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Show Summary
In this conversation, Austin Schmidt shares his journey from corporate America to becoming a successful real estate developer. He discusses the importance of mentorship, the transition into real estate, and the lessons learned during his early years. Austin emphasizes the value of vertical integration in his business model and the strategic decision to own properties rather than just build to sell. He also highlights the importance of diversification in real estate investments and the need for a solid financial foundation to gain trust from banks.
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Investor Fuel Show Transcript:
Austin Schmidt (00:00)
I’d love to see if I can be a help. I’ve got this kind of background. I’m looking at getting in the game. Maybe it’s something where I come work for you or be a partner with you or can just provide help. And ⁓ being persistent, networking, I picked up a mentor that was the director of operations for the Prologis Corporation, which is, I don’t know if they are today, but back then they were the largest owner of square footage in the world. They were industrial.Dylan Silver (00:28)
Whoa.Hey folks, welcome back to the show. Today’s guest is in the Denver, Colorado area and is a commercial and residential developer. Everything from single family residential to apartment complexes. Please welcome Austin Schmidt. Austin, welcome to the show.
Austin Schmidt (02:21)
Thanks Dylan.Dylan Silver (02:21)
It’s great to have you on here. were talking before hopping on really about the experience that you have and your approach to running real estate like a business. Before we hop in there though, I do want to ask you about how you got into real estate.Austin Schmidt (02:37)
Yeah, I am. So I, it goes kind of back to being a young kid, you know, my family was in a construction business. They were commercial builders, Atlanta market, Tampa market and Charlotte. And I kind of grew up on a job site and went to school, did civil engineering degree at University of Georgia. Kind of always said I wasn’t going to get into construction because I’d been around it, butI kept looking back to it throughout my career in corporate America. And I actually worked for the DuPont Corporation for a while out of school. The engineering grads go to work for the big three chemical giants. great experience. And honestly, I just kept looking back to the opportunity of real estate where you can own an asset and create value and be creative. And it just kept sucking me back into it. So I ended up pulling the plug.
Dylan Silver (03:10)
Yeah.Austin Schmidt (03:29)
kind of doing the bounce out of corporate America thing, went completely solo, kind of set a goal for myself, blew it out of the water, and I’ve never looked back.Dylan Silver (03:40)
Walk me through that first year transitioning into being a full-time real estate operator. What was the process like? Also, what types of guidance did you have when you were going through that yourself?Austin Schmidt (03:56)
Yeah, so I’m a big believer in mentoring and I had a couple of, I was pretty fortunate to get a couple of really experienced mentors. ⁓ You know, one of the things that I learned when I was honestly in corporate America was that, you know, I hate to say this, but it’s so common in real estate that people are like wanting to get in the game and they just reach out to people that they’re like, I want to do what they do and they want to pick their brain andIt’s very difficult to kind of get in that room. And I got kind of trained in corporate America because I called on some of the biggest real estate owners in the U S when I worked for DuPont to not really take that approach and to try to like be the person that reached out and offered help first rather than, you know, trying to kind of take, take, take information. ⁓ I don’t think that’s like second nature to most people. I think most people are kind of like raise their hand, like,
hey Dylan, I really wanna do what you do. Can you grab a coffee? Can I pick your brain? And I mean, know when sometimes when people reach out to me like that, it kinda comes across as like it might be a waste of your time, ⁓ cause you don’t really know what the goal is. Yeah, like what is me meeting that person gonna do for them and me? And so I always took a different approach. I took the approach of like, hey man, really love what you’re doing.
Dylan Silver (05:10)
what you’re gonna get out of it.Austin Schmidt (06:10)
I’d love to see if I can be a help. I’ve got this kind of background. I’m looking at getting in the game. Maybe it’s something where I come work for you or be a partner with you or can just provide help. And ⁓ being persistent, networking, I picked up a mentor that was the director of operations for the Prologis Corporation, which is, I don’t know if they are today, but back then they were the largest owner of square footage in the world. They were industrial.Dylan Silver (06:39)
Whoa.Austin Schmidt (06:40)
and they happen to be based in Denver and then I had another mentor who is in the multifamily space that’s kind of based out of Nashville that I knew kind of through my corporate career that had kind of bounced out of running a very large construction company to becoming a developer and we just honestly we developed like friendships and it turned into a lot of guidance a lot of mentoring and I feel like theThe mentoring aspect, like people underrate because they think like, ⁓ me get some information from this person, like an underwriting spreadsheet, a little training, like ⁓ some guidance on how to talk to a lender or raise capital. And then they kind of bounce. And that’s not really how it works. know? So.
Dylan Silver (07:27)
Yeah.do want
to ask you about that first ⁓ deals and when you were getting into the space. You’re involved as a developer. Was that the origin or were you involved in single family residential prior to becoming ⁓ a developer?
Austin Schmidt (07:49)
So 2008 was when that ⁓ recession hit and at that time in Denver there was a really across the country there was a lot of foreclosures and you know one of the guys that I teamed up with ⁓ locally not more on them not as much on the mentoring side but kind of more as like a friend slash mentor he he he learned aboutmy background and kind of gave me an opportunity to get in the game where they were essentially running like a pretty large scale home flipping business where they ran it almost like a home builder and they had a huge acquisitions team. So I kind of jumped in, got on the acquisitions team with them. ⁓ It was all like commission based, zero salary and helped them kind of hunt down deals, ⁓ underwrite them.
Dylan Silver (08:27)
Hmm.Austin Schmidt (08:43)
get them sold, help them with the operation to get the ones that we kept in house to fix and flip. ⁓ I did that for about three years and I learned a lot. mean, you know, when you listen to real estate entrepreneurs and they make the business sound easy and simple, one of the things I think everybody leaves out is like thatA big majority of getting into the business is almost like learning how to deal with the unsophisticated side of real estate, which is like managing the trades. A lot of people want to kind of get up high up here where they’re like acquisitions, reselling at the end or dispositions, and looking into raising funds and communicating with the lenders.
Dylan Silver (09:19)
Yeah.Austin Schmidt (09:35)
and kind of float up here and hover above the actual operation. And that was not really in my DNA. And that was probably part of the reason why the guys that I teamed up with locally in Denver ⁓ saw some value in me because of the construction background that I had. ⁓ So I would say probably the most valuable thing I learned in the first year was kind of how to take your level of where you operate and pivot up and down. ⁓and not just float up here at the owner side and be able to float at the operator side and the owner side and bounce between the two.
Dylan Silver (10:06)
Right.Help me understand the journey from being involved in acquisitions there to then scaling to where you are today as a developer. Was it a linear path? Did you have your eyes set on, I’m going to be a developer? Or was this a natural progression where you started to see that this was something that, you were both interested in and also, could scale a business.
Austin Schmidt (11:13)
Yeah, I think one of the reasons why it morphed over time was I had a background in new construction and I understood it, I liked it. It’s kind of a part of the business that…people don’t pivot between kind of the distressed assets and new construction a lot. And I think one of the reasons is because a lot of times people get in the distressed assets and they’re looking at it as like an acquisition, a shorter timeline for renovations, whether it’s on the apartment, multifamily side, or just fixing, flipping a home. I always enjoyed like the higher quality, higher style projects. ⁓
Dylan Silver (11:36)
Right.Austin Schmidt (11:57)
And it gets very challenging to do that in the renovation side of the business. And I mean, you can definitely do good quality, but I feel like, you know, the overarching scope of what you can put in a deal kind of limits where you can go with it a lot because you have to be careful of what your back-end sale is. ⁓ So the way I kind of pivoted was obviously like, ⁓ it was a recession.Dylan Silver (12:25)
Yeah.Austin Schmidt (12:26)
that the fix and flipping business and acquiring distressed apartments was a good model for that. And then I saw the business kind of turning on the uptick in about 2010, 2011. And it started to, I started to see that deals were penciling on the underwriting side for new construction. And that was really what I wanted to make our primary focus. So, I mean, I literally just,I literally just stuck my toe in the water and started jumping right into deals. one of the things that one of my mentors taught me was in order to really go from working in the distress side of real estate to working as a developer in new construction, you have to really spend time, get your finances tight, become what I like to call kind of bankable. ⁓
because you’re going to borrow a lot of money from banks and banks lend money to the people that they know like and trust that they feel like can fix problems and that they feel like can get from A to B on a project and finish it. It’s probably the most important thing that people overlook. that room, yeah, in that room you’re not the customer. The bank is the customer and you’re kind of there to provide
Dylan Silver (13:41)
is being vagabond, yeah.Austin Schmidt (13:51)
a good operation, good underwriting, and a path from A to B to get finished and prove to the bank that they should do business with you. That was pretty good advice, honestly, to get.Dylan Silver (14:03)
I wantto pivot a bit here, Austin, and ask you about the vertical integration of your businesses. We were talking before the show about this and also how you haven’t limited yourself to one asset class, one deal structure, or one type of transaction. Walk me through some of that and how you have approached your real estate business as a business.
Austin Schmidt (15:13)
Yeah, so another item that one of my mentors ⁓ gave me lot of advice on early on was about like to what you were saying, Dylan, like vertical integration, like a lot of developers kind of, I noticed a trend that they had the new next best general contractor every two years. You know, they would find someone, they’d be like, my gosh, this vendor is great.You know, they take care of things, they communicate well. Well, you know what happens? People get divorces, people get too busy, people start to lose focus on their business. And then all of a sudden you’re their customer and you are the investor that has a return to try to yield to either your investors or yourself. And you’re out of control of that deal. so like being that I had a background in engineering, I became a licensed class A general contractor.
in like seven counties and basically created my own construction company from the ground up in 2009. And that morphed into, you know, a team of 12. We have everything in house from underwriting to interior design to project management, management, accounting. You know, we raise funds on the family office side and friends and family side.
and structured that as well. Got great attorneys on our team. ⁓ I kind of just looked at it as it needs to be a one-stop shop to create control. ⁓ And then we’re really selective of what types of vendors and subcontractors we work with. Like we actually operate our construction company as if it was a construction company for hire. So we measure our progress, we measure our results. ⁓ You know, when we see a vendor that
Dylan Silver (16:43)
Right.Austin Schmidt (17:03)
isn’t quite pulling their weight for the results that we expect. I mean, we literally work to replace that thunder ⁓ right away.Dylan Silver (17:10)
Iwant to ask you about the aspect of being a developer and owning these projects because I think for most people when they think of developers they think of build to sell, build to sell, especially in the residential space. You’ve taken a different approach. A, how did you get to that approach? But also two, is this something that is becoming more common in the development space where developers are owning?
the buildings that they develop.
Austin Schmidt (17:41)
Yes and no. I think it’s smart to have a business that has a percentage of your annual workflow that’s going to be for sale. That’s what creates the cash flow coming in and out of the business. Our construction company does do fee-based projects too, so we do some consulting with other developers to help them underwrite their deals.And we either charge a percentage to kind of help them underwrite and flow through like their bank, their bank approval and draw process with the builder they hire or they can hire us. ⁓ So we’ve created kind of a revenue model for like the for sale housing, you know, the consulting side. And then we have a percentage of our annual output every year that is projects that we’re willing to own, build, develop and operate and continue to hold them. Whether it’s a
You know, we built a couple of express tunnel car washes that we own and operate. And those are like separate entities. We brought on an operation partner that’s a partner in the deal. And then we obviously own a bunch of apartments, ones that we’ve been, you know, raising capital for that are larger deals that will have like, you know, 10 to 12 limited partners in each deal. And then ones that we just outright own by ourselves. So.
Dylan Silver (18:54)
Right.Austin Schmidt (18:55)
I think it’s important to kind of have a mix because you never really know which section of the business has been outperforming the other based on the economy or what’s going on. you know, I saw developers that focused only on like for rent product kind of struggle at times and have much income coming in. And then I saw developers that focused on only for sale product struggle when there were times that they didn’t have as many.Dylan Silver (19:13)
Right.Austin Schmidt (19:24)
successful sales coming in as well. So we tried to kind of create a mix so that we could have the for rent product help us through the bumps of this for sale cycle and the for sale product help us through the bumps that could happen on the for rent side. So it’s good to have a mix, kind of keep multiple plates spinning. ⁓Dylan Silver (19:45)
It’sgood to be diversified, know, not have all your eggs in one basket, especially when you’ve been in as long as you had. You talk about, you know, 2008 to today, and we’ve probably seen however many market shifts during that time frame. And I feel like we’re going through one now even. We are coming up on time here though, Austin. Where can folks go if maybe they’re interested in reaching out to you? Maybe they’ve got a deal they’d like your feedback on or they may be.
Austin Schmidt (20:01)
Yep.Dylan Silver (20:10)
and an aspiring investor or developer themselves and would like maybe to get in touch with you and see what your feedback is on their journey.Austin Schmidt (20:17)
Mean anyone can hit me up on Instagram. I’m Austin Schmidt to 2258 ⁓ Also are on our website, which is lux, L U X – builders .com ⁓ We currently look at deals in Southern, California, Arizona and Colorado Not a plan right now to expand outside of those three markets But yeah, I mean we’re always there to be like a helpful hand lend what we canLook at partnerships, ⁓ you know, make deals work, you know
Dylan Silver (20:51)
Austin, thank you so much for coming on the show here today.Austin Schmidt (20:54)
Yeah, for sure.
