Latest / Real Investor Radio Podcast / Ep 32 | Austin Carroll - Building Generational Wealth and Pivoting to Commercial Real Estate
Transcript
- Craig Fuhr (00:04.566) Well, hey, this is Craig Fuhr with Real Investor Radio. Welcome back. Joined here with Jack Bevere and Austin Carroll. We spoke with Austin on the last episode. If you didn't catch that, I would tell you to go back and check out that episode for some foundational. And we're gonna jump into this episode with Austin again and talk about sort of how he scaled his businesses and has pivoted to some others. Looking forward to hearing more. Austin, welcome back to the show. Austin Carroll (00:30.867) Hey, thanks guys. Craig Fuhr (00:32.258) Jack, good to see you. Jack BeVier (00:35.275) I'm very excited about this episode. Austin did a great job digging into his career and how he's gotten to this point in his real estate investing career. But then he's doing some really interesting stuff that I'm excited to learn about stuff that I don't know a whole lot about. So, dude, thanks for taking the time. Really appreciate it. You did a great job of teasing some topics for this episode. So why don't you take us right into it? Austin Carroll (00:57.257) Yeah, do you want to start with generational wealth? I think it's an easy, kind of a fun little thing. Cool, so I love that you guys had Alex Hermosy on a couple episodes ago, and loved what he was talking about with his fund is for generational wealth. And it's a term that was thrown around a ton inside of my spheres probably four or five years ago. And it was always like, what does that mean? What is it? Let me put, I'm the guy who likes to get specific and put a model behind it. And so, Jack BeVier (01:01.067) Let's do it. Jack BeVier (01:06.752) money yet. Craig Fuhr (01:18.558) Mm. Austin Carroll (01:26.797) For me, people would be like, oh, well it means that it's gonna keep going, right? You're gonna have enough for your kids. And they would point to a couple different examples, the Rockefellers and the Vanderbilts and all of these, dig into those, those are fun stories. And to me, I developed a, specifically how do I know that I've created generational wealth? When do you know you've gotten there? And there's kind of two things for me. One is that two generations of my bloodline, can severely mess up and there's still wealth to be distributed. So I gotta build a model for that, right? Like, you know, how does that happen? Right, and so that's my first question. And then the second one is, how am I actually raising my kids today? We got a two and a half year old and a six month old. And I think about that a lot, right? Like, is it important for me to be home at dinner every night, three nights a week, five nights a week? Like, what's important? Like, do I... intentionally spend the mornings with them versus getting straight into deals? When my brain is super excited to go down with this deal, am I taking the time to be present with them? How does that actually relate to generational wealth? I just wanted to put some, for anybody that was like, oh, I like that concept, but I actually don't know what it means and I don't know how to do it, is monetarily, which I think most people are talking about monetarily, I think about it in generations and how can I create a system that lasts that long? and then secondarily, how am I actually raising my kids? So hopefully they're not one of those generations that really messes it up. And then that's gonna pass down, right? So anyways, that was just something that I was like, I'd love to share that, so. Craig Fuhr (03:05.246) And it's obviously a concept that maybe wasn't shared with you when you were younger. So this is something that, yeah, exactly. Jack BeVier (03:05.469) So what's. Austin Carroll (03:11.369) lot yeah. Jack BeVier (03:13.684) So what's the model that you are using? Austin Carroll (03:18.625) So for the generational, like passing it down, one of the best models is a life insurance model. If you look at what the Rockefellers do is they have enough money that funds life insurance. So you have a new baby, and I'm probably butchering this a little bit, like look into it deeper. But basically like I have a baby, the Rockefeller organization, you know, fund, trust, whatever, buys that baby. Like let's call it like. a three million dollar policy and funds it for the first 10 years of their life and then it keeps funding itself. Now that baby, their whole trust is pulling from that. So now you've got a huge cash value from that life insurance and so they can pull the whole cash value. It doesn't mess with the trust at all. And then they've got money to get them started and things like that. And then if they die, let's say they become a drug addict and everything messes up, well, the life insurance policy... pays back the trust. And so you've got this really interesting, yep. Jack BeVier (04:17.803) It's like a built in hedge. If they, if they screw up, they're only screwing up their portion and the life insurance companies, you know, cut is the only piece that's left the system, so to speak. Austin Carroll (04:28.289) Yeah, yeah, and if you look at it, I'm pretty sure that this is the case, but Chase Bank was literally kind of meant to, it was seeded with the idea. So you've also gotta have an organization that's gonna last that long, right? So, I mean, obviously Chase Bank has done a great job of growing, and it might be JPMorgan, I forget which one it is, but one of, I mean, they became each other. But yeah, so that's the model for, it's not your most efficient model for your cash, right? You could have a bunch of money and it would be more efficient. but it's a model that it lasts through generations. And so really good trust management and using life insurance in some smart ways is kind of how you do it. Craig Fuhr (05:05.442) Chuck, I'd be shocked if you hadn't done some research on this. Jack BeVier (05:09.203) Well, I have I have done some research on this for other folks. But actually, yeah, I'm gonna maybe steer the conversation a little bit sideways, just because I'm curious. So particularly Austin, given your background, do you think like, how do you think the generational wealth is, is sell is the is that as a as a valid goal self evident to you like that doesn't require explaining? Because I've struggled with that a little bit that like because as you see folks who like, you know, hand down money to their kids, and then their kids aren't the one who earned it, right? So they don't have the same like attachment to it the same sense of self worth through the accomplishment of having done it. Does growing up with money make you happier make you a better person? Are you doing your kids a favor by leaving them a bunch of money? Like I feel like that's often when we start a conversation, particularly that has to do with generational wealth. kind of taken for granted. And I'm like, Whoa, I'm not sure that the pre you know, I'm not sure that I agree with the assumption here that this is like a self evident thing that we you know, that is that is doing good for our family. Frankly, I don't know what you're talking about as someone you know, as a working class, you know, as a working kid, you know, what do you think about that? Austin Carroll (06:19.309) Yeah, I- Austin Carroll (06:24.245) It's number two. It's the second part of that, which is how do you raise your kids? And I think it's so interesting because I think about it all the time. I'm probably gonna do more physical work when my daughters are teenagers so that I can do it beside them, to show them like, and there's schools of thought, right? Like you could be like, no, like we pay people to do that because our time is valuable. Or I teach them that you can do anything. Right? Like that's something that's been super important to me is that like, I'm just confident. Like if the lights go out in here, I'll figure out how it works. Right? And if I don't, I'm resourceful. So I think that's number two is like, how do you design something? And, and some like the Rockefellers or another organization that have, they've designed family vacations, family things, right? You hear the Kennedys and they've got a Joanna's port, right? Like they always went there, right? There were these, uh, traditions and things like that, that you pass down and that became their identity for good or for bad, right? Like both of them. but it's how do you actually, it's a good question, and I think the answer is, if you're just gonna go put your nose to the grindstone until you're 50 and then have $50 million to pass down, yet your kids never got to spend time with you, working or learning, you sub that out to, you know, whoever, nannies or anything like that, then like you're not passing down your values and that's how you get the messed up generations. And so I think you just have to be extra intentional, just like you're intentional in your business. Which is hard sometimes because it's like I could do more. Like let me work 80 hours a week, I want to. But it's like I'm rocking my six month old to sleep and there's a part of me that's like this is a waste of my knowledge, my energy and things like that. And then you look down and you're like but she's gonna be so much more comfortable with me as a dad because I spent this time together. And so anyways, it's just something that you think about but I think that's number two. Jack BeVier (08:11.724) So talk to me about that. What are your plans? I know your kids are really young right now, but are they going to be going on site visits with you when they're five? You throwing them in the car seat and having them walk through vacant houses and stuff? What's the plan there? Austin Carroll (08:25.325) I already take them. Yeah, yeah. Emory, my older one, she was, you know, we went and so I kind of tease that we're starting a co-working business in a downtown Towson office building, which by the way, when we talk about that, the financing you guys were talking about and Jack, I know you were like kind of probably like ribbing me in the back of your head when I was telling you the terms of the loan that we originally get in, it got denied. So now we're a lease option into the building. So like it's fine. It's like the pivot, right? Like you figure out how you. how you pivot to it. But we're walking there, it's 11,000 square foot floor. I'm walking there with her, we're talking about it. I bought a house, it's titled in my name, but in my brain it's hers. And I talked to her even today, two and a half years old, I talked to her like she's making the decisions. There's a tenant coming in, they have a dog. Should we charge them extra for that? How long should we do the lease term? How should we charge it? And it'll get much more fun when she's like seven, eight, and you can actually go in and. and I intend to let her make decisions with that. I think that's a huge part of it. She comes on showings with me, right? And it's just getting used to some of this stuff, but I think given some sort of responsibility, and then for me, a value that I care about is openness. And so, they'll know how much money we have. I had a vague sense with my parents, but there were certainly times where I don't know, and I want them to know in family meetings that we have, like, What are our values? What are we doing with our money? What choices are we making? And then part of my dream is I wanna have, rather than a beach house or something like that, I wanna have a vacation farm that we go to. And so I was thinking about it, because all the rich people in Texas have ranches. They don't have beach houses, they have ranches. And so I was like, why don't we do that here? I'll buy a Thurmondt farm or something like that, and we'll go there on the weekends kind of thing. Jack BeVier (10:21.235) What if what if she's so this is not really real estate conversation, but it's you know, it's related. What if she's an artist? What if she has no interest in money? And you know, like, you know, maybe I have a, I often see, you know, the next generation, they're not their parents, right? Like I have a, I have come to believe that I don't think the personality is genetic. I think lots of stuff is genetic, but I don't think that I don't I think that you can have kids that are just not, you know, you know, the progeny of a business person is just maybe not a business person. And there's nothing, and there's nothing wrong with that, right? They're just not, that's just not there the way that their brain is structured. You know, so, and I'm sure you've seen, you know, examples of that. Like, so what if you've, what, what if your kids end up just like not ha not having any interest in real estate investing or business in general? Like how, you know, how does this play, how, how will this plan get affected by that? Austin Carroll (11:15.905) Yeah, I think the beautiful thing about real estate investing is it's not trains, right? There may be, like you may never interact with a train in your life. And so if your family business is trains, then like, okay, cool. You might never like go down that. If our family business is investing, like not just real estate investing, but investing, what I mean by that is businesses in addition to real estate. And so businesses are people. So I want you to understand people and I want you to understand real estate because you're going to have to live somewhere. You don't have to invest, you don't have to do any of that stuff. But if you understand people, and I would love for you to do something more entrepreneurial, but I'm totally cool if you don't. Yeah, if you're an artist, I mean, honestly, artists are probably some of the most entrepreneurial people as well because like how many jobs are like, you're an artist. Yeah, very few of them. And so I think there are the, you pick out those macro principles. That's what I care about way more than I care about. Are you learning how to manage your expenses on a rental property? Jack BeVier (12:15.688) Mm-hmm. Austin Carroll (12:15.841) I just want you to know that there are expenses and that you can manage them, and then you can pick that up and put it anywhere else. In my life, I have expenses, I can manage them. I have to live somewhere, what should I do? Let me just be smart about this. I actually think that the things that I try to cultivate more, and my wife is incredible at this too, I'll give her way more credit than me. She teaches me every day. But it's curiosity and it's confidence. And if I can foster curiosity and confidence in my kids. I think we're going to be all right, no matter what they do. Jack BeVier (12:50.055) Hey, Craig, you're muted. Austin Carroll (12:50.285) Kaga. You did. Craig Fuhr (12:53.558) Sorry guys, I'm dealing with a weeks long cold here, so I've been coughing offline. I would take a slightly contrarian point to what Jack said in that what I think I've noticed as I observe people is that our gifts, the gifts that we are sort of given at birth are magnified in us from our parents. And so I find that my mother is very much a... a person who likes to be in the in the sort of the center of the mix and she's very ebullient and she's all of those things and so it should come as no shock that I probably have that even more magnified. What I what I don't think that I learned from my parents and I really appreciate what you're intending to give your kids is this sense of what are your gifts? It doesn't matter what you do. it's how these how these gifts are manifested right and so if I look at my son who's now 17 who I used to take into all of my flips and worry about if he's got half of his allergies from walking through dust filled you know asbestos filled you know like yeah and by the way teach your daughter never to pick up the bottle that looks like apple juice yeah ask me how I know it's not apple juice Austin Carroll (14:05.58) Mold. Jack BeVier (14:06.495) Yeah, black mold everywhere, yeah. Austin Carroll (14:12.319) Oh. Jack BeVier (14:13.604) Or do they open the refrigerator? Don't open the refrigerator. Austin Carroll (14:16.569) That's a story over beers. Craig Fuhr (14:20.666) So anyway, what I find that my parents never sort of discovered in me or sort of helped sort of grow in me was, hey man, this is what you're really good at. This is how God made you. And so what I think I've recognized in my kids is that, and I'm not trying to steer them into a vocation. more so than I'm trying to steer them into what I think might really sing to how they're built. You know, Austin Carroll (14:53.357) Yeah, and I mean there's so many different things, right? Like you get what you reward, you know, you're either providing a example or a warning, you know, and it's like, like I find four leaf clovers, like I've got, you know, Jack knows this, like I'll like whip him, it's so weird. Jack BeVier (15:05.111) weird thing man it's like it's like it's like odd and my cousin actually my cousin grace he does it too and i'd never seen it before and then we're playing ultimate frisbee and every time we play ultimate frisbee austin picks up one or two or three four leaf clovers and then i go try looking for them and i can't find every anywhere and i'm like this guy's got a fucking horseshoe up his ass Austin Carroll (15:21.82) Hahahaha Craig Fuhr (15:21.934) I'm out. Austin Carroll (15:27.089) So here's the difference. I thought about that because it kind of bothers me. Like, why do I find it, other people don't? And I think it relates back to your kids. At some point, I think I was rewarded because I found a four leaf clover and my mom and dad were like, that's the coolest thing ever. So now I'm a little kid and I'm like, I'm going to spend hours looking. So like, Jack, you can't find them now because you're spending hours in your late 30s trying to figure that out. I was like, five doing it. And so I was rewarded for it, and then I did it a bunch, and then I continue to be rewarded, right? Like I find it in Jack's like, what, like, how can you do that? And so my brain just picked up that pattern, right? So we're like rewarding these things, and it gets like really interesting. So anyways. Jack BeVier (16:07.087) I do think that I appreciate your guys comments on that. And I do think that real estate is a great industry. It's broad enough that it requires all kinds of people. And so yeah, building a foundation of real estate knowledge in somebody is, it's hard to conceive of a personality that can't benefit from that body of knowledge. So I do appreciate that point, yeah. Craig Fuhr (16:28.47) Absolutely. Yeah. Austin Carroll (16:30.189) Yeah, the challenge is when you try to force it. And I do think that people try to do that. Oh, you're getting in the family business. Oh, you know, whatever. And yeah, no. Jack BeVier (16:36.383) You're going to run this one day. Yeah. Craig Fuhr (16:38.046) Never works. Never works. I mean, how many how many entrepreneurs do we know that have great businesses that they that they absolutely have pegged one of their children for and the children want nothing to do with it. See it all the time. Jack BeVier (16:52.671) So, hey, Austin. So, from the last episode, we learned about your early career, worked at a development company, became a real estate agent, started doing house hacking, started building your own rental portfolio from that point and grew the rental portfolio as you moved to Baltimore, got greater expertise in the construction side of things. And then most recently, you've done some pivoting into the commercial side of things. One, why, right? Like there's not enough houses in Baltimore to fix up. Like, you know, so why the pivot to commercial? And so what, you know, what's exciting to you about that opportunity and what have you learned? What's been your experience so far as you've undertaken these first couple of projects? Austin Carroll (17:39.233) Yeah, absolutely. Well, you guys are buying all their property, so it's really hard for us, little peons here. Yeah, yeah, I'm like, hey, you guys aren't at commercial, I'll go there. No, yeah, right, yeah, oh no. So, there was a deal, like it was led by a deal, like my whole thing is that the numbers will drive me more, like my buy box is more numbers than it is, like there's some things that like in our single family homes, like Jack BeVier (17:42.61) Thanks for watching. Craig Fuhr (17:43.143) Ha ha Craig Fuhr (17:50.943) Oh, just wait. Austin Carroll (18:08.417) I like things with the front porch, right? There are some characteristics about it, but largely it's the numbers. We had this wholesaler that sent this deal out like 10 times. It was as COVID was starting, that was our first commercial property. We had owned some mixed use, two residential upfront, a salon on the first floor kind of thing. We had a little bit of exposure to commercial, and I had done some commercial working for the McKitty Group. I had a little, very, very little knowledge. And this deal just kept like hitting me across the face. Like it was just coming up and it was like when you analyze tons of properties, you recognize patterns and it doesn't matter if that pattern is something slightly different. Like you still pick it up. And so that pattern was just the ratio between the purchase price and the monthly rent. And so it was advertised, I think it was like 1.6 million or something like that. And it was bringing in like 18,000 a month. I was like, okay, like that's pretty good. I'm sorry, it was like 12,000 a month, but it had vacancies. And so I was like, that's pretty good, that's pretty good. You know, what I know about commercial, maybe it's triple net, so like you don't have real estate taxes and other stuff to pay, like this seems pretty good. And I was just like, somebody's gonna gobble that up. And then it kept coming across and coming across and I was like, finally I picked up the phone and I called her and I was like, what's the deal with this? She was like, well, we had it under contract and it came back out, you know, like I've had some interest, but like nobody's interested. I was like, all right, let me go check it out. Jack BeVier (19:18.643) Yeah, expense ratio is lower. Yeah. Austin Carroll (19:35.533) So I went and checked it out and it was this really interesting property. It's probably the most crossover to residential commercial that you can have. It looks like 18 town homes built and it's an upper and lower unit. And so they're like 600 square foot units, 650 square foot units. And it's just a bunch of those. And it was like, yeah, kind of just the ownership is fee simple. So yeah, but like we could actually, we could probably turn them into condos, make some good money. Jack BeVier (19:52.543) Like office condo, office condo style. Austin Carroll (20:01.825) So, and it was like dilapidated parking lot. It was stuff we knew how to do. Like, I know how to get a parking lot done. I know how to do a roof. There are residential HVAC units in each one. It's just paint and carpet, you know, it's on slab. Like, it's easy. And so, we were like, this like really makes sense. And I think everybody was kind of running from commercial and COVID. And we just took a contrarian view. I think anytime you can have a contrarian view in investing, you're gonna have some sort of leg up. Now you might be wrong about that. Craig Fuhr (20:11.388) Mm-hmm. Austin Carroll (20:31.585) you'll lose money. But if you're right on contrarian views, that's probably where you find some of your best deals. So whether it be a part of town that other people don't like, whether it be a block other people don't like, whether it be I'm good at fixing up really, really dilapidated stuff versus a kind of lipstick runner. And so this one was we had luckily gone through the process for a property that we bought in our LLC with a community bank and just refinanced it. And they were like... We're gonna do this small deal. Tell us when you get something bigger in Baltimore County." We kind of laughed at each other and we were like, yeah, it's not what we're doing. We're doing city town homes. They're gonna be small deals in the city. And then this deal comes across, so I send it to the banker. And so again, it's like the right things come at the right time. We were doing the right activities otherwise, getting financing lined up, that I could send that right to them. And they said, yeah, we'd love this deal. And then we walked through and it had a bunch of vacancies they didn't advertise. And so it's like, okay, cool, we could do this. And so we negotiated that. And then the question was, how do we raise money for this? And we didn't have enough money to be able to buy it, you know, 20, 25% down and do the reno and all that stuff. Jack BeVier (21:40.646) And you never done a syndication before. Austin Carroll (21:42.709) I'd never done a syndication. We had raised a lot of private capital. So we had done a couple hundred thousand dollars at different points in time that we raised. And we would just pay, in the beginning we were paying 20%. It was just like promissory note. We need to get something done. It can't be recorded against the property. We had worked down to like 10. Now we're at 9%. And so people in our sphere or our clients, this is where you get some crossovers. So our real estate sales clients, when they sell a house, it's like, do you guys want to invest with us? we have a place that you could put some money, if you trust us and you've built trust through that process. And so anyways, we just went to some of our top lenders and we just said, everybody wants a slice of equity. You know, like anytime you're raising money, people are like, all right, well, like, how do I get the upside, right? How do I get equity? We said, this is the first time that we're gonna have something like that. And so what we looked at was the traditional syndication model. And like, if I were just to like severely simplify it from what I understand the... syndication models, we're gonna go buy something really big, we're gonna raise a lot of capital, we're gonna charge fees, and then a lot of times we're gonna make money on the sale of it. We might not even make money other than our fees for three, four years, and then we're gonna proform a rent growth and forced appreciation, and we're gonna sell it or refinance it in three years or five years or whatever. And it's the model, and the problem with that, and Jack, I've heard you talk about this, but I'm always like, I want my incentives to be aligned. Craig Fuhr (22:59.67) That's the motto. Austin Carroll (23:08.569) with my employees, with my investors, with anybody that's in my sphere, like I want our incentives to be aligned. And so like you could see a world, and I think the world is happening right now, where syndicators are like, I'm not gonna get that out sale in two years. You know, I don't think it's gonna be there. So let me give the bank the keys. And my equity is wiped out or they'll get whatever they get. You know, like things like that, because it's not aligned, they don't have big skin in the game. And our other thesis is that we just wanna own as much as we can. Like I wanna own as much as I can. And so we ended up putting a model together where we own 50% of the building and then we just priced equity. So I just said, Jack, I think that one was 85K for 12 and a half percent ownership. So I'd say, Jack, you give me 85K, you get 12 and a half percent. That's of cash flow, that's of like literally anything that comes. There's no like preferred, it doesn't, like we're not getting fancy with it. We're just like, you're buying equity. And that actually works really well in that like middle market. That was a $1.6 million deal. It's worth probably about 2.8 now. We put about 350K into it. So those guys, I price that equity low, honestly. Looking back, I was like, that was very low to price that equity. But that was just how we did it. Jack BeVier (24:20.627) Did you, when you, when you price that equity, so you, you're basically mark, you're basically marking up the equity of the deal, right? Like there's, there's only, you know, you're raising 500 grand, but you're saying that 500 grand is going to come in at a million dollar valuation so that you get to keep the other 50% for yourself. I'm making up numbers here, but is that essentially what you're doing? You're saying like, Hey, for, for having found this great deal and for doing the work to add value to this deal. Austin Carroll (24:42.67) Yes. Yeah. Jack BeVier (24:49.987) I'm going to put a number on my off balance sheet equity, what I've brought to the table from a value point of view, and you're going to buy into that as just money. Austin Carroll (25:01.005) Yeah, and there's two ways to think about that. One is if I want the traditional route, I'm gonna throw an acquisition fee on it, I'm gonna throw a project management fee for the construction that I'm gonna do, and I'm probably gonna make up those numbers, right? And then I'm gonna throw my, although I'm just gonna fee it so that I get to the same place, but you as Jack are like, okay, cool. So at the end, I just wanna model what my best case and worst case scenario is for my equity. And I'm trying to get them to like a 20%. Craig Fuhr (25:13.286) Mm-hmm. Austin Carroll (25:29.753) IRR or something, a couple other things we look at, payback period. Those guys got fully paid back within, I think it was 20 months. They've got that and then they've just got an annuity. When we sell it, they'll get a big payday. Then in the meantime, they get tax advantages. It was just looking at how do I most closely align my investors with me? If I'm a 50% owner in something, you as an investor are going to be pretty sure I'm going to be having your best part of interest. I've got... I own half of it, right? I'm gonna be doing the smartest things for the building. Jack BeVier (26:02.355) Did you take in any fees on the deal? Yeah, so you because you've got indicated no because you've got other sources of income, you're able to really just work this deal based off of sweat equity not have to fee it which is you know, yeah, I do from an alignment point of view. I love that right? Whenever I find a spot, find a situation where the sponsor is not charging a bunch of fees. I believe the alignment story right because I see that there's no way that he's making money unless I make money too. So yeah, I do like that. Austin Carroll (26:32.429) Yeah, I'm sorry, I do charge property management, which is the same as what we would, but it's not an asset management. It's like legitimately like we're calling the dumpster company, we're taking, you know, and that's our property management division. So I'm sorry, there is that fee in there, but that's it. Yes. Jack BeVier (26:36.52) Yeah, sure. Jack BeVier (26:44.411) Yeah, yeah. Yeah, certain out-of-pocket costs, yeah. Craig Fuhr (26:47.598) Some of the smarter guys I know in self storage right now have just built very, very simple models just like that Austin, where it's like, you know, I'm willing to give up 50% of ownership to equity partners. They've got very little of their own skin in the game, but they're working their asses off to bring the assets up to par and to manage them to a place where they're either going to sell them at some point or they just got way more equity. So that's fantastic. Jack BeVier (27:16.627) So you've made the transition with that deal into becoming an office landlord, right? And now you've taken that even the umpteenth step forward beyond that to now your most recent new stuff has been on the co-living, I'm sorry, co-working side of things. So like the high, I was going to ask you, how did you learn how to become an office landlord? But now what I really want to know is how did you learn how to become a coworking space office landlord, which is like, you know, the operational extreme of that business model. Austin Carroll (27:49.025) Yeah, it's an actual business. I think the thing with investing in general is you have to look at each of your business divisions as a business, right? Jack, I'm sure you look at your lending business, right, and then your portfolio business and your flipping business. They're all their own businesses. And so the hunch that we got was that these 600 square foot spaces rented so quick, and we were charging reasonable rent, and it was just the small operator that's like, I need a... I need a place to go, right? Like your lawyer, your dentist, your accountant, they were like, I don't wanna go have this crazy like, oh, what's my core factor and triple nets and all this other stuff. Like, I just want a simple. And so we just took that model and we just said, hey, your rent's 900 bucks a month. And like you pay for your electric and internet. And you got, yeah, you got parking spot. So that was like in the office, like we started to understand that. We bought another office, but the one I'm in right now actually, and it was near the other one. Jack BeVier (28:36.381) and you have a parking spot. Austin Carroll (28:47.169) did the same thing, like big deferred maintenance. So we took like our model of the burn method and put it to commercial. And then we saw the same thing. Okay, there is a starved demand for people wanting to have small space that has easy flexibility, that's not complicated to get into. And so it actually started with our third big syndication deal, which is a big property on Ballard Road. And we were gonna park. partner with a coworking space. We had worked out of a coworking space for a couple years. And I think that my generation is the next one that's coming into the business world. So how do I like to work? That's probably how a large portion of the next generation is gonna like to work. And so then you look at the options for people. And there's just not great options. And I can't find a bunch of buildings like this that I can shrink down into a bunch of small square footage. that is easy to do like that. So we just said, why don't we do, that has a large events portion to it. So we said, okay, we're gonna go in and we're gonna operate coworking. And the question was, we bought the building, it was a fantastic deal. And so, and we're in construction for that one right now. And so we had three. Jack BeVier (29:56.523) When'd you put that under contract? Because the timing matters here, right? Austin Carroll (29:59.405) That one was, yeah, that one we've owned for about a year. And so put it under contract a year and a quarter ago or so. That one was on the market, it was just terribly marketed. Wrong square footages, you know, it's about a 22,000, no, sorry, 26,000 square foot building. It was marketed as like 17. Jack BeVier (30:15.004) In a great location though, in a pretty A location, right? Austin Carroll (30:19.294) This one's on Bel Air Road, so I would say, yeah. Jack BeVier (30:20.755) Oh, the Bay, the Leroy one is that one. Gotcha. Craig Fuhr (30:22.076) It's a long road and for those of you who are not from Baltimore, I'm dying to know where on Bel Air Road. Austin Carroll (30:28.565) It's right in the county in Overly. Yeah, yeah, it used to be the Overly Event Center is what it is, so if you look that up, it's super cool. People have like, it was a bowling alley at one point, I mean, it's a really cool property. And we bought some properties around that too. But anyways, so that was our, we could have three things that we do. We either partner with a coworking space that we like, and honestly there just weren't that many great ones in Baltimore. Craig Fuhr (30:31.079) Oh, that's fantastic. That's great. Jack BeVier (30:31.115) to serve the life. Craig Fuhr (30:35.332) Oh! Craig Fuhr (30:41.815) That's awesome. Austin Carroll (30:58.645) The second is we could franchise something, and we went down that. We interviewed probably 10 different franchises, and we're like, okay, should we do this? Or we start our own. And one of my agents is a very entrepreneurial guy. He's a part-time agent, and he wanted to get more into, okay, I wanna have something that I do entrepreneurially. And he's from hospitality background, so I was like, dude, you would be awesome to run this business. And he was like, I would love to run that business. So that was like, it was a little bit of the who as well. And so, you know, he's. Jack BeVier (31:32.307) So let me let me interrupt you sorry. So like, because I feel that it's a very contrarian thing to, you know, we worked filed bankruptcy two months ago, and they're like the name in co working. And so, and I do think that like human psychology and market psychology tends to have this bug to it. So I would I would think that if you ask the common person walking down the street or even Austin Carroll (31:34.2) Yeah. Jack BeVier (31:59.507) or even folks in the know, right? Even if you ask your local banker like, Hey, I'm, I'm starting a new business. It's a coworking space. It's, it's, it's a coworking space. 60 days after we work files for bet, the only brand that they know in that space is filed for bankruptcy. They'd look like he look at you like you got five, you know, three heads. Why did you guys think that you could do it when those Presumably very smart, sophisticated, experienced people with lots and lots of money raised couldn't, you know, couldn't do this. What's different about you or your approach that you think that gives you confidence to do this when that model is, you know, in headlines for failing right now? Austin Carroll (32:44.321) Yeah, I think it's like a lot of things, sometimes the first mover is just the one that like, flails, right, like you've seen this in so many different technology types of things, where it's like, okay, cool, the next entrant learns from those guys. And so a couple different things, one is, again, it's just kind of like, what do I like? It's like the, you know, Airbnb, you know, like I stay at hotels now, right, so like I'm not gonna go do an Airbnb, like that's not what I do. So, Part of it was a little bit of market research. We'd be at tailgates and stuff and we'd ask people, like hey, would you, and resoundingly, the small entrepreneur, the insurance guy, is like absolutely, sign me up for an office and that. Because I'm in my house right now, I'm getting ready to hire somebody and I don't wanna go lease a long-term space. So I think the fundamental of it is just, you have the right location and you have the right operations. I think we look at WeWork, there was a lot of, it was a thriving business. You take any location, And if you have an appropriate rent and an appropriate build out, then it kills it. And there's actually companies coming in, there's one called Industrius, and we went and we looked at 15 locations down in DC. So we did market research. Jack BeVier (33:55.881) Yeah, talk to me about that market research process. You were telling me a little bit about that before and I was like, I was impressed. Austin Carroll (34:01.473) Yeah, we literally just were like, okay, where is the best place for coworking nearby? It's probably New York or DC. Let's go to DC and let's like literally just secret shop them for 15 different ones. And we saw so much stuff, it was so interesting. The takeaway was one, the model is fantastic if you have energy, the right location, and the right people working there, and the right processes. We would walk into places just off the street and they would never get our information. It's like that, that's a mess up. I'm telling you, I'm gonna rent from you, right? I'm a small real estate developer that needs space, and you didn't get my information. So there's some operationally things, is that most of them were changed, and most of the people that were in there were not the owners of it. And so there wasn't that care. It's like the difference when you go to a really nice restaurant versus an IHOP or something like that. And so I think the problem with WeWork was more so their capital structure, how they set things up and their growth and things like that versus the fundamental business. And how do I know that? Is because a company called Industrius was coming in with a better business model, renegotiating the rates for WeWorks and then taking over their business. If it wasn't a viable business, then some other business would move into that. It wouldn't be another, and Industrius is a great business. They were the best ones operationally designed, all that stuff. So anyways, I think part of it is a hunch. You know, like we do make bets, and that's a bet that I'm making. The bet is that operationally we can make that work. The number's pencil. The bet is that I can own the building and be a great tenant. The bet is I can go buy buildings that other people can't because I have a, you know, you have 22,000 square foot of vacancy. I'm gonna come right into that. And so those are the different bets that we're making. Yeah, and honestly, it's a business I want to own. Jack BeVier (35:50.123) Mm-hmm and immediately make it income producing. Yeah Austin Carroll (35:56.473) I would love, we were talking about on one of the nonprofits that Jack and I are on, I would love to host you guys, in a really cool space that is designed to wow people. And that's also gonna be marketing for me because maybe one of those people is like, oh, I'd like an office here. And so I would love to own that business because I will use it. I'll have monthly board games in Towson there. And I'll advertise to the community, $10 buy-in, we'll do a little tournament style. So they're like. It's just like, I'm gonna have fun with it. That's the other thing is like, what business are you gonna have fun with? And so, anyways, that was kind of a really long. Jack BeVier (36:32.531) No, I think that's incredibly interesting right now because I think that the average investor would be like, you're going to buy office buildings right now and do coworking. Like you're crazy, you're insane, you must be an idiot, right? Like the combination of those things, like the common sentiment right now is that office is screwed, particularly unless you're class A prime location office, right? But you're talking about buying like good location. you know, really depressed price because of this psychology. And then coming in with an operating model saying that, no, yeah, they just did it wrong. Right. But there is still, there's still demand for this product. And yes, it's an operator's model, but this is the way that I'm going to make buying this office building at 65 bucks a foot or whatever, like super cheap work, you know, when no one else can, because I've got an anchor tenant in my back pocket, it's me. And I can, and I know that I'm going to be able to make that income producing. And I just think that combination is really intelligent, contrarian. You know, like I just, it's the right combination of things to take advantage of the, of the, the sentiment going, being the other direction right now. And, um, like when we, when we started buying houses, it reminds me of when we, when we started buying houses, uh, in 2011 in Atlanta, like we were, you know, keep it, you know, keeping the train on the tracks in Baltimore, but we, uh, found about, found out about the Atlanta market and started buying houses down there. and went around to raise money for it. And at the time, you know, you couldn't get any debt at all. And raising equity even was like extremely difficult because everyone was like, this is the worst time ever to buy houses. You know, what are you talking about? And we're like, you know, we just thought it was a fantastic time. And we made a, you know, we did really well in that market. Because we had the, because we were like, no, we've dug in, we understand how to operate it. Like even at these depressed prices, there is a market clearing price where these numbers do work. And if you, you know, and I think that, you know, and I also believe this about office that I think five, 10 years from now, everybody who buys office over the next couple years and figures out how to get through it is going to do really well off of that. Because you know, we're not building anything of right now is office buildings because of the psychology, because of the sentiment. So if the economy continues to grow, which over the course of the next 20 years, the American economy, you know, population and economy is projected to grow. Jack BeVier (38:58.439) I have a hard time thinking that we're not going to need office space and particularly the model that you're talking about, which I feel is more demographically appropriate for where office demand is going to be. I just think it's very smart. I'm very impressed with it. I don't know anybody else doing it. I'm rooting for you on that one. I hope you'd knock it out of the park with that. Craig Fuhr (39:21.998) Yeah, that's awesome. Austin Carroll (39:22.437) I appreciate that, yeah. Yeah, it's, the thing to look at is exactly what you said. It's the contrarian view, so like I love that. But the question is like, what do I actually buy it for? Like I do, I wrestle with that a little bit, right? Like what is the right price? Everybody's like, oh, office should be, you know, like 60. Yeah. Jack BeVier (39:38.215) Is it still falling? Yeah, like it's still falling like who that we haven't really found a clearing price. We haven't found a bottom yet. Right? Like it's still there's an argument that it's still early to get into office. And I that I that I struggle with a little bit. I'm like, I love the trade. But I'm I wrestle with the timing question. Austin Carroll (39:44.694) Right? Austin Carroll (39:48.984) Yeah. Austin Carroll (39:55.397) And I do too, right? But what I know is that it cash flows. And so at the end of the day, it's like if you're like, I don't know what this house should be priced at, but it cash flows well, okay, cool. That's where I'll live at peace in that, if that makes sense. And I think the last thing that I'll say about the coworking business is, the thing that I would love to do in business is to also start other businesses and help advise and invest in other businesses. not necessarily like venture, right, but like where is there going to be a cluster of probably incubating and small businesses? It's gonna be in a coworking space. And I'm a realtor and I do commercial real estate. So when they outgrow my space, who I'm gonna like design the process so they come to us to say, hey, like we need some bigger space. Okay, let me go buy that building that you wanna go be in. Right, so like there's so many things that grow off of it that it's like. I'm going to, like we are going to figure out how to make it work because I know the business model works. And so we're gonna figure that out because that's also what I wanna do in the future. Craig Fuhr (41:02.858) Well, gentlemen, we have just a few minutes left here. Jack, is there any other thing? Any other things you wanted to share with us? Austin? Jack? We've covered a lot. Jack BeVier (41:12.659) Yeah, we covered a lot of ground there. Austin Carroll (41:16.497) Probably the last thing in our business is that I think might be interesting for people to hear is, and largely, or at least partially thanks to you all, we're shifting some of our business to do more flips. Like I kinda talked about it a little bit last episode, but the idea is that I always wanted to own everything. I wanna keep it, I wanna own it. And there are people out there under the spectrum, I never wanna own anything, I wanna flip everything. And so some of your alls, commentary on the economy and where values are, things like that, made me realize, we've got a process for doing all of this stuff, let's just ramp it up and do some flips. So I appreciate you guys for that, pushing me over the edge, I've always had kind of a little block on that, I just wanna own everything. And so I appreciate that, I think that's gonna be huge for our business, and other people might be realizing that as well. So. Craig Fuhr (42:07.894) We were obviously set up to find the deals and to find those needles in a haystack and you've been through the process many times. So yeah, I don't see why that wouldn't be a profitable venture for you. Should be an interesting year for finding deals. Yeah. Well, guys, lively conversation. Austin can't wait to come out in the spring and play some ultimate frisbee with you and Jack and find some four leaf clovers. I actually love Ultimate. Jack, you may not, you can't look at me and know that I actually love the game of Ultimate Frisbee Jack, but I honestly do. Big fan. Austin Carroll (42:39.353) Good. You will come? Okay. Jack BeVier (42:46.984) Do you? I love it. It's fun. Austin Carroll (42:48.749) That was like, there was that older gentleman, I don't know if you were there, Jack, but this older guy on a bike came and he was just riding through and he was like, hey, can I play? And you're like, all right, this guy, he's pretty old, he's not gonna be able to keep up with us. Jack's incredible, he's like a little Wolverine out there, he doesn't get tired and it's crazy. And so this guy comes out and he's just throwing these incredible passes, it was insane. Jack BeVier (43:12.763) Yeah, he's like, Oh yeah. Uh, yeah. After we get to know him, super nice guy. He's just like riding through Druid Hill Park and literally stop or Druid Park and, um, stops and it's like, Hey, you know, can I, you know, play with you guys next time in Austin exchanges numbers, of course, makes it makes a new friend immediately, of course. And, uh, the guy comes out and joins, you know, a month later and he's just, he's showing us how to throw the frisbee in different ways. He's like, yeah, you know, I, I had a pretty, like, I had a pretty steady game with my college buddies for about 23 years and we're like, what the. Craig Fuhr (43:34.747) Right, right. Jack BeVier (43:43.036) This guy is just he's 15 years older from anybody on the field and like the first in your first pick, right? Like dudes a monster. They're like Craig Fuhr (43:50.038) His name just happens to be Joe Whammo. What is this round disc thing here? I don't quite understand. Let's just be careful on how we handle the old guy things. Austin Carroll (43:54.459) Hahaha, yeah. Yep, yep. Jack BeVier (44:01.459) Yeah. Austin Carroll (44:02.478) Well, if any, I mean, so that's a good point actually. If anybody wants to play with us, we'll start playing again in the springtime. So find me on social, hit me up. I'll add you to the invite if you're in Baltimore and you want to come out and enjoy some Ultimate Craig Fuhr (44:15.634) Well, we sometimes forget this, but man, tell people how they can find you, you know, find the exciting projects that you're working on, things like that. Austin Carroll (44:24.705) Yeah, we are, so you can find me, probably Instagram is the best, I don't do a fantastic job of being on there all the time, but I usually answer messages, so it's Austin Carroll, two R's and two L's in Carroll. R-E for real estate, that's my Instagram handle. And if anybody wants to shoot me an email or anything, it's acarroll.com, A-C-A-R-R-O-L-L at kw.com. You know, I usually try to go to some meetups and things like that in Baltimore, if anybody's around, but. And then check out our coworking space. It's gonna be Haven Cowork. I don't think, Jack, I don't think you knew the name of it. We've just been, like we're like 99% sure. So like, you know, maybe that's not it. But we gotta do some trademark searching and stuff. But Haven Coworking and Towson and Overly. Towson will be open in like April. And then, yeah, Overly will be a large events part too. Like it's got like a 3,500 square foot event hall too. And that one will be towards the end of the year. So. Jack BeVier (45:08.456) Oh, nice. Craig Fuhr (45:18.094) I may stop in to stop in to Frank's pizza today and then hit you up over there and see what you guys are up to. Well, man, thank you so much for taking the time. You're obviously a busy guy, but you seem to be working that all out. And I wish you all the best with your two year old and your six month old. It sounds like they have an exciting future ahead as well. So thank you, Austin, so much for taking the time. Appreciate it. Jack, any last words? Austin Carroll (45:23.39) Yeah, absolutely. Absolutely. Austin Carroll (45:40.558) Yeah, thank you all. Jack BeVier (45:42.027) Thanks guys. Now, really enjoyed the conversation. Thanks Austin. It was great perspective and very exciting and inspiring stuff you're doing. So thanks again. Craig Fuhr (45:51.254) Well, folks, stay tuned because we have lined up a bunch of guests in upcoming episodes that we're really exciting about. We're hoping they'll be as good as Austin. We're pretty sure they will. It's Craig fear with real investor radio. Thanks for tuning in.