Land Development In The Great Smoky Mountains w/ Real Estate Investor Austin Williams

Mike DeHaan: [0:00] Real quick, guys. If you want to take your real estate investing business from 6 to 7 figures in the next twelve months, and you wanna do without being a slave to your business, then you have to check out our scale community. You can get the full details at collectingkeys.com/scale. But very basically, it is a community of like minded investors who are working to become the absolute top tier investors in their market. Along with three coaching calls per week led by Dan and myself, we also have a whole bunch of videos and materials that go into all the different SOPs that we use to run our business on a daily basis. This includes how we manage our sales team, how we hire, how we do our marketing systems, how we get the best assignment fees possible, how we do renovations, how we do all the different kinds of creative financing. And if you are serious about taking your real estate business to the next level, it is absolutely something that you should check out. So go to collectingkeys.com/scale, see all the details, and see if you're a good fit.

Austin Williams: [0:59] You wouldn't give us 12,000 six months ago, but now you're willing to give us 86. How does this make any sense? And I quickly got a good education on leverage and how bikes bring.

Dan Austin: [1:15] Hey there. We have an awesome episode today. I interviewed Austin Williams. He's down in East Tennessee in Knoxville where we have all the country music stars like Dolly Parton, we have Morgan Rolin, we have Kenny Chesney, they all called out their hometown, and you can tell it from his accent. But the thing I love about Austin, he is so stinking humble. If you go to his website and look at it, it's called compassventures.net, and just scroll through their projects, he's a land developer, you're gonna say, holy crap, this guy is doing some big things, and you would just you would just never know it by the way he carries himself, Zero ego whatsoever, so humble. In this episode, we just dive into kind of his process and how he got there, and guess what? He got there by buying rental properties, one single family at a time, and eventually got into land development, and he talks about some super cool projects he's doing, as well as a pretty awesome win towards the end of the episode where he's talking about, essentially, I think it was like an $11,000,000 spread where he was buying a crappy, low income housing apartment building, and had the foresight, and took a little bit of risk, and also it was just obviously a problem solver to get this deal done and create massive value for himself and his company there. But it's a really cool business model. He's vertically integrated top to bottom.

Dan Austin: [2:30] If you're at all interested in ever doing any land development, this is an episode you should listen to, so I hope you enjoy it. Alright, welcome to the show, Austin Williams. You're an East Tennessee guy, sounds like you're related to possibly Dolly Parton down there, I I don't know. It might be true. Yeah. There's some good country music down there. Like, my wife's a big country music person. I'm not like huge into country music, but I do know the popular people like Morgan Wallen. He claims to be a volunteer down there, and apparently, I found out just for the pre show that Kenny Chesney's down there too.

Austin Williams: [3:00] Yep. Knoxville's home to those folks, and that's just few minutes down the road. You said you live somewhere else, or do you actually live in Knoxville or a small town outside Knoxville? Small town right outside Knoxville. So we're in The Smokies. Most no Pigeon Forge, Gatlinburg. Yes. Dribble, though, is the the county capital, and we're thirty minutes from Knoxville. The house

Dan Austin: [3:19] of the county, I guess. So okay. So I definitely wanna dive into that because I got a ton of questions about Knoxville, and Mike and I did some business down there a couple years ago, and also just like The Smokies and all this stuff. I wanna talk about that. But for our audience that doesn't know you, why don't you give us a quick snapshot of like what you do now, and like kinda what your business looks like, and and what you focus on.

Austin Williams: [3:40] So our business is Compass Ventures. It's a real estate development firm. Our vision with Compass is to create a vertically integrated company that can execute any type of real estate development here in the Smokies Yeah. And really throughout East Tennessee. So what that means is having the development team, property management team, the financial department, the architectural team, civil engineering team, and then also the general contractor. So all aspects from, you know, the inspiration or design to execution all the way down to the management of the asset.

Dan Austin: [4:09] Right? So let me ask you that. Like, why vertical integration? And I ask that because that can sometimes it seems like it can go the wrong way where you're too spread thin, you're trying to do too many things, you're running essentially multiple businesses within one, But it sounds like maybe there's some benefits to you from other vertically integrated companies I've talked to and other industries. So I'd love to hear your perspective on why that from a development standpoint.

Austin Williams: [4:32] It's certainly it is complicated because you are you are running six, seven, eight different businesses. Yep. We've done, I think, a pretty good job of trying to make sure that they're all aligned and that we've got, you know, employees that really function more like business partners, and they're bonus in a way that they're incentivized to profitability, which helps us not be spread too thin, you know, keeps me not having to focus on each of those departments, but also keeps them in line. The reason we did it, though, is because we got really frustrated with the typical model of having a development company that went out and hired an architect and a GC and a civil engineer and folks that have different priorities. Right? Typical architect, civil engineer, their fees come from pumping out plans. How efficient or well designed those plans are? I don't wanna say it's irrelevant, but it's not their main focus. Right? The more fees they have, the more profitability they have. Right? That's I mean, we're all in business to try to make a dollar. And so we wanted to start bringing in those folks in house so we could then incentivize them around efficient design and timely design. And then also allow them to be investors in our own deals. And so they're, again, aligned in a way that that it really makes sense.

Dan Austin: [5:47] I really like that. So, when you're talking about incentivizing and aligning people, and I'm I'm just kind of imagining, I've looked at your website, how to get your organization, but just I'm gonna act, you know, ignorant here. So, you have you here, and then maybe you have, like, civil engineering, or engineering in general, or something like that, and the department head would essentially be a partner with Encompass Capital, so they they have an incentive to do well and to run it without you having to, like, kinda beat the drum for them, right? Is that kinda what you're talking about?

Austin Williams: [6:17] Yeah, that department head typically a bonus that's structured around department profitability. Okay, fascinating. Let me ask

Dan Austin: [6:24] you this too, you don't have to share exact numbers or details or percentages. When you do that and you have partners in these businesses, because Mike and I actually have a couple of our own, like, smaller businesses where we've partnered with people, where we're not the main shareholder. But if you have, like, a business that you've started, and it's 100% yours, how do you, like, figure out, like, how much of the company to give to a partner? Is it a profit share? Is it equity? Like, what have you done in your business? Like, then you don't have to share exact numbers, but just kind of, like, roughly your thought process around that.

Austin Williams: [6:53] That I'm not sure that I've got a good blanket answer to that Okay. Because each department has been a little bit different. Okay. And you know, I mentioned general contracting. It's actually its own standalone business. There is truly a equity partner. It was a situation where we came across a great general contractor. He's a young guy with a really, really good team. But he was new in business. He needed, you know, a little help in figuring out how to structure his business for growth and how he could scale it and then also the financial backing to do so. Yep. And so actually, January 1 is when we joined forces, and and now we got a partnership. So Nice. But he saw the vision that, hey. All of these aspects just spin the flywheel faster and faster.

Dan Austin: [7:37] Yeah.

Austin Williams: [7:37] Every time that he has a new build or a new development, someone calls his company, well, they're gonna need the architectural services, civil engineering. They're gonna need management. They're gonna need all aspects of it. So there's so many good aspects for the referral sources from each of those departments. And that's another piece that's that's been really helpful for us.

Dan Austin: [7:57] Yeah, that's good. I'm fascinated, because Mike and I are constantly looking at kind of our holding company, and like, what's the best way to set people up for success and incentivize them. But, let's talk into like, how did you get there? Because I'm sure you didn't, like, wake up one day and you're like, I'm just a real estate developer. I have a vertically integrated company. Like, where did you start out, and, like, how did that process tell us that story of, like, going to Compass Capital.

Austin Williams: [8:19] So my great grandfather started a local hardware store in 1952 that all the family really went and worked at. Now I worked at, you know, pushing a broom, carrying sheetrock, lumber, stuff like that as a kid. So I grew up familiar with construction, and then my dad had built a few spec homes, so somewhat familiar with small scale development like that. I spent seven years out of college, though, as a financial planner. Well, I noticed that my wealthiest clients were in real estate for the obvious tax advantages and leverage and all these things that helped. So, you know, three or four years into that, in 2012, we started buying single family homes. And, you know, it was interesting. So my first deal is me and an architect, 2012. We're in our early twenties, and we were buying a a 1,200 square foot, two year old home that was in foreclosure like many homes were. We bought it for $32,000. We each had $10 apiece, and we couldn't get any bank in East Tennessee to give us the additional 12,000 clothes. Yeah. So I swallow my pride, I go to my grandparents and ask for a small loan. Because they were happy to do to help me get going. Yeah. Six months later, a one of the banker calls back and says, hey, Austin. Sure y'all still have that home. You got renovated as a rent. Was like, yeah. It's, know, rented for $8,900 in the month, whatever it was.

Austin Williams: [9:41] He said, well, we can loan you $86,000. That's a lot of money. Jared was asking, you wouldn't give us 12,000 six months ago. Yeah. But now you're willing to give us 86. How does this make any sense? And I quickly got a good education on leverage and how banks think. And so we got that loan, took that 86,000, bought three more, did the same thing, bought nine more. And then you fast forward four or five years, and we've got a pretty significant value add portfolio of single family homes, storage units, you know, strip centers, office buildings, just an assortment of different assets. All value add stuff. 2,017, I partnered up with a developer who had a quite a bit more experience in actually, he had a ton of experience in development, whereas I had none. But I had a lot of experience in long term rentals where he had none. And we built a a 204 unit. Oh, wow. That was my first step into real estate development. He's now my partner Encompass Ventures. Okay. And many other things that we do. But we've done several ground up developments since then. But that was sort of the story and the progression of how we got into development. We still do a ton of value add projects, but also a lot of new construction. Right.

Dan Austin: [10:57] That's an incredible story that it seems like you condensed a lot. You condensed a lot, because I know it wasn't that easy to get to like where you were at, it was, it took you more than five minutes to get there in life, right? The interesting thing I find about your story is it was like literally logical, right, right? You like bought this property, then you finally, you're like, oh, think I've got something here, And then you kind of doubled down. It got a little bit bigger, got a little bit bigger. When you partnered with this developer, I'm just curious, like, how did that relationship spark? Like, what, like, what was the initiating conversation where you were like, I think that we could build a 240 unit apartment complex together?

Austin Williams: [11:33] Yeah. So one of my clients that I had when I was a financial planner had invited me. He knew that I was starting to, you know, deal a little bit in real estate, and he invited me to a breakfast group with you know, there's eight or 10 other developers, business owners here in town that they grab breakfast every Friday at 08:00. Okay. And so they invited me to it. Was like, yeah. Great opportunity to show up and learn and just listen. Well, after a few years of being at that, I kept saying there's a huge need for apartments here in Smokies. Huge need. Huge need. And finally, after years of me just telling the group that, Jimbo, my business partner, said, hey. I've got a great piece of property. Let's go look at it. So we drove to it. So that progression was just a lot of time spent at that breakfast table talking about business and life and everything else. And then having heard that so often, he's like, well, let's go look at this. And and that over many more conversations turned into a a business partnership and a tremendous friendship as well. Yeah. That's that's pretty incredible, a breakfast. I wonder if they have something here in town where we could do that. I'm a breakfast guy too. I like to get up early, go have some coffee, go some breakfast, and if

Dan Austin: [12:39] I could talk business, somebody would be even more happy. One of the, I think, big upswing, Judith, you were investing in Knoxville before it was cool. Mike and I found Knoxville. Literally, we'd looked at we were very agnostic. Like, neither I still have never been there. I flipped a house and made, like, $30 out there. I've never been there. But we were looking at it very agnostically at just the numbers, like we were looking at markets in Florida, markets in Texas, markets in the Northeast, Southeast, all over the place. And Knoxville, we liked it because it's not a super big town, but it's big enough. It's not the primary market in the region, but it's like a a big secondary market. And you hear about, you know, people going to Nashville and all these things. That's what I mean by secondary. Like, ever you go to a top 10 list where we are looking at it. Top 10, invest in this place, it would be Nashville. You You didn't really see Knoxville. You didn't see the Smokies, but, you know, COVID hits, and all of a sudden, everybody started going down to the Smokies and buying up million dollar cabins, which I just wanna ask you about this. Like, million dollar cabins and some of these houses they're buying, I gotta imagine there's guys losing their ass. Do you look at some of that and you're just like, oh, yeah, that's that's a bad that's a bad play? Or are you so bullish on the area, you're like, you could buy anything, it's

Austin Williams: [13:49] gonna go up? So can both be true? I think so. I think so.

Dan Austin: [13:53] Yeah. I I actually think you're right.

Austin Williams: [13:54] I am extremely bullish on Larry. Yep. You know, The Smokies grows during recessions Mhmm. And has continually done that.

Dan Austin: [14:02] Okay.

Austin Williams: [14:02] COVID, I mean, I feel like the world found out about the Smokies during COVID for various reasons. But I think the Mainland then, everybody said, hey. We wanna get out of populated areas. Let's go get a cabin in the woods. And then, oh my gosh, there's this great investment opportunity, and things blew up here. I think that continues mainly because I've heard for years that two thirds of the population in The United States is within a day's drive. Well, think about the mass migration that's happening to the South. That number will rise on how many people can actually drive here within a day. Yeah. During a recession, it grows because people who might take, you know, several week long trips, you know, on vacation throughout a year in good times, maybe they cancel one of those trips or two of those trips and then take a trip to The Smokies. Sure. We get a really high retention rate on first time visitors. Mhmm. So then those people end up making a, you know, hey. Let's take a trip or two to The Smokies every year. For that reason, our our base continues to grow, and so long term, it's good. Now some of the cabin prices that we saw in 2122, they were certainly high. Yeah. They came down 10 to 15%, so I think they've reached a point that makes more sense now. Sure.

Austin Williams: [15:15] But, yeah, 2122, there were certainly some purchases that

Dan Austin: [15:18] Yeah. Yeah. We were I'm not gonna quote the exact numbers, but Mike and I were talking about somebody down there, and on the good side of things that that maybe paid, like, 800 for a cabin down there is, like, selling it for, like, 1.2 or 1.3 a couple years later. So, I mean, there's some people got some great upswings in appreciation. Oh, yeah. So okay. Let's talk about that back of the the concept of development. I'm personally fascinated with the idea of do I just like that. It feels like progress to me. You get a little bit of the capital side of things, like the money, the finances, because you can't just go build a large scale or even just any type of development without some sort of financial, you know, savviness, and then also the construction savviness where you can obviously make things a little bit nicer, better, more efficient, whatever. When you're looking at development opportunities, what are you seeing? And for a lot of the folks that we a lot of the operators that work, that are in our scale community, which is our coaching community, or just that are listening, they come across land all the time or maybe properties that could be redeveloped. What is somebody like you? What are you looking for when you're like, that's what I wanted. I wanna buy that, or I'm at least going to look into running the numbers on this piece of property or this this project?

Austin Williams: [16:30] For our company, we're usually, developers are hypo focused in the asset class. Right? They're a multifamily gatherer, storage unit gatherer. You know, they do retail centers, whatever it may be. We're hypo focused here in The Smokies. Mhmm. So given those answers may not be fitting to the listeners for a particular area. Right? Mhmm. You know, one of the challenges here in The Smokies is that we don't have a ton of infrastructure for something like multifamily, for instance. Okay. There's a limited amount of space that has access to water and sewer, and to get any effective density for an apartment complex, you gotta have both. Right? Yeah. And for those sites that do, a vast majority think that it should be a hotel. It should be an amusement. It should be a campground, something that's gonna be a sky high price. And so the tricky part here is finding that piece of property that the value is at the right place that also has the infrastructure to be able to make the the site work, and it's typically off market deals. I mean, you know Yeah. Obviously, off market deals are always the best. So I I know I answered your question, but I'm not

Dan Austin: [17:37] sure I've got great metrics for outside. How are you finding the properties you're developing? Like, what is your strategy?

Austin Williams: [17:43] Fortunately, where we've created that vertically integrated company, we get folks who reach out all the time, and they say, well, hey. We know that you've done more multifamily here than anybody else in town. We've got a site that we think would be good that the families want to sell. Or and if you don't wanna take it on, do know somebody that would? And so we get calls like that oftentimes, but we'll also spend a lot of time looking at maps, sending out letters. Like I'm sure a lot of folks do that, hey. We identify that water and sewer's here. You know, this area needs Yeah. Whatever the site is. And so we'll send out letters or oftentimes, you know, know somebody that knows that person and and just be able to reach out to mutual connections.

Dan Austin: [18:23] Right. So it sounds like you have kind of a a plan of, like, these are the things we can develop. These are the requirements, like you said, water and sewer, things or other requirements, like, hey, there's only so many, like, permutations of what we can do, and it's based on what the environment is allowing us to do, what's out there, the infrastructure, the the market, the density, and then you're just going and looking and saying, well, these are the only pieces of land that fit into that, so we need to look at these, and then, like, take offers to these people essentially.

Austin Williams: [18:57] That and we're a small community Okay. With a little under a 100,000 people that live here. And so it's easy to find a lot of people. But then additionally, we've got a lot of partners and investors that are somehow right on the edge of real estate. So maybe it's an estate attorney Yep. Who finds out about stuff before a realtor might or, you know, similar type professions that they know about deals. They're not in development. But when they find out about them, we usually, you know, the news gets to us pretty quick too.

Dan Austin: [19:25] Yeah. Yeah. That is the the advantage of not only being in a small town, but being considered an expert or a knowledgeable person. And you do have people, so actually, that brings me to another question. So you are vertically integrated for your projects. Do you ever actually do other people's bid? Like, will your architects do architect design? Will your engineers do engineer design for other people?

Austin Williams: [19:46] Yes. Okay. About a third of the stuff that we facilitate here is out of house. Okay. On own projects. You know, sometimes that's for a local developer that we work with. Yeah. Sometimes it's for an institutional group that might invest right here in the Smokies, but we're boots on the ground. Right. But it's usually only for that developer individual that we typically Right.

Dan Austin: [20:09] I mean, that's just such a great idea too, because not only now do you have organic lead flow coming to you because you're known as experts, people are asking you like, hey, would you want this project? But you also have lead leads coming to you because people are looking for work, or they're like, hey, I'm looking looking at this piece of property. I talked to the seller, and I'm wondering what I could do here. And now, all of a sudden, you can become a partner on that project or maybe just take it over and figure out a good way to to help compensate those people that are bringing that into you.

Mike DeHaan: [20:32] Yeah. Absolutely. That's great. Hey. We really appreciate being a listener of the collecting keys podcast. Did you know that we also are on social media and on YouTube? You should go and shoot us a follow on those as well. You can find both Dan and I on Instagram. I am at Mike underscore invests. Dan is at investor man Dan. You can also find short clips from the show at collecting keys podcast on Instagram. And if you wanna see our faces talking while listening to the show or you wanna check out some of our crazy animated adventures, we've been putting together into some funny little web cartoons that sort of show the crazy stories that guests tell on the show, then you should go over to YouTube and check out the collecting keys channel. Shoot us a subscribe over there. It really helps in human grow our audience. We really, really appreciate it. Well, anyways, enjoy the rest

Dan Austin: [21:17] of the show, you guys. We appreciate you all. So the other question I have, you're a development company, so when you say that, I say that because, like, you have to raise capital or are you guys doing this all within your own partners and your own finance? Like, how are you bringing in investors to do this stuff, if you are?

Austin Williams: [21:33] We actually just started bringing in investors about eighteen months ago. Everything before that was we were having to sell previous successes Mhmm. Find the equity and the cash to do the next two or three projects. Right. And that became exhausting. And so we we ventured into figuring out how do we start raising capital and bring investors in on deals. So Mhmm. You know, right now, we do that a couple of different ways. We've got, you know, a very limited, I guess, what you would call retail platform. K. Where we're dealing with local investors. We're sort of figuring out what makes sense there, folks that we know, friends and family types of. But then we've also got a few institutional groups. K. And both setups have pros and cons, and we're sort of figuring out right now what makes most sense for us long term.

Dan Austin: [22:19] Yeah, I can definitely, and I know a lot of listeners can really empathize with what you're saying, like, gets exhausting, like, build, sell, build, sell, build, sell. We see that, we do that a lot with house flipping, which is a lot easier than doing a big development, but it's like, you flip the house, sell it, maybe put some profits away, maybe eat some of your profits, feed your family, and then you're doing it over and over again. It's just like fast cycle that just, you see the value over the long term, and you look back, you're like, wow, I wish I coulda kept some of those properties, and why didn't I? But when you need the money to do the next project, you do that, you have to. And it speaks to the ability to leverage, and I talk to a lot of people doing house flipping or smaller projects. I have friends that are doing some development stuff as well, and the idea is like, well, I can't wait till I have enough just to do this myself without having to get a loan or do this or that, and it's like, well, do you really wanna get to that point to where you're only using your cash because then you're just always using your cash? Or are you better off building the skill of bringing in partners, bringing in investors, giving a piece of the pie away, but you can do so much more and you can move so much more quickly when you have more liquidity through leverage and through other people? So for you guys, when you're doing this, is that kinda what your play is? Like, now bring on investors. Maybe you don't have to sell.

Dan Austin: [23:33] You can keep these, and then you can build a portfolio of assets that are producing income for your business? That is

Austin Williams: [23:39] the hope. That we're not Okay. So now as I sit here and say that, we still have plenty of things that we're selling. We sold Of course. A couple of cabins this week. So it's always a balance. I mean, everything for sale for the right price. But the intent is that we will start holding on to more and more things, and we'll we'll be forced to sell off good cash flow assets. Just Right. Develop more things.

Dan Austin: [24:01] So you see cabins. That actually reason because I'm by I've got your website up here right now. I'm looking at these are some pretty cool projects. Like, these are, like, legit large projects, but do you guys develop and do single family stuff right now or, like, cabins or things like that? Or, like, how do you do that when you're picking projects? How are you looking at that?

Austin Williams: [24:18] So for us, we've got three core pillars that Compass focuses on. Mhmm. One is solving the workforce housing crisis here in in the Smokies. So we quantify that by saying 2,000 residential units built by end of twenty twenty seven. So that can be multifamily, single family, duplex, triplex, whatever it may be, but long term risk. We want to revitalize downtown Cerebral, which would quantify that one by 30 different businesses or developments in downtown by the end of twenty seventh. And then third is turning Sevierville under Premier Resort. And there's several things that fall under what defines that. But, effectively, it's building 1,500 short term rentals here in Sevierville by the end of twenty twenty. Wow. So that's our company's focus. Now how do we decide what we're gonna do? Where? I mean, it sort of comes back to that deal flow. It's like, you know, like, we've got a a cabin development right now, a 177 units on a 105 or 110 acres. Wow. A couple years ago with Partner Sound, and it was a off market deal. He tossed it to us, and it just lent itself great to a big cabin resort. Yeah. That is actually our biggest project that we've ever taken off. Another deal is a great multifamily site that, again, a it's actually a realtor had heard about the deal. And before it got listed, called, we hopped on the deal, and it said an apartment complex. So, I mean,

Dan Austin: [25:43] it just

Austin Williams: [25:43] it sort of depends upon the deals that come through, but those three core pillars are the things that we're focused on on doing.

Dan Austin: [25:49] Right. So do you have are you in a position where you have more deals than money, or do you want more deals? No. We're certainly more deals than money. Gotcha. Yeah. That's a good problem to have. It's great.

Austin Williams: [26:00] Yeah. It's again, why, you know, the investor piece is like, we've gotta figure this out. Mhmm.

Dan Austin: [26:06] Yeah. And that's kinda where Mike like, Mike and I are with our business on the residential side is like, we know how to turn up lead flow and deal flow, then it becomes, do you want more? And then if you do want more, can you handle more? Like, because eventually, especially right now in, like, a lending environment, if you're relying only on debt to fund your projects, you're not gonna be doing as many projects as you could have if you have investor money coming in. So let me ask you about that development, and then I wanna pivot because we're kinda running short on time, and I'm so curious about all this stuff. But with that cabin development, what does that look like for you guys? Is this are we talking like little teeny one bedroom things? Is this a resort feel where they have clubhouses, pools, all

Austin Williams: [26:46] that stuff? What does that kind of project look like? Yeah. So projects the lodges at Rebunt. It's, like I said, a 177 units. Yeah. The majority of those units are three, four, and five bedroom units. Wow. Different variation of floor plans, but they're 24 to 3,400 square foot units.

Dan Austin: [27:03] So these are proper houses. You call them cabins, but they're proper houses.

Austin Williams: [27:07] Yeah. Yeah. Okay. 80% of them have

Dan Austin: [27:09] a pool in the basement. In the basement? Really? Indoors? Yeah. Wow. That's unique. Is that

Austin Williams: [27:14] something common down there? It is a new trend. It usually will bump rental revenues by 20 to 25% on that particular unit. Not a huge cost increase, and so it's a no brainer. And so we started doing that on, you know, like I said, the majority of our cabins, about 80%. So it's right up against the golf course here in town and the biggest water park in the state. So there's not a ton of on-site amenities. We're gonna have some walking trails, but Yeah. We've got so many things that are in. Mhmm. Basically, on-site.

Dan Austin: [27:48] Yeah. Wow. Well, you're obviously a very humble guy because you're talking about a lot of things that these are big projects. You talk about them as if they're simple, but I know they're not. There's a lot of complexities here, and it's not easy to put this stuff together. So definitely, I know you're doing some stuff. Let's pivot to our end of show questions. The first question is, what is your craziest real estate deal? This could be a big win, it could be a big loss. Our one rule is no more dead people, because we've had so many people come on here and talk about how they found dead people. Unless it's a really crazy, unique story, I will accept a dead person. I know sometimes Michael, but I'm game to get morbid. Anyhow, let's talk about what you got going on, Austin. So I think the craziest deal that we had was one that we actually bought at the end

Austin Williams: [28:33] of September in last year. Mhmm. So we've got a multifamily guy here in our company. That's his thing is to find value add section eight, HUD, or really even market rate multifamily deals. Yeah. He had found a project, and it was one that had general partner that was a nonprofit. They own point 1%. Uh-huh. And then their limited partners own 99.9. Well, there's a a unique rule, but I actually let me back up and give you some of the details on you know, it's 150 units we bought for right at I think it was 3,200,000. And obviously, know, at $20,000 a door, it's like, how in the world can you buy anything that's structurally sound at that rate?

Dan Austin: [29:14] Yeah. Yeah.

Austin Williams: [29:14] Well, unique because, you know, so it was devalued for a couple of different reasons. One, the general partner had not increased rents in fifteen years. So there was about a 40 to 50% rent increase opportunity. 25 units were vacant. But the biggest piece that caused complexity was the city had a reversion clause. So thirty years ago, they had donated the property for this development to be done. And there was a really odd item that was hit at the end of twenty twenty nine or 2028, they could buy the property back for a $100. Oh, dang. So, you know, obviously, it's you've only got four, five years left on that asset. It creates a huge devaluation. So, additionally, it was unique. The general partner could file for limited partners for the debt, which was much less than that 3.2. And there's all sorts of other dynamics that fall under that. But we we bought the asset, renovated the units, increased the rent, extended with some with a few items, extended the that reversion clause out 30. So now we've actually got something we can get financing on, and it's got a lot longer trajectory. And we increased the value of the property by a little over 11,000,000. Holy cow. So we basically five time five x the the value of the property overall and create a ton of equity for ourselves and for our investors on the project.

Dan Austin: [30:41] So you still own this asset?

Austin Williams: [30:42] We we did. Nice. We're actually in the process of refinancing it for long term debt, but it was really unique. That reversion clause was something we had never seen. Yeah. You know, our multifamily guy finding the ability to to buy the general partner to be able to buy out the limited partners. I guess another complex thing about that was the general partner being a nonprofit could do that only if they bought it with cash. So you couldn't get bank financing. The general partner being a nonprofit didn't have cash, so they never thought about it. There's just a lot of complexities that it was a tremendous value add buy. So let me go back

Dan Austin: [31:15] to because maybe I missed this when you're talking about that general partner LP structure. Obviously, you're saying it's a nonprofit. Was it because they were trying to do some, like, affordable housing? Like, what was the reasoning for the nonprofit?

Austin Williams: [31:25] Yeah. It was it was a tax credit deal originally. Okay. And so that's where the the GP only had point 1%. LPs had 99.9%.

Dan Austin: [31:34] Yeah.

Austin Williams: [31:34] You know, they had done this deal thirty years ago. And so did I ask to that question?

Dan Austin: [31:39] Yeah. It did. Yeah. And I'm thinking about it too because then I'm like, man, this sounds like a terribly managed GP, like, not raising rents. Sounds like vacancy, so no property management, then no raising rents. Was it because it was low income? They're like, hey, we've gotten what we wanted out of it.

Austin Williams: [31:55] We got our tax credits. Nobody cares. The investors didn't care anymore. That was a piece of it. The investors certainly cared, but they couldn't get over that reversion clause.

Dan Austin: [32:03] Gotcha.

Austin Williams: [32:04] They couldn't figure out how can we get longer term financing. How can we put Yeah. Hundreds of thousand dollars into renovating these 25 units when the the the rents we're gonna be able to get don't make sense when there's only four years left. Gotcha. So that reversion clause was something that nobody could figure out that nobody wanted to bring up. Yeah. For us, it was really easy to hop in and and figure out how to work something out with the city to where it was a good win win for everybody. We'd stand big problem here in town is everybody's buying long term rentals turning in short term rentals. Well, for us, we put some restrictions on there to where that can't be done for the next thirty. Okay. But we didn't mind because we wanna keep it as housing. Right?

Dan Austin: [32:43] Yeah. Yeah. Oh, totally. And the city's probably happy about that. Kinda helps your guys' case with them. So when you guys bought it, did you have any inclination that you were going to be able to get that reversion extended, or is this just a total blind risk you guys jumped into were like, YOLO.

Austin Williams: [32:58] Not not a total blind risk.

Dan Austin: [33:00] Yeah. Okay.

Austin Williams: [33:00] We had pretty high level amount of confidence that we were going to be able to. K. We weren't able to get that done during due diligence. The GP only had a you know, it was like a thirty day window to execute that unique provision where they could file the LPs. Yep. But we'd had plenty of discussions and and and thought that we'd be able to make it work with the city. Yep. We at least knew what they wanted to see happen. Felt we could get to win the middle.

Dan Austin: [33:25] That makes total sense, and I wanted to ask that question too, because when you're looking at doing some of these projects, what I've learned over the years is you can't know everything, and you can't have everything solved before you close the deal, but if you see something, like, there's no Nothing wrong with doing your due diligence period, setting up some phase gates, like, especially when you're doing land development, and there's so many unknowns, so many risks, you know, setting, like, hard Like, dates when you're More and more earnest money goes hard, right? Like, hey, we get through this. The first phase gate on a development project might be like, hey, if we can get zoning changed, we're gonna throw another 100,000 in hard earnest money, and then hey, if we can get our plans approved, so on and so forth. If it's a really risky deal, doesn't mean you need to avoid it. Like, what you guys did was obviously, that was a risky deal. They couldn't solve it, and you guys had to take some risk, but doing your due diligence process obviously found like, okay, we feel confident enough that the asymmetric upside

Austin Williams: [34:18] of this deal is worth the downside risk. And, I mean, value add, obviously, there's a certain set of risks. New development, there's a whole I mean, it's much longer list of risks that are out there. Sure. But I think a lot of folks get caught up on new development and never getting into it because they wanna have every saying, every I dotted, and every t crossed, and you just can't. There's unknown risks that you'll always forget about. Not to say that we don't wanna find them, but you just have to be comfortable in in that risk.

Dan Austin: [34:47] Totally. I agree with that. Okay. That's awesome. Big win too. Good job, man. So the second question we have for you is, like, for what advice would you give, like, a new investor or somebody looking to get started?

Austin Williams: [35:01] Well, we've all heard that you become the books you read and the people you surround yourself with. Right?

Dan Austin: [35:05] Mhmm.

Austin Williams: [35:06] Just like the breakfast group that I mentioned earlier, find a group of developers, real estate investors, or people that you want to become like and just soak up that knowledge. That was a big impact for me, just being around those guys and listening to their conversations. I think that's the biggest piece of advice, is just

Dan Austin: [35:25] That comes true time and time again, and, you know, we have, I mentioned earlier in the show, like, our scale community, where we, you know, Mike and I do some coaching with folks, but really the the keyword in that is community, and it's super cool, people get in, and they do deals with each other, they, you know, you get to see somebody who shows up with no experience, or hasn't ever done a deal yet, and all of a sudden they're an operator and they're doing deals, it's just getting around those people, and like that osmosis is real, but also it's just like you learn things, and you build confidence. You're like, okay, so when you're get, like we just talked about getting into land development, like there's just so many unknowns and risks, but if you get around other land developers, you start learning what risks are acceptable, and that there are a solution to, you just have to get down the path far enough to find the solution, and what ones are like hard nosed for people like, hey, that risk, we don't do it. We, and you learn why, and so, to me that helps quell some of the fears of getting into something new. So, that is such good advice. I like that, and you're right, is. People say it time and time again, because it's true, it's fact. So, alright, last question, the toughest one. Where can people find you or reach out to you, either online or websites, or or how can people get connected with you if they wanna chat with with Austin Williams?

Austin Williams: [36:38] Sure. So, website, compassventures.net. Mhmm. My email address is Austin, austin,@CompassVentures.net. So either one of those, you can reach out to us, and we'd be happy to connect. Heck yeah. And Mike and

Dan Austin: [36:51] I always say this on the show, reach out to people. If you found something that was inspiring, let them know. If you have a question, let them know. If you wanna do business with them, let them know. People come on here for a reason, it's because they wanna talk to people, they want to get in front of our audience, and it's always mutually beneficial to connect with people, so take Austin up on that. Without further ado, man. Thanks, Austin. This is awesome. That's great. I learned a ton from this show. Appreciate it. Thank you. Alright. See you guys.