified across a lot of
assets, I've got professionalsrunning it and I don't have to
(17:20):
worry about it.
My goal is to create a hundredmillion dollars of wealth for
these people.
We're well on the way to doingthat.
I'm in the dream, grantingbusiness.
I'm like the genie in thebottle.
You get to retire sooner,retire better, send your kid to
a better school.
We make that happen.
Ed Mathews (17:33):
It's amazing, and it's truly amazing what you can
do.
Similar story in that when mydaughter, katie was born in 2008
, I was going to invest in realestate.
It actually took me almostthree years to get the courage
to pull the trigger and I boughta four family and over the
course of the next 14, 15 yearswe fixed it up and made it
(17:53):
beautiful and clean and safe andpaid it off.
And then, when she turned 17and became a senior in high
school, it turns out the childwanted to go to college and we
leveraged that asset tobasically pay for her college
education.
And yeah, it was wonderful andwe even got her a car, but she
(18:14):
had to wait for that to be asenior.
Nevertheless, real estate avery useful tool to be able to
plan for those life events,especially if you're figuring it
out early on the fact that youare the genie in the bottle,
granting more than it soundslike, more than three wishes
that's a pretty cool place to beHonored to do this and one of
the things that I'm alwaysinterested about.
(18:34):
We're going to talk about booksin a minute, but I want to talk
about your books for a moment,because you reminded me you've
written 13 books.
One of them I'm familiar withis the Complete Guide to Pass
diversified real estateinvesting, and so I wanted to.
One of the great things about abook right, especially someone
who has been there and done thatlike you is they're basically
(18:55):
boiling a sizable slice of theirlife into 200 pages.
Yeah, exactly, and I can sitand read or listen that's how I
do it to the book and basicallyunderstand and hopefully digest
and impulse some of thestrategies and tactics that
author has provided in the bookto help me improve my business,
and that's a really uniqueexperience.
(19:16):
Can you tell me a little bitabout the experience of writing
either that book or if there'sanother book that you'd like to
talk about, that's fine, but thepassive book jumped out at me
so I figured I'd mention thatone.
Lon Welsh (19:27):
That's a really good example.
After talking to a lot ofprospective investors, many of
whom did eventually go on toinvest with us the idea of
passive investing and what is aprivate equity fund this was
like a lot of really newinformation.
How does this kind of fit intothe overall financial plan of my
family?
So these were like a set ofquestions that kept coming up on
a recurring basis.
Rather than me giving an hourand a half discussion to each
(19:49):
person, I thought I'm just goingto write all these things down,
because they're a set of commonthemes.
That's actually where themajority of my votes came from
is you would hit a vein of Iwant to invest in Colorado real
estate.
What are my options?
All right, here's eightdifferent options.
Here's six skills thatinvestors tend to have.
Let's do a diagnostic when areyou relatively strong and
relatively weak?
Based on that assessment, I cantell you that this class and
this class are a good match.
(20:10):
Here's why these other six youshould not look at.
Here's why.
And then there's a chapter oneach of the eight investment
classes.
Just read those two chaptersthat apply to you.
It'll save you all this timeand greatly increase your odds
of success.
And, as a real estate broker.
I want you to be successful, soyou come back and do 10 more.
The wrong reason.
You're not going to come backand neither one of us win that
game.
So this is the exact same thing.
If your listeners would like acopy, it's just
(20:32):
irontoncapitalcom forward, slashR E underground and you can
download a free copy.
Ed Mathews (20:38):
Oh, that's awesome.
Thank you.
Of course, I know about a dozenpeople off the top of my head
that are going to jump on thatimmediately.
So that's great, that's great.
So let's talk about other books.
I'm always curious about howleaders like yourself sharpen
the saw, so to speak.
I'm curious about how you takein information, how do you do it
and who are you payingattention to these days?
Gosh, a lot of it is justgeneral business 101.
Lon Welsh (21:01):
And it's everything from sales skills to people who
have studied TED Talks to figureout which ones are more or less
successful.
What are the elements of asuccessful speaker that really
captivates an audience?
How to be more effective withinterpersonal communications.
There's always something youcan get better at and half the
time you realize like gosh.
I heard this seven years ago ina different book, but I'd
forgotten about it.
I really need to re-implementthis.
Ed Mathews (21:22):
So I try to eat a pretty broad and varied diet so
I try to eat a pretty broad andvaried diet, and so, when you
think about some of the creators, authors and so on, what are
some of the ones that have beenparticularly valuable to you
over the last however much time?
Lon Welsh (21:36):
oh, gosh, you probably had this 55 times on
your show but rich dad, poor dad.
25 years ago, when I first gotstarted, that's crystallized for
me more than anything elsereally what the opportunity was,
because that's something thatwe didn't learn in the MBA
program.
Oddly enough, I think sincethen it looks like Captivate
were really good at justthinking through how you
communicate, how you're received, how to adjust your delivery to
(21:56):
have the impact that you wantto have.
That was incredibly helpful.
Anything you could do from acommunication standpoint, I
think, would be a very highreturn on investment.
Ed Mathews (22:05):
Absolutely Wonderful .
So I'm also curious about thementors you've had in your life,
and I'm very specificallycurious about the best advice
you ever got and who gave it toyou.
Lon Welsh (22:15):
When I started at Deloitte, there was this guy,
john Baer, who was my firstengagement manager, and
something he told me that wasn'tobvious to me at that moment in
time is that he said wheneveryou're talking to a client, our
job is to affect some sort ofchange in behavior to get a
business outcome.
If we don't do that, we're notin the entertainment business.
So to do that, what you got todo is figure out what is it
(22:37):
that's important to this personand what's the best way for them
to receive information.
So just to use stereotypes like, you've got an engineering type
.
They're going to want a lot ofdetail, a lot of supporting
evidence.
Show me the whole chain oflogic you're going to have.
Other people are going to be alittle bit more like artists
where you can show them thecomposite picture and they don't
really care about how you gotthere.
They see the vision.
That's all they want, andthere's a couple like steps in
between on that sort of a scaleidentify what this person's
(22:59):
style is and then adjusteverything about your
presentation format and thelevel of detail to that.
And I was able to do it in acrude fashion almost immediately
after he said it and it gotbetter results from a persuasion
standpoint immediately, andthen just by iterating over the
years, I hope I get better andbetter, and I think the way to
do that is just to ask a lot ofgood questions of the other
person about how do you like tomake decisions, what is the
(23:22):
deliverable you're hoping to getfrom this, and then asking a
couple of whys behind that.
If you want to grow youroverall investment portfolio
from $2 million to $3 million,that's good for me to know, but
what would that enable for yourfamily?
If you pulled that off, themore granular you can get on the
end goal that you back-solve,and then it's not abstract.
There's a really meaningful whybehind it.
Ed Mathews (23:39):
That's where you want to be.
It's something I learned veryearly in my career as well.
Understand where your customeror your client is in their
journey, where they're trying togo, why they're trying to get
there.
And then your job understandwhere they're trying to get and
help them get there right.
Provide the alternatives andsome of those alternatives are
things that you can do with,they can do with you, and some
(24:01):
of them are introductions toother people in the space it's
they've got to go out on theirown, but at least you've given
them a path.
In all three situations you'veadded value to where they're
trying to go.
Absolutely, karma is a realthing and integrity is a real
thing.
If you help enough people getdown that path, eventually they
will reciprocate and in some way, shape or form, it does come
(24:24):
back.
It has for me.
Yeah, that's what keeps me inCheerios and coffee.
I'm also curious about the waythat humans grow right, and so I
.
Fundamentally, in my 55 yearson this earth, I think I've
learned a lot more from themistakes that I've made than the
successes I've had, and so I'mcurious about a decision that
(24:46):
you've made than the successesI've had, and so I'm curious
about a decision that you'vemade along the way, and one of
them I'd like to talk, inparticular about something that
you decision you'd love to haveback, and if you can talk about
that kind of what, was itknowing that you're only as good
as the information you have atthe moment at the decision point
, right?
And so I'm curious about amistake that you made, and if
(25:08):
you were able to recover, howdid you?
Lon Welsh (25:09):
recover.
I'll give you three of them.
So the first is the decision tosell the real estate brokerage
which I built from scratch.
I spent almost two decadesrunning.
In retrospect, I probablyshould have sold it four, five
years earlier and launched thepassive investing firm that much
faster.
I think I was reluctant to letgo of something I knew so well
and it was like I'm autopilotmaking a lot of cash and start
(25:30):
something new was a little bitgosh.
There's going to be a lot ofwork.
I'm glad I did it, but I shouldhave done it sooner.
So I think the core letter tothat is there's a lot of people
who are stuck in a bad job andthey stay at it because it's
known or a bad relationship, andthen when they finally end the
relationship, where they getlaid off and they move on to the
next thing, it's a terribletransition time emotionally, but
when they get to the new thing,they're like, oh my God, why
did I wait so long to do this?
And this is an example of that,I think.
(25:51):
The second is shifting frombeing an active investor to a
passive investor.
I'm 57, so not too far from it.
I don't need to prove toanybody I can slay the dragon
dream.
I've had an absolutely greatproject I don't need to prove it
to myself or anybody else andI'd like to work just a little
bit less.
So I want to ski a little more,Letting go of something I'd
done so well for so long tolearn something entirely new,
right Once I figured it out.
(26:13):
I wouldn't have to work as muchbut get pretty similar returns.
And everybody on this call isgoing to have to go through that
transition too, because you'renot going to want to be 80 years
old running a renovation of upfor me.
I was in my early 50s, youmight be in your 60s, but we all
have to come to that momenteventually.
And then, probably the mostactionable one is in our first
fund we only had eightinvestments.
It wasn't enoughdiversification.
(26:33):
So on those eight it was atypical distribution one
complete disaster, one grandslam and a bunch of base hits,
and it all ended up averagingout okay.
So the big mistake on that onewas we bought an office building
that was a huge value add inthe office park suburb called
Sugar Land of Houston, likethree, four months before COVID
broke out, and we'd losteverything on that project.
(26:55):
And it's just like why did Ibuy this thing?
But there's nothing I couldhave done to do it?
I said no one saw that coming.
Yeah, exactly.
But on the other hand, when wedid a build to rent project that
we should have been like in thelow twenties on our returns, we
ended up delivering a 54% toour limited partners and I'd
like to tell you that I'm justreally smart at picking out
funds.
But, to be honest, we just gotlucky.
(27:19):
We bought it at the exact rightmoment in time in the cycle, we
sold it at exactly the rightmoment in time and we ran a
fundamentally really goodproject on top of it, but the
timing being perfect raised thisfrom being like a 21 or a 22 to
a 54.
So when I talk to people whoare considering passive
investing and you're evaluatinga sponsor and they trot out
these really great successstories, you've got to take some
time thinking about.
Why don't you get in and getout of the project and think
(27:41):
through how much of this wasjust luck of the timing cycle
and how much of it was actuallyauthentic, what they did
operationally, Because there'sthey could be very significant
factors and that those twostories, I think, bookend the
experience.
Ed Mathews (27:53):
I agree.
I thank you for sharing thatthe yeah.
The fact is that the late 2019,18, 19 and early 2020s, 2021,
22-ish made a lot of people looka lot smarter than they were.
Exactly, Exactly, yeah.
How do you define that?
Lon Welsh (28:10):
in your life I've been fortunate enough to do a
lot of real estate products fora couple of decades and I've
built and sold two companies.
So what I really focus now onis I'm on the board of directors
for three charities in Denver,trying to help them achieve
their mission.
The other part is just thegroup of limited partners that
we serve as our investors,trying to help them achieve
their financial goals, andhopefully I can help them get
there a little faster with alittle bit less brain damage,
(28:31):
and if I can do that then I'vebeen successful.
Couldn't agree more.
Ed Mathews (28:34):
Brain damage.
I've really enjoyed thisconversation, Lon.
Congratulations on a tremendousbusiness you've built and
congratulations on all yourother successes as well.
When not talking about realestate or medical billing, what
do you like to do for fun so?
Lon Welsh (28:47):
things I've done for a while are skiing, tennis, golf
skiing, or I'm actuallystarting a new gigantic Bob Mann
hat and project project next,two or three years from now,
we're learning how to paint.
Ed Mathews (28:56):
Oh, artistically paint.
If you need a house painted,I'll do that.
Different skills, so I'm a.
Lon Welsh (29:01):
I've gone through a fine arts certificate.
I got a minor in art historyduring COVID just for something
to do while we were all lockedup.
I've picked out like a hundredmaster canvases I want to copy
from Degas or Cezanne or Titianand we're going to do that for
the next year and a half andI'll see if I develop a style
plan after that.
Ed Mathews (29:16):
You have to keep me up to date on that.
Are you going to create awebsite or something share, or
is this just for you and you'renot going to make it public?
Lon Welsh (29:27):
going to make it public.
I think the first phase of itfor me is that I've traveled a
lot.
I've been to a bazillionmuseums multiple times, so the
art history study helped me toget a much better appreciation.
When I was in a gallery lookingat a piece.
But my hypothesis was that if Iactually tried to copy some of
these things and ended upspending eight hours looking at
one canvas trying to recreateyourself the level of detail and
engagement is a lot differentthan just standing in front of a
painting in a museum for twominutes.
(29:48):
It's analogous to I playedpiano and saxophone growing up.
I can listen to jazz orclassical music in a way that
people who haven't played aninstrument probably can't.
So I'm trying to recreate thatand so far I think it's working.
Ed Mathews (29:59):
Excellent, you bet.
All right, lon.
If someone wants to learn moreabout Ironton or anything else
about you, what's the best wayto get in touch?
Lon Welsh (30:07):
Two ways to do.
It would be just Lon Welsh myname L-O-N-W-E-L-S-H at Ironton,
i-r-o-n-t-o-n.
Capitalcom.
You can email me.
You can go to our website andbook a time slot or, honestly,
just text me 303-619-0633 andset up the time for us to talk
for 15 minutes.
If you are an investor andyou're not sure of your strategy
(30:30):
, I am not that busy.
I am happy to talk to you for15 minutes and try to give you
some advice and say here's threethings I would try not to do
and one thing that might work.
You'll need to test it.
Here's three things to find outif that's going to work for you
or not.
I had a lot of people do thisfor me when I was starting and
it greatly accelerated mylearning curve.
I've been a lot more successfulas a result and if I could
spend 10, 15 minutes with someof your listeners, getting them
(30:51):
that same benefit, I'd behonored to do that.
Ed Mathews (30:53):
Thank you very much.
That's incredibly generous,absolutely so, lon.
Thank you so much for your timetoday.
It's a pleasure to meet you.
I am very much looking forwardto reading your book.
Now that I know there are 13,I'm a voracious reader I may
read all 13.
You never know.
Thank you for your time andit's really good to meet you.
Lon Welsh (31:11):
Thank you, thanks for having me.
If you are getting value we've had some amazing
guests over the last severalmonths and if you're getting
value out of it, I would greatlyappreciate if you could follow
us and maybe share our show witha colleague that helps us grow.
So with us today is Lon Welsh.
He is the managing director ofIronton Capital and he works
(01:30):
with real estate brokers as well.
As I've just discovered aformer strategy consultant.
I'm not going to make him.
We're not going to get intomanagement consulting because
that's one of the hats I used towear, but we may get into
technology just a little bit,because he knows more than I do.
So, lon, welcome to the show.
Thank you for joining us today.
Thanks for having me.
Yeah, truly my pleasure.
So, for those folks who haven'tdiscovered you on LinkedIn and
(01:53):
the other places that you haunt,why don't you tell us a little
bit about you and your firm andthen we'll get into it?
Lon Welsh (01:59):
Yeah, just a quick nickel tour.
I was in corporate finance fora couple of years, went back to
business school.
I worked as a strategyconsultant for eight years at
Deloitte and then Accenture.
I've been investing for justabout 25 years now, started when
I was still a consultant.
Left consulting in 2002 to gointo real estate full-time.
Sold real estate for a coupleof years, decided to launch a
brokerage called your CastleReal Estate in 2004.
(02:21):
Grew that to be the largestindependent in Colorado, with
about 750 agents.
Built a title company with apartner.
Sold the brokers to a privateequity fund about three and a
half years ago.
Title company to Compass threeand a half years ago.
And then I launched Irontonabout three years ago.
What I found is that I was anactive investor, probably like
an awful lot of your listeners,for a couple of decades.
It was getting hard to finddeals that make sense.
Ed Mathews (02:47):
So I've switched to passive investing and with the
private equity fund I started, Ican help other people be
passive investors too.
Yeah, congrats.
And Ironton is a rapidlygrowing firm.
Even in.
It's interesting and one of thereal.
One of the things in preparingfor our conversation today I
really wanted to understand iswhere are you finding the deals?
And obviously you're findingoperators, not deals, but it's
still a process, because we'veswitched to a similar strategy,
(03:09):
mainly because we went to gotrade up and sold off a bunch of
assets with the intent offinding new, larger assets, and
we were successful in somerespects, but in others we were
like, oh boy, it's day 30 in my45 day, 1031 exchange and I
don't have anything that I likepicking up the phone and calling
operators that I know and trustto see if I could deploy the
(03:31):
capital with them.
We were able to find deals,land those deals.
It's really stressful.
Lon Welsh (03:34):
No doubt about that.
There's three of us full timeon investment committee that are
just out trying to find thingsand then doing initial
underwrites and then flying outto visit the properties and meet
the sponsors and double checkeverything.
Probably about a third of ourinvestments are repeat of
sponsors that we've worked within the past, that we've had
success with, and once you'vebeen a successful investor for
(03:55):
them, that's not a pain to workwith.
They usually have a friends andfamily list that they'll
contact before they broadlydisseminate a new investment
opportunities and the very bestones they're totally filled just
by us.
Nobody else even sees them.
So that's probably about athird.
About a third is just randomstuff that comes into the inbox
and it's just like a lot ofboiling to get to the good ones.
On that, Back when I was acommercial broker selling
(04:16):
multifamily, I had a designationcalled a CCIM, a Certified
Commercial Investment Manager.
So I'm not active anymore but Istill have access to the CCIM
database we started with.
Every CCIM in Georgia thatspecializes in multifamily
introduced ourselves hey, do youhave an interesting transaction
?
Makes a ton of sense.
But the lending requirementsare different, where your buyer
needs more of a down paymentthan they used to Do.
You need a capital to partneron the equity stack.
(04:37):
Explained what we did and thenwe called everybody in South
Carolina.
We called everybody in Floridawe're working with everybody in
North Carolina.
We called everybody in Florida.
We're working with everybody inNorth Carolina.
It's just a lot of calls.
I wish I had a slick answer,but it's just a lot of work.
Ed Mathews (04:48):
Yeah, it turns out this is actually a hard job,
right, and people like you andme and our backgrounds dialing
for dollars, as they used tocall it.
They may still call it that,but I haven't done that in a
long time, but the fact is thatthere is nothing replaces a hard
work and b a network ofrelationships, right?
Lon Welsh (05:09):
yeah, the network is actually my biggest driver in
the real estate.
There's really no substitutefor it.
If you can't be on the phonetalking to people mostly all day
long, it's tough for peopleliving at this.
Ed Mathews (05:18):
You can't market your way to find deals.
You can occasionally, but thosedeals are sometimes.
They're okay.
If you want real meaty dealsthat are going to perform like
they would if you were runningthem, there's really only way to
do that, and that's embracingthe fact that this is a team
sport.
Okay, so let's talk about yourbuy box.
You mentioned Georgia, southCarolina, north Carolina and
(05:41):
Florida, I believe, and sothat's a pretty large area, and
so I'm curious about the typesof properties you tend to target
.
Are you a value add player?
Do you look more for luxury Aand B class?
What's your target?
Lon Welsh (05:57):
Good question.
From a geographic standpoint,we've actually invested in about
15 different states.
They're mostly the Sunbeltstates.
Our biggest criteria is we wantto see a high degree of
employment growth, because thattends to drive everything
downstream.
About half of our investmentswill usually be new construction
and the other half will bevalue add.
We don't do any buy and holdwork.
There's plenty of REITs that areoutstanding and it's tough for
(06:18):
us to compete with that.
And then, from an asset mixstandpoint, a typical fund will
have about 30 different assetsin it, usually with about 10 to
12 different sponsors.
So usually about two-thirds ofthose will be multifamily and
the rest will be industrial.
Every once in a blue moon,self-storage not too often and
there are some segments withinhospitality that we like.
So what we want to try to do isbring really good
(06:40):
diversification across a numberof different axes to our limited
partner so that they can have areally broad portfolio, and the
payoff for that is last fallthere was two hurricanes within
a couple of weeks that hit Tampaand we had an asset there and I
was able to sleep pretty wellat night knowing that 3% of our
portfolio was in Tampa and it'sgoing to be flooded when I woke
up in the morning, but the other97% would be just fine.
(07:01):
And man, that's a whole lotless stressful.
We are all prostituted in onespot.
Ed Mathews (07:06):
Yeah, sleepless nights, right, and you bring up
a point that I ask most of theinvestors that I meet who
operate in the Sunbelt.
Let's talk about insurancebriefly.
Obviously, even our insuranceup here in the Northeast and we
haven't had a direct hit of ahurricane since I think I was a
sophomore in high schoolInsurance companies are looking
to diversify their own risk, andlittle guys up here in
(07:29):
Connecticut, where I am, get alittle bit of a surcharge From
what I've heard in talking withyour counterparts as well as
several insurance brokers.
Insurance has been a prettyrough road over the last two,
three years.
Lon Welsh (07:42):
Oh, it's really been a headache.
So the projects that we boughtin, say, 2020 through the first
part of 2022, when the rateswere a little bit on the lower
side and the insurance rateswent up quite a bit, that's been
a negative hit to cash flowthat wasn't anticipated and a
lot of times the contingenciesweren't sufficient to offset
that.
So that's been a negative hitto projected returns.
But what we've seen in thestuff that we've bought in 23,
(08:04):
24, and this year is that we'reunderwriting on a much higher
base for the insurance premiumsand we forecasted in higher
rates of growth in the future.
What I'm hearing from somepeople is that we might be
getting close to the apex andmaybe it'll stabilize and if
that's the case, we've been tooconservative in our underwriting
.
We've put too much reserve intofuture years, which is a great
(08:29):
thing.
Taxes, I think, would beanother analog that would follow
that same cost trajectory and,to a lesser extent, the
underwriting that you're doingnow.
Not only the benefit of buyingon a higher cap rate than you
would have in the past, you'vealso got a much fatter OPEX
stack.
So there's a lot more room forerror in the stuff I buy today
than, say, four years ago.
Ed Mathews (08:42):
Sure, absolutely.
And so I heard capital reserves.
Is there anything else thatyou're doing to?
No one has a crystal ball, butyesterday I was reading the wall
street journal website aroundtwo o'clock two, 15, actually
and I saw huh, fed, didn't.
Fed kept rates soon.
Yeah, they did a nice job withthe soft landing, but I would
(09:03):
love to see rates at least chipdown.
That said, rates arehistorically right down the
middle in terms of the median ofwhere they are over the last 50
years in that seven, seven anda half range.
So I can't really complain alot.
I like 3%, 4%, we all do.
It was nice, made me look a lotsmarter.
That's got to be a challengewith managing a private equity
(09:27):
fund, because do you havemultiple funds and one fund is
targeting development andanother fund is targeting more
cashflow oriented assets, orlike, how do you manage that,
knowing that you take on a 200unit development project and
you're probably two years awayfrom any cash flow, at least 18
months and possibly three yearsfrom some level of stability and
(09:51):
break even and possiblyprofitability?
And I'm curious, how do youmanage that with your partners?
Yeah, so for the limitedpartners, we really have three
offerings.
Lon Welsh (10:00):
We have a short-term income fund that pays about 8%
and it's got a high degree ofliquidity.
We've got a short-term incomefund that pays about 8% and it's
got a high degree of liquidity.
We've got a medium-term incomefund that pays around 11 to 13,
depending on how much youinvested with us.
It's locked up for a year, 90days notice, so not bad
liquidity, but not as liquid asthe short-term.
And then we've got our long-termgrowth funds and our goal with
the long-term fund is thatthere's no income, or as little
income as I could possiblymanage to, and it's all capital
(10:25):
gains, and that's usually abouta five-year horizon.
I usually try to coach peoplethat will try to get most of
your equity back by the fourthyear and most of the profits
will be in year five and six.
If they're selling an apartmentcomplex and they want to be
passive with us, we could put asmuch as we have to into the
medium-term income to replicatethe cashflow they were living on
from owning this real estateproperty, and then the rest we
can put in the long-term fund toreplicate the long-term
(10:46):
appreciation they had.
But synthetically I canrecreate just about any scenario
a client needs just bybalancing across the two.
Ed Mathews (10:53):
Oh, okay.
So I have half a million bucksand we're going to allocate 150K
into the long-term fund, 150kinto the medium term and 200K
because I've got kids in collegeand I'm going to need that
money I got you.
That makes a lot of sense.
I'm curious about the shortterm.
Is that more of a debt fund oryeah?
Lon Welsh (11:12):
it's a hard money fund, so probably have a lot of
real estate investors that arefamiliar with hard money.
Our business partner on that.
It runs about a $270 millionfund.
It's around 300 loans.
So we're just a tiny slice ofevery single one of those.
Ed Mathews (11:26):
Nice.
One of the things that wasparticularly interesting to me
when I'm meeting with people arelike why are you loaning out
money when you could be buyingreal estate?
I said here's the thing In somecases not all, but in some
cases I would like to be JohnSutter of the fame where he was
the first millionaire in thegold rush back in the mid-1800s,
(11:47):
and the reason being is that hewas selling the shovels and
sticks.
In our world, when real estatepeople are digging for gold,
capital is that tool, or atleast it's one of them, and so I
would much rather facilitateyeah, and we're not getting the
same returns, but they'resix-month gigs, nine-month gigs,
(12:08):
12 months at the absoluteoutside, and we're able, like
you were saying, to be able toprovide liquidity, which is
unique in the real estate world,where you deploy capital into
some sort of real estateinvestment and you're probably a
year plus, in some cases,multiple years away from having
access to that capital again.
Lon Welsh (12:29):
Absolutely.
One idea for your listeners toconsider in our medium-term fund
is underpinned by medicalaccounts receivable, and medical
receivables are not impacted byinterest rates wars in Ukraine,
if we run a deficit or not,because people are getting car
access no matter what and it'sreally valuable to have part of
your portfolio.
Be not correlated to the realestate markets or the drivers of
(12:49):
the market, because I'm veryheavy in real estate and when
interest rates go up, that's nota favorable thing for me and
when they come down, as you werealluding earlier, like we're
all cheering.
So try to get a coupledifferent asset classes.
Not all have your eggs in onebasket.
It's not a bad idea.
Ed Mathews (13:03):
So what other asset classes are you using to
diversify your funds?
You, so what other assetclasses are you using to
diversify your funds?
Lon Welsh (13:08):
You know that's really it.
So the short-term fund isprimarily the hard money loans,
the medium-term fund is based onmedical receivables and then
the long-term fund is equitypositions, not debt positions.
Okay, a variety of eitherdevelopment projects or rehab
projects.
Ed Mathews (13:23):
So I'm intrigued by the mid-term one then.
So when you are investing inmedical receivables, are you
simply?
Is it a factoring type of aplay, or like how does that work
with?
Lon Welsh (13:38):
Yeah.
So our coach EP that we workwith on this, it's actually a
two component solution.
For larger claims, thephysician or the medical
practice is going to want to doall the work themselves on the
billing and paperworkadministration side.
But for small claims say$30,000, it's just not worth
their time to do it.
So what we do is we completelytake over the claim.
We give them about a third ofthe value of the claim.
So it's factoring in the sensethat we're giving them an
(13:58):
advance against receivable butthey don't have to pay us back.
We're just taking the claimover and we're doing all the
paperwork from here on out.
The challenge is, if you're justselling money, which is what
factoring is, then it's just aknife fight to see which bank
can provide the best terms.
We're providing a businesssolution, so then the terms
don't need to be as attractive,because we're solving a
different problem entirely andwhat we like to do is have a
(14:19):
basket of about 100 of thesemedical claims from a
physician's office or a clinic.
We'll advance on about 95.
We're only advancing a third ofthe value and they're all
cross-collateralized.
So we anticipate two or 3% willbe fraudulent and then we've
got 97 other claims in thebasket we can go collect against
.
So it's as if you had a partnerwith a hundred paid off real
(14:40):
estate investments that came tous as a bank.
We did a 35% loan to value on95 of the rental properties, but
they're allcross-collateralized.
If you didn't pay the mortgageon one, I could take any other
property I wanted to get paid.
Ed Mathews (14:50):
Oh, it's pretty darn close Now.
Are you so the entity that youare billing yourself?
Is that the patient, or is thatthe insurance company?
Or is that-?
Lon Welsh (15:01):
Insurance company.
Okay, so usually it's going tobe in a state where there may be
it may be contested.
Is it you with Geico or me withState Farm that's at fault for
this accident?
I don't know which of the twoof us is going to pay for this
medical claim yet, but meanwhiledoctor needs to get paid and
needs to move on to the nextpatient.
They need cash flow.
So we solve that and we solvethe paperwork problem.
So it's a really great niche.
(15:22):
One of the guys on ourinvestment committee.
He started at Goldman Sachs andthen he ran a $2 billion family
office.
Then he came to us and therewas a relationship that he
brought with him.
They only work withinstitutions.
So we've raised just under $30million for these guys so far
and we've got a $100 millionallocation, so I'm very grateful
to be doing this.
Ed Mathews (15:48):
Yeah, it's a fascinating play.
It really is.
One of the things that I'malways interested in is and
let's see if we can get into ourlightning round into the final
five.
I'm always fascinated by thefact that people that are
successful like you, where themortgages are paid, the college
tuitions are taken care of,there's probably no car payments
Every Monday morning you wakeup and go to work.
That tells me that there'ssomething else driving you, and
I call that purpose.
I think a lot of people do so.
(16:09):
I'm curious what is yourpurpose?
What is that thing that getsyou bounding out of bed on
Monday morning and heading overto the office?
Lon Welsh (16:16):
I'll tell you a quick backstory.
I've written 13 books, five ofthem on real estate investing in
Colorado, and I've done a bunchof training classes over the
last two decades for people onwhy should you invest in real
estate.
I'd have 20 people in a classand at the end one of them would
say, yeah, I want to go buy anapartment building with you.
And the other 19 would tell meI'm too busy.
I'm an attorney or an architect, I'm taking my kids to soccer
parties.
I can't buy real estate, but Isure love the idea.
So when I launched the passiveinvesting company, I really had
(16:38):
formulated a solution to 19people instead of one person.
No-transcript.
Help them do that in a taxadvantaged way Not as good as a
1031,.
But the other use case is allthese dentists, physicians,
(17:00):
chiropractors, architects,attorneys that have got their
entry-level high network.
They're between one to fivemillion.
They know they need to havesome exposure to real estate,
but they don't want to have theburden of running an apartment
building themselves.
We're a way to give that partof their financial portfolio a
sense of peace of mind that I'mdiversified across a lot of
assets, I've got professionalsrunning it and I don't have to
(17:20):
worry about it.
My goal is to create a hundredmillion dollars of wealth for
these people.
We're well on the way to doingthat.
I'm in the dream, grantingbusiness.
I'm like the genie in thebottle.
You get to retire sooner,retire better, send your kid to
a better school.
We make that happen.
Ed Mathews (17:33):
It's amazing, and it's truly amazing what you can
do.
Similar story in that when mydaughter, katie was born in 2008
, I was going to invest in realestate.
It actually took me almostthree years to get the courage
to pull the trigger and I boughta four family and over the
course of the next 14, 15 yearswe fixed it up and made it
(17:53):
beautiful and clean and safe andpaid it off.
And then, when she turned 17and became a senior in high
school, it turns out the childwanted to go to college and we
leveraged that asset tobasically pay for her college
education.
And yeah, it was wonderful andwe even got her a car, but she
(18:14):
had to wait for that to be asenior.
Nevertheless, real estate avery useful tool to be able to
plan for those life events,especially if you're figuring it
out early on the fact that youare the genie in the bottle,
granting more than it soundslike, more than three wishes
that's a pretty cool place to beHonored to do this and one of
the things that I'm alwaysinterested about.
(18:34):
We're going to talk about booksin a minute, but I want to talk
about your books for a moment,because you reminded me you've
written 13 books.
One of them I'm familiar withis the Complete Guide to Pass
diversified real estateinvesting, and so I wanted to.
One of the great things about abook right, especially someone
who has been there and done thatlike you is they're basically
(18:55):
boiling a sizable slice of theirlife into 200 pages.
Yeah, exactly, and I can sitand read or listen that's how I
do it to the book and basicallyunderstand and hopefully digest
and impulse some of thestrategies and tactics that
author has provided in the bookto help me improve my business,
and that's a really uniqueexperience.
(19:16):
Can you tell me a little bitabout the experience of writing
either that book or if there'sanother book that you'd like to
talk about, that's fine, but thepassive book jumped out at me
so I figured I'd mention thatone.
Lon Welsh (19:27):
That's a really good example.
After talking to a lot ofprospective investors, many of
whom did eventually go on toinvest with us the idea of
passive investing and what is aprivate equity fund this was
like a lot of really newinformation.
How does this kind of fit intothe overall financial plan of my
family?
So these were like a set ofquestions that kept coming up on
a recurring basis.
Rather than me giving an hourand a half discussion to each
(19:49):
person, I thought I'm just goingto write all these things down,
because they're a set of commonthemes.
That's actually where themajority of my votes came from
is you would hit a vein of Iwant to invest in Colorado real
estate.
What are my options?
All right, here's eightdifferent options.
Here's six skills thatinvestors tend to have.
Let's do a diagnostic when areyou relatively strong and
relatively weak?
Based on that assessment, I cantell you that this class and
this class are a good match.
(20:10):
Here's why these other six youshould not look at.
Here's why.
And then there's a chapter oneach of the eight investment
classes.
Just read those two chaptersthat apply to you.
It'll save you all this timeand greatly increase your odds
of success.
And, as a real estate broker.
I want you to be successful, soyou come back and do 10 more.
The wrong reason.
You're not going to come backand neither one of us win that
game.
So this is the exact same thing.
If your listeners would like acopy, it's just
(20:32):
irontoncapitalcom forward, slashR E underground and you can
download a free copy.
Ed Mathews (20:38):
Oh, that's awesome.
Thank you.
Of course, I know about a dozenpeople off the top of my head
that are going to jump on thatimmediately.
So that's great, that's great.
So let's talk about other books.
I'm always curious about howleaders like yourself sharpen
the saw, so to speak.
I'm curious about how you takein information, how do you do it
and who are you payingattention to these days?
Gosh, a lot of it is justgeneral business 101.
Lon Welsh (21:01):
And it's everything from sales skills to people who
have studied TED Talks to figureout which ones are more or less
successful.
What are the elements of asuccessful speaker that really
captivates an audience?
How to be more effective withinterpersonal communications.
There's always something youcan get better at and half the
time you realize like gosh.
I heard this seven years ago ina different book, but I'd
forgotten about it.
I really need to re-implementthis.
Ed Mathews (21:22):
So I try to eat a pretty broad and varied diet so
I try to eat a pretty broad andvaried diet, and so, when you
think about some of the creators, authors and so on, what are
some of the ones that have beenparticularly valuable to you
over the last however much time?
Lon Welsh (21:36):
oh, gosh, you probably had this 55 times on
your show but rich dad, poor dad.
25 years ago, when I first gotstarted, that's crystallized for
me more than anything elsereally what the opportunity was,
because that's something thatwe didn't learn in the MBA
program.
Oddly enough, I think sincethen it looks like Captivate
were really good at justthinking through how you
communicate, how you're received, how to adjust your delivery to
(21:56):
have the impact that you wantto have.
That was incredibly helpful.
Anything you could do from acommunication standpoint, I
think, would be a very highreturn on investment.
Ed Mathews (22:05):
Absolutely Wonderful .
So I'm also curious about thementors you've had in your life,
and I'm very specificallycurious about the best advice
you ever got and who gave it toyou.
Lon Welsh (22:15):
When I started at Deloitte, there was this guy,
john Baer, who was my firstengagement manager, and
something he told me that wasn'tobvious to me at that moment in
time is that he said wheneveryou're talking to a client, our
job is to affect some sort ofchange in behavior to get a
business outcome.
If we don't do that, we're notin the entertainment business.
So to do that, what you got todo is figure out what is it
(22:37):
that's important to this personand what's the best way for them
to receive information.
So just to use stereotypes like, you've got an engineering type
.
They're going to want a lot ofdetail, a lot of supporting
evidence.
Show me the whole chain oflogic you're going to have.
Other people are going to be alittle bit more like artists
where you can show them thecomposite picture and they don't
really care about how you gotthere.
They see the vision.
That's all they want, andthere's a couple like steps in
between on that sort of a scaleidentify what this person's
(22:59):
style is and then adjusteverything about your
presentation format and thelevel of detail to that.
And I was able to do it in acrude fashion almost immediately
after he said it and it gotbetter results from a persuasion
standpoint immediately, andthen just by iterating over the
years, I hope I get better andbetter, and I think the way to
do that is just to ask a lot ofgood questions of the other
person about how do you like tomake decisions, what is the
(23:22):
deliverable you're hoping to getfrom this, and then asking a
couple of whys behind that.
If you want to grow youroverall investment portfolio
from $2 million to $3 million,that's good for me to know, but
what would that enable for yourfamily?
If you pulled that off, themore granular you can get on the
end goal that you back-solve,and then it's not abstract.
There's a really meaningful whybehind it.
Ed Mathews (23:39):
That's where you want to be.
It's something I learned veryearly in my career as well.
Understand where your customeror your client is in their
journey, where they're trying togo, why they're trying to get
there.
And then your job understandwhere they're trying to get and
help them get there right.
Provide the alternatives andsome of those alternatives are
things that you can do with,they can do with you, and some
(24:01):
of them are introductions toother people in the space it's
they've got to go out on theirown, but at least you've given
them a path.
In all three situations you'veadded value to where they're
trying to go.
Absolutely, karma is a realthing and integrity is a real
thing.
If you help enough people getdown that path, eventually they
will reciprocate and in some way, shape or form, it does come
(24:24):
back.
It has for me.
Yeah, that's what keeps me inCheerios and coffee.
I'm also curious about the waythat humans grow right, and so I
.
Fundamentally, in my 55 yearson this earth, I think I've
learned a lot more from themistakes that I've made than the
successes I've had, and so I'mcurious about a decision that
(24:46):
you've made than the successesI've had, and so I'm curious
about a decision that you'vemade along the way, and one of
them I'd like to talk, inparticular about something that
you decision you'd love to haveback, and if you can talk about
that kind of what, was itknowing that you're only as good
as the information you have atthe moment at the decision point
, right?
And so I'm curious about amistake that you made, and if
(25:08):
you were able to recover, howdid you?
Lon Welsh (25:09):
recover.
I'll give you three of them.
So the first is the decision tosell the real estate brokerage
which I built from scratch.
I spent almost two decadesrunning.
In retrospect, I probablyshould have sold it four, five
years earlier and launched thepassive investing firm that much
faster.
I think I was reluctant to letgo of something I knew so well
and it was like I'm autopilotmaking a lot of cash and start
(25:30):
something new was a little bitgosh.
There's going to be a lot ofwork.
I'm glad I did it, but I shouldhave done it sooner.
So I think the core letter tothat is there's a lot of people
who are stuck in a bad job andthey stay at it because it's
known or a bad relationship, andthen when they finally end the
relationship, where they getlaid off and they move on to the
next thing, it's a terribletransition time emotionally, but
when they get to the new thing,they're like, oh my God, why
did I wait so long to do this?
And this is an example of that,I think.
(25:51):
The second is shifting frombeing an active investor to a
passive investor.
I'm 57, so not too far from it.
I don't need to prove toanybody I can slay the dragon
dream.
I've had an absolutely greatproject I don't need to prove it
to myself or anybody else andI'd like to work just a little
bit less.
So I want to ski a little more,Letting go of something I'd
done so well for so long tolearn something entirely new,
right Once I figured it out.
(26:13):
I wouldn't have to work as muchbut get pretty similar returns.
And everybody on this call isgoing to have to go through that
transition too, because you'renot going to want to be 80 years
old running a renovation of upfor me.
I was in my early 50s, youmight be in your 60s, but we all
have to come to that momenteventually.
And then, probably the mostactionable one is in our first
fund we only had eightinvestments.
It wasn't enoughdiversification.
(26:33):
So on those eight it was atypical distribution one
complete disaster, one grandslam and a bunch of base hits,
and it all ended up averagingout okay.
So the big mistake on that onewas we bought an office building
that was a huge value add inthe office park suburb called
Sugar Land of Houston, likethree, four months before COVID
broke out, and we'd losteverything on that project.
(26:55):
And it's just like why did Ibuy this thing?
But there's nothing I couldhave done to do it?
I said no one saw that coming.
Yeah, exactly.
But on the other hand, when wedid a build to rent project that
we should have been like in thelow twenties on our returns, we
ended up delivering a 54% toour limited partners and I'd
like to tell you that I'm justreally smart at picking out
funds.
But, to be honest, we just gotlucky.
(27:19):
We bought it at the exact rightmoment in time in the cycle, we
sold it at exactly the rightmoment in time and we ran a
fundamentally really goodproject on top of it, but the
timing being perfect raised thisfrom being like a 21 or a 22 to
a 54.
So when I talk to people whoare considering passive
investing and you're evaluatinga sponsor and they trot out
these really great successstories, you've got to take some
time thinking about.
Why don't you get in and getout of the project and think
(27:41):
through how much of this wasjust luck of the timing cycle
and how much of it was actuallyauthentic, what they did
operationally, Because there'sthey could be very significant
factors and that those twostories, I think, bookend the
experience.
Ed Mathews (27:53):
I agree.
I thank you for sharing thatthe yeah.
The fact is that the late 2019,18, 19 and early 2020s, 2021,
22-ish made a lot of people looka lot smarter than they were.
Exactly, Exactly, yeah.
How do you define that?
Lon Welsh (28:10):
in your life I've been fortunate enough to do a
lot of real estate products fora couple of decades and I've
built and sold two companies.
So what I really focus now onis I'm on the board of directors
for three charities in Denver,trying to help them achieve
their mission.
The other part is just thegroup of limited partners that
we serve as our investors,trying to help them achieve
their financial goals, andhopefully I can help them get
there a little faster with alittle bit less brain damage,
(28:31):
and if I can do that then I'vebeen successful.
Couldn't agree more.
Ed Mathews (28:34):
Brain damage.
I've really enjoyed thisconversation, Lon.
Congratulations on a tremendousbusiness you've built and
congratulations on all yourother successes as well.
When not talking about realestate or medical billing, what
do you like to do for fun so?
Lon Welsh (28:47):
things I've done for a while are skiing, tennis, golf
skiing, or I'm actuallystarting a new gigantic Bob Mann
hat and project project next,two or three years from now,
we're learning how to paint.
Ed Mathews (28:56):
Oh, artistically paint.
If you need a house painted,I'll do that.
Different skills, so I'm a.
Lon Welsh (29:01):
I've gone through a fine arts certificate.
I got a minor in art historyduring COVID just for something
to do while we were all lockedup.
I've picked out like a hundredmaster canvases I want to copy
from Degas or Cezanne or Titianand we're going to do that for
the next year and a half andI'll see if I develop a style
plan after that.
Ed Mathews (29:16):
You have to keep me up to date on that.
Are you going to create awebsite or something share, or
is this just for you and you'renot going to make it public?
Lon Welsh (29:27):
going to make it public.
I think the first phase of itfor me is that I've traveled a
lot.
I've been to a bazillionmuseums multiple times, so the
art history study helped me toget a much better appreciation.
When I was in a gallery lookingat a piece.
But my hypothesis was that if Iactually tried to copy some of
these things and ended upspending eight hours looking at
one canvas trying to recreateyourself the level of detail and
engagement is a lot differentthan just standing in front of a
painting in a museum for twominutes.
(29:48):
It's analogous to I playedpiano and saxophone growing up.
I can listen to jazz orclassical music in a way that
people who haven't played aninstrument probably can't.
So I'm trying to recreate thatand so far I think it's working.
Ed Mathews (29:59):
Excellent, you bet.
All right, lon.
If someone wants to learn moreabout Ironton or anything else
about you, what's the best wayto get in touch?
Lon Welsh (30:07):
Two ways to do.
It would be just Lon Welsh myname L-O-N-W-E-L-S-H at Ironton,
i-r-o-n-t-o-n.
Capitalcom.
You can email me.
You can go to our website andbook a time slot or, honestly,
just text me 303-619-0633 andset up the time for us to talk
for 15 minutes.
If you are an investor andyou're not sure of your strategy
(30:30):
, I am not that busy.
I am happy to talk to you for15 minutes and try to give you
some advice and say here's threethings I would try not to do
and one thing that might work.
You'll need to test it.
Here's three things to find outif that's going to work for you
or not.
I had a lot of people do thisfor me when I was starting and
it greatly accelerated mylearning curve.
I've been a lot more successfulas a result and if I could
spend 10, 15 minutes with someof your listeners, getting them
(30:51):
that same benefit, I'd behonored to do that.
Ed Mathews (30:53):
Thank you very much.
That's incredibly generous,absolutely so, lon.
Thank you so much for your timetoday.
It's a pleasure to meet you.
I am very much looking forwardto reading your book.
Now that I know there are 13,I'm a voracious reader I may
read all 13.
You never know.
Thank you for your time andit's really good to meet you.
Lon Welsh (31:11):
Thank you, thanks for having me.
Popular Podcasts
New Heights with Jason & Travis Kelce
Football’s funniest family duo — Jason Kelce of the Philadelphia Eagles and Travis Kelce of the Kansas City Chiefs — team up to provide next-level access to life in the league as it unfolds. The two brothers and Super Bowl champions drop weekly insights about the weekly slate of games and share their INSIDE perspectives on trending NFL news and sports headlines. They also endlessly rag on each other as brothers do, chat the latest in pop culture and welcome some very popular and well-known friends to chat with them. Check out new episodes every Wednesday. Follow New Heights on the Wondery App, YouTube or wherever you get your podcasts. You can listen to new episodes early and ad-free, and get exclusive content on Wondery+. Join Wondery+ in the Wondery App, Apple Podcasts or Spotify. And join our new membership for a unique fan experience by going to the New Heights YouTube channel now!
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!
Fudd Around And Find Out
UConn basketball star Azzi Fudd brings her championship swag to iHeart Women’s Sports with Fudd Around and Find Out, a weekly podcast that takes fans along for the ride as Azzi spends her final year of college trying to reclaim the National Championship and prepare to be a first round WNBA draft pick. Ever wonder what it’s like to be a world-class athlete in the public spotlight while still managing schoolwork, friendships and family time? It’s time to Fudd Around and Find Out!