Episode #10 : Want More Money? An Engineer's Story on Real Estate Investing with Dave Schmid
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In this episode of The Richer Geek podcast, I’m talking with Dave Schmid – software engineer, real estate investor, and multipassionate whose philosophy includes simplifying the complex and eliciting value from every opportunity so he can focus on creating, experiencing, sharing, and doing.
If you’ve been considering getting involved in real estate investing, Dave is here to share with you that initial beginning experience.
In this episode, we’re discussing…
Why it’s important to find a mentor who can help you understand how to get started (without getting into trouble!)
How an intentional buy-and-hold strategy can raise the standard of living for an entire neighborhood
When you should start upgrading the tools you’re using to manage your business finances and operations
The role of knowing your financials in giving you a roadmap for the direction you want your business to take
Dave’s Top Tips
Start small – be patient as you learn and gain the experience that will guide you forward. There owill be times when you can jump in and run, but there are also times when it’s important to take your time and learn from other people’s experiences.
Be intentional and give back – be cognizant of the needs of your tenants and the benefits you can provide. Understanding the bigger picture in your business will help you cultivate good personal and business relationships.
Be mentally prepared – things will happen; being mentally prepared for that will help you take care of your tenants.
+ Read the transcript
Nichole Stohler 0:03
Welcome back to the Richer Geek podcast. I'm here today with Dave Schmidt, who's one of my peers who has been in technology for quite some time and works full time in this particular field. What I really like about Dave's background, and what he's going to share with us is he's fairly new to investing in real estate. But he's kind of gung ho. And he's dug in, and he's got some great experiences that he's going to share with us. So if any of you were thinking, Hey, I'm interested in getting involved, but I don't really know, this is someone who can help kind of share with you that initial beginning experience. So welcome to the show, Dave.
Dave Schmid 0:44
thank you so much for having me.
Nichole Stohler 0:46
We are, we're a no fluff show. So we're just going to jump right in. All right.
Dave Schmid 0:51
Alright - cut the fluff. That's right.
Nichole Stohler 0:52
Exactly. So tell us a little bit about yourself professionally. And also personally.
Dave Schmid 0:58
Sure, yeah. So you know, I just you mentioned before, right? So we get, we get to spend our time in technology. And so I work as a software sales engineer, at App Dynamics, which is a really cool place where we help solve digital experience problems, and APM and all that kind of good stuff. And so I love that. And before that, I worked at a couple other places. And before that I worked in it for 15 years doing all the overnight stuff. And back when the internet was the Internet, and we had things like webmasters and all that kind of silliness. So it so it's been fun. I've enjoyed being able to do all the technology and all that all those things that got me to where I'm at today.
Nichole Stohler 1:34
It's so funny, one of my intro episodes, I talked about that I went from talking with clients about why they would need a connection to the Internet, to where things are today. And so But to your point webmasters and all of that good stuff.
Dave Schmid 1:48
Oh my gosh, yeah. I mean, we can certainly talk about the sounds of modems, and whether or not we had a 28. But that that gets the geek side out. But I certainly remember my first times on the internet and kind of wondering what all this is gonna be about. And then it's turned into a really great career solution. So it's been fun, for sure.
Nichole Stohler 2:04
That's great. And we do date ourselves when we share that.
Dave Schmid 2:08
You kind of scratch your head when someone goes, Well, you've been doing it for 22 years. And I go Whoa, whoa, not not okay, Grandpa, you know, get off my lawn type stuff. But, but it has been fun. It's been good.
Nichole Stohler 2:18
So thanks for that background, tell us tell us a little bit of the catalyst and the inspiration that led you to start investing in real estate.
Dave Schmid 2:28
So for sure, so I it was one of those things where I where I started hearing stories from my girlfriend that I've been with for a little while now. And she has a brother who has his own property management business. And some of these stories were really crazy. And it was kind of like that, she always kind of say like, Well, here's some of the stories because she's been in here for good number of years. But until you hear it from him, like the connection is a little, it's almost too good to be true. And so I had the chance to meet him in person as we started dating a little bit more. And then I got to go to some family events and some holidays and things like that. And so I mean, I was just totally blown away by the stories about where he started, why you started, and what he's done with that business and how he's grown it. And it really turned into like, how does he invest in the community and the houses that he was interested in. And that that blossomed in his business, we got into property management, and getting into rehabs and, and flips and all this other stuff. And I was like, Whoa, this is very interesting. So not only did he have these really crazy stories that were just like, you have to live to understand the experience. But it sort of reminded me of when I was talking to my, my tax accountant A while ago, he says you can do two things actually reduce your taxes. One is you can have more kids, I'm kinda like, I don't know, I don't know about more kids. But the other side, the other thing you said was you need to figure out how to start getting into real estate. And one of the things that I really didn't know was, so how do I take that and do anything with real estate. And it wasn't until I started talking with him. And his experiences were like this, this idea of like real estate investing, real estate investing would actually started clicking in and I started drawing some some conclusions of what I had before. And so it was really interesting. He said, he started telling me more stories. I'm like, I think I want to know more about that. And sure enough, that's what we did. He started telling me like, how to get involved, how you got involved. And it really turned into like, let me just try this out and see if it's something that I even want to do. And that that really turned into, you know, where I'm at today, which is, you know, just jumping and just like you said, like, I'm probably 18 months in. And I really did just jump right in. And in was interesting is So Brian - Brian's and even though a business partner, so when he basically said, Hey, you should start small. And as soon as I got in and started running the numbers and started, you know, having those conversations I I jumped in. And so he had to remind me like you need to be a little patient, you need to understand what's going on, you need to have some experiences to guide you forward. And that's been one of things that's actually been quite helpful, which is really like figuring out where I can jump and run and have a really good time and other times where you really need to be patient and learn from other people's experiences.
Nichole Stohler 5:11
Oh, that is so interesting. I love how you said that. Because you do kind of you get sort of excited and there's all this, you know, interest and you're looking at properties. And you've already had success maybe with a couple. But but there is that patience is really key and not getting too emotionally excited about it because you have to detach yourself from that.
Dave Schmid 5:34
Oh, that's right. So that was it was very clear early on, when we started looking at some of my like, first properties. He's like, my first ones were like, you know, buy in rehab, and then rent out. And he's kind of like, I'm like, well, maybe I should redo this. But this, this kitchen, he's like, who will hold on like, he had started telling me like how to detach myself emotionally to what I want to put in these phases, because we had a model that really made sense from a financial perspective. And going in and like, like redoing the whole house wasn't really going to fit our financial model, even though like emotionally, I'm like, I really want to do this, this, this and this, he's like, Hey, you know, you need to slow down. Because here's, here's a long term way of doing things that has worked for him. And here, I was, like, hey, let's put up all new this and all that. And so it was a really good way of mentoring me down a path to keep me out as much trouble as possible.
Nichole Stohler 6:26
So, so you're kind of describing a few things here, it sounds like some flipping and some long term rentals, tell tell me about the specific investments that you are doing?
Dave Schmid 6:36
Sure, so most of what actually so I have, I have five houses that I've jumped into, I started with one and then I immediately did my second one right next to it before I'd even closed on the first one. And these are basically two and three bedroom single family homes with single baths. And they are usually houses that kind of went through the wholesaling process, and it basically that they've either been sold for low amounts of money, and then need a fair amount of work. And so we've kind of looked like a model of where we want to have those houses be so that we haven't all in cost, and the buying cost and the rehabbing costs may fluctuate and have like a little you know, a little bit of a balancing act, they tend to be within a certain price range. And then those would turn into the right type of houses that were we wanted to have more cash flow, which was, you know, just renting them out. And these weren't necessarily appreciating appreciable assets. But they were really, for me to get started, I just want to really understand the cash flow and make sure that as I as I got started in these houses, that it was something that I could sustain on my own, even if I needed to take a little bit longer to get renters or tenants or I took a little bit longer to do rehabs and and getting those things ready. And then just trying to see like, do I even want to do this. And so, so part of a lot of things I look at is like, I'm pretty, like, you know, math is math, which is what the numbers really look like. And that really helped me kind of take the emotion out of but once I started seeing how I was working with Brian and his team and getting these houses put back together into good shape, where they may have just had, you know, lots of work, and then we start getting families in these houses. And those families now start having a great place to live, where they didn't have some of these things to do before, they really started kind of turning around and me wanting to accelerate my adoption for more houses. And then the you know, the emotional side starts coming back in again.
Nichole Stohler 8:28
So there's a part that you you were testing kind of this buy and hold for cash flow strategy. And at the same time, it sounds like you really liked being able to kind of bring the community up, at least in the area where you're building the where you're rehabbing these houses.
Dave Schmid 8:46
That's right. That's right. So So part of that was we found that, and this was really again, working with Brian as my mentor, and going through his experience and understanding is that as you build up, you know, these houses that you know, I've been really left for, for not, and you start building them up, and you put people in there and those people end up being really good tenants, they want to bring in their friends and family into the same area. And so we've actually started buying, you know, blocks by blocks, not lots house but you know, individual houses so that you start making more of the blocks and more the areas kind of grow up in you know, in better and nicer houses, they're well taken care of, and they put families and actually care, that tends to raise the entire neighborhood as well. And that actually started really working out for us and and then it's just a numbers game at that point. So like, we want to, you know, keep buying houses keep reinvesting into the communities that they're at. And it's starting to really change some of the neighborhoods that we're in actually,
Nichole Stohler 9:41
that's got to be so satisfying to see that and feel really good. Making it making a difference there.
Dave Schmid 9:47
Oh, for sure.
Nichole Stohler 9:48
Now, so you aren't doing any flips. You're you're buying hold?
Dave Schmid 9:52
So yeah, so right now, my first five houses are buying hold. Although I certainly have been really interested in the other opportunities from the real estate. So the flipping the commercial side of things, I wouldn't say into the apartments or things like that, but there's so much opportunity out there that I really have to like hold myself back from saying like, what else do I want to get involved with. And part of that is just really making sure that I'm that I'm doing things and looking at how the investments look and how they perform, both from an asset perspective, as well as cash, you know, like a cash flow aspect. And then just really understanding where the houses are at and how those things are, are improving upon themselves. Because they certainly don't want to over you know, overreach, what I'm comfortable with doing from an investment perspective, but knowing that like, like, how I've started and who I get to work with, and all those things, you know, coming together, makes me wish I would have done this actually a lot sooner.
Nichole Stohler 10:52
I think I think it's so scary for people to kind of jump in and get started. And then once you have had success, and you've got the right, you know, people to help you and all of those pieces, then yes, you do want to go and you do wish you had done it sooner. It's It's so good to hear.
Dave Schmid 11:10
Yeah, for sure. Yeah.
Nichole Stohler 11:11
So tell me what kind of systems tools, what do you have set up to kind of help you manage the business?
Dave Schmid 11:18
Yeah, so a lot of it, you know, I started I think, when I started with Excel, like a lot of people, and like, I'm looking at what my numbers are, and I'm not quite sure what numbers I should care about, or, or what things and so this is where I again, I go back to, you know, the mentoring side of the house, which is, I really felt like I could you know, I love learning about things and love consuming those things. But I was really lacking the experience. And so I'm why I can put all the numbers together and all those things, I needed the experience of understanding where I should do the properties and why I should do what I do and things like that. And so like starting from scratch, I started reading a lot of things. And so there were there's a lot of great resources out on the internet, and from other people I've worked with that have, you know, simple Excel spreadsheets, things like that. But that for me, that worked pretty well to just kind of get started. But then as I started getting my fourth and fifth properties, I started kind of going down the route of things like just like, like running my own books, because now I started because because it all is tied into my LLC. That means keeping, you know impeccable bookkeeping and financial records and taxes. And so I did jump right in and start using some online accounting software where I pull in all my expenses, and my rental income into one place. And so I can start looking at my assets, my appreciations and my cash flow, and where's everything going. And then that led itself into like, well, now I started having, I need to learn accounting, which I didn't know before. And then I started looking at like how other people have done accounting for property management. And in my case, I am using, you know, property management company that's doing the day to day management, but financial things in order for we don't understand where those things fit in, I now have to like split everything out by classes, and where my expenses going and and how do I determine how to lower my expenses and increase my incomes? And like, all that really came into play of just having to go out there. And I don't know if we can do to name names or Yeah, sure. Alright, so so I use QuickBooks flow, sorry, QuickBooks plus. And that was the online version. And I did look for some other Excel spreadsheets. But honestly, I like to have you know, I'm a technical person as well. So I like having things in my hand. So I like having, you know, I've got the apps on my, on my phone. So it's all mobile, it's all in the cloud, I can do it wherever I want. And it really gives me a good way of understanding the numbers, which is how do I am I am I making good decisions? Am I am I able to compare what I did, you know, quarter over quarter year over year, I know, and I'm just getting started. But what I what I found is that this was since this was my first year or last year was my first year to actually have taxable income, then I really had to start taking a look at how I manage my expenses and how I'm management deductions. And that that, you know, for me to do that going forward as I want to grow, I just can't wait to the end of the year to figure all that stuff out. And so not only does it give me the ability to understand how I'm doing as I move forward, but it also gives me an idea of, of how things look, going, going forward. So again, a lot of this stuff from the non emotional side, which is I just want to see the numbers. And when I when I share those numbers with my business partner kind of go, am I doing things the right way, in my mapping to the direction I want to go. And it really all kind of turned into the right kind of thing, which is you need to know where you've been, where you're at, and where you're going in order to really understand, is this something I still want to do from a financial perspective? And how do you you know, measure your KPIs? And how do you measure yourself against your peers and, and understand, you know, how to grow? Am I growing too fast? Am I growing too slow? and all this kind of thing. So a lot of is just really having visibility in what I do, which is something I never had had to do before. And so it's been good. So far, there's, there's a lot of lot more to it than I ever thought.
Nichole Stohler 15:06
Oh, absolutely. Now you centers. Since you're using a property management company, do they tie into the QuickBooks, I'm just curious how that works.
Dave Schmid 15:16
So they don't, but they do have their own accounting software that's all web based. And I can export those things out. So I take CSV files from all my expenses that they've done entries for, I kind of flip that around and create my own, essentially my entry, like a, like an Excel entry into QuickBooks. And so it's kind of like having two sets of books, but I get to have very specific line items for everything that they're charging me for everything that's being expensed out, and I get to put in all the different classes, this is an expense is this a cleanup this is income. And so I do get to really, basically have a second set of books for what happens. And then I get to, you know, validate that those things are all where they need to be night, and I do that on a monthly, weekly, weekly basis, just to kind of keep up on it, because it will get away from you, if you don't stay up on it.
Nichole Stohler 16:06
Yeah, I can absolutely relate. So we use QuickBooks as well. And but we self manage. So that's why I didn't know that property management integration piece. And it's it's also obviously very valuable from a tax standpoint, and, and providing that file over to your accountant, which your tax guy is the one who recommended you get into real estate. So. So along those lines, what have been the key benefits and overall impact for you?
Dave Schmid 16:37
So, so one of the benefits, that I really think around this is, you know, personally, I get to new, you know, I get to learn new things all the time. And so I love being able to stretch out, try new things. And this was one path that I've never had the experience, or really the guidance on how to do that. So like being able to look at those things, it's been really great. The other side of that is being able to because it's all new, but it also requires a lot of visibility, because of the financial impacts and the taxing you know, the government wants to make sure that you're doing everything you're supposed to. So it really got me to think about how businesses actually run. So part of that was really understanding what's the differences between CAPEX and OPEX, you know, topics and topics, and where do I want to do my investments, and you know, those types of things. And that really started giving me a little bit more insight into my own financial, you know, guidelines on on how I make personal decisions on things I want to get done. So that's been good. And then the the outside the other side out outside of just like, Hey, here's the business of financials that it does provide a way to validate the things I need to do to make really good personal and business relationships. And then as you and I talked about earlier, right, so how do we take these things that we're doing and give back to the community. So certainly there, there are places you know, where I'm focusing on most of my housing now, are places that need a lot of assistance, it's the lower income neighborhoods, it's the places where tenants want good relationship with their land, with their landlords, and in this case, we're really great property management company that is all about trying to give back and do well. And a lot of the things that they do is what I care about, as well, which is, you know, just just showing up and being cognizant of the needs and the benefits that we give. And, you know, that takes a lot of empathy and things like that, that I think we can all learn a little bit about. And so it's a little bit of just being able to stretch what those things mean. And then keep figuring out how to grow that.
Nichole Stohler 18:41
Thank you, thanks for giving us that kind of overall perspective. Now, tell us a little what some of the key challenges have been?
Dave Schmid 18:50
oh my gosh, so. So as you and I talked earlier, right. So part of that is, is really not knowing how to get started. I like I said before, I got really lucky with being able to enjoy the stories with Brian and his family and his business partners. And so, you know, part of that was having to understand what's going on the market and the timing and the experience. So I had to look for ways of growing my experiencing quite quickly. And that is a lot of like self learning and having mentors, like you're trying to look for all these different lovers on trying to figuring out what makes sense. And you know, thankfully, again, I had, you know, a great mentor, and a lot of a lot of that to really speed up that experience. So I really, I will say, I got lucky with understanding how that goes. And you know that guiding me through like how to figure out how to have patience and have an understanding of things will happen. And you know, my first two houses, I absolutely had things happen the first time, right, so my, the day that I closed, I went over there a couple hours later, to swap out the locks and all that stuff. And we're looking around, everything kind of looks fine that we go into the basement, and there's a foot and a half of water in the basement. Right? Well, this doesn't see right. And coming to find out someone had actually gone in and cut out all the copper as a basement. And, you know, I think you know, before I had started having this relationship with Brian and his team, I would have been like freaking out like, holy cow, what am I going to do? And there was a bit of that to like, like, like, how do we get the water shut off? And how would he does not do all these things? Because it's really just trying to remain in an unemotional investor at this point. And I think part of was because Brian was super calm. He's like, dude, I told you things like this are going to happen. And sure enough, they did. Because like, we shut off the water. And then like two days later, someone came back and ripped out all the copper wiring out of the basement. And then three days later, they came in and ripped out all the copper out of the bathrooms.
Nichole Stohler 20:44
I think maybe changing the locks or something I don't know.
Dave Schmid 20:49
Oh, yeah. So like everything was being you know, already changed. It just kept coming back from where I think they felt I was like some really good copper. So and they did to the house next door. And so like part of that is just really like, like, you certainly want to understand that things will happen. And you just need to be prepared for those. And, and thankfully, the other houses have not had that happen. But in general, things are always going to happen. So things are going to cost more to get done, they're going to take longer than you expect. And we certainly have had where you know, you have to understand that things will happen to the houses and you need to take care of your tenants. And certainly you're going to have chips in the bathtubs, and you're going to have clogged drains and you're going to have window air conditioners that need to be replaced. Like all that kind of stuff, you just need to be prepared for it and understand that it's going to take some investment up front in order for your investment to actually help pay off toward towards the end as well.
Nichole Stohler 21:42
Yeah, there's so many good nuggets of information that you shared there. And I'm, and I'm laughing I certainly we have experienced sometimes in the neighbors neighborhoods that your houses are in. And we've absolutely had the similar kind of situation with one of our homes. So I absolutely can relate, it's it's interesting too, if you build that in, and if you say well, things are going to cost more and there's going to be it's going to take longer, and you know, I'm going to have, you know, instead of it's not going to be ready in two months to rent, it's going to be ready in four and you are conservative that way, it'll actually it'll all work out and it is absolutely worth it. But there, but things do go wrong. It just in any business, I think for sure.
Dave Schmid 22:23
I mean, if I if I had my wishes, like it'd be all perfect, right? I'd have I buy it. And then the next day, I'd have a tenant and then be paying me and like all that kind of stuff, and it'd be a perfect house. But that didn't fit the model that it made sense for me from an investment perspective, it requires a lot of extra work. And so having all those things in play, that the patience is, is just a matter of the game. And even now I'm like, okay, I've I've gone from one to two to five, and in the last 18 months, and I'm like, Okay, now how do I get from five to 10 and 10, to 20. Because like the the technical side of us, like, hey, these are really good numbers. And I like where they're going. But I know that there's going to be things that come up where maybe I don't have a tenant for two or three or four months, or I'm going to have another issue or I need to replace, you know, the furnace, you know, come winter time, those things are all just part of it. And, you know, making sure that you have the financial means to understand where that goes, and you've got the people that are working with you again, I know I kind of go back to the property management side in the in the mentors, but you know, for me, I don't think I would have really gone as quickly as I have or had as much fun, or, you know, be guided down the path, what that experience would mean, if I didn't have all the friends and family to help me out with that for sure.
Nichole Stohler 23:42
Yeah, support and mentors or coaches, whatever the case may be or pretty key, I think in any stage, right. So, you know, depending where you are, and where you're trying to continue to go with your real estate business. So tell us what advice then would you give others who are looking to invest in real estate?
Dave Schmid 24:04
Oh, advice. So yeah, I think a lot of that is is again, finding the mentors that will help guide you through, there's there's a lot of especially on the internet, there's a lot of people that have, you know, kind of gone down this path as well. And they've got things to watch out for, I would just absorb that as much as possible. And be very, very conservative about expectations not only from what houses that you can look at and invest in, or where you want to, you know what kind of properties you want to do flips or you know those things. And just, you know, start out a little bit slow, make sure that it's something you want to do. And then accelerate when the things start going in the past that you want to certainly expect things to go sideways. And they will and just kind of relax and enjoy it for sure.
Nichole Stohler 24:52
That's great. That's good advice. So tell us what you mentioned. So we've got the five and you're chomping at the bit, what are you looking to do next?
Dave Schmid 25:02
Yeah, so I was fortunate to get into the investing side with using my own funds that I that I'd done some investing over time. So I pulled some things out of my investments and really kind of went down this path on it on a cash basis. And then come to find out, you know, as I started really digging into this, that there's other opportunities to get in, I think, I had a colleague of mine Tell me like, oh, there's already a whole thing about this, this birthing, right, so you, you buy and you rehab and you rent and then you repeat or something like that. So I'm like, oh, there's already a process for this. And so come to find out that that's exactly the path that I that I'm going on, which is, you know, take take the investments have had in these houses, and then look to go to like a community lending site. You know, here in St. Louis, there's a couple of business partners that I'm starting to build relationships with, to understand a way of taking the, the equity that I have in these five houses, and then let's go, you know, package this thing up, and then do a cash out on those and then go after another five houses, get, you know, get tenants get those rehabbed, get tenants in those and then take the the cash flow on those things, and just continue to reinvest in houses, and other opportunities. So it's kind of, it's, you know, when I look at the numbers, they really help define that there's, there's just a path forward. For me, that makes sense for me where I want to continue down this path. And hopefully, it's something that I can, you know, accelerate and then just have to keep working out for me. You know, like I kind of joked about before, it's like, I wish I could just like jump into it all at once. But it absolutely does take some time. And it does require, you know, some some patience and understanding of working with the right people at the right time. And then just kind of like taking a moment taking a breather, you know, checking a little bit, and then saying, am I ready to go on this next phase. And so for me, I've got a little bit I got a few more months this year, to make sure all these things are in order for me and then come fall. Hopefully, I'm just jumping right back in and doing it all over again.
Nichole Stohler 27:00
Well I look forward to hearing how that goes. Tell us how the listeners can get in touch with you.
Dave Schmid 27:05
Sure. So I've got a couple of websites. My my real estate investing website is boulph.com, that's Bo-ul-ph.com. Or you can just go to Dave Schmid.com as well. And you can reach out that way.
Nichole Stohler 27:19
Fantastic. Thanks so much for joining Dave.
Dave Schmid 27:21
Thank you so thank you so much for having me.
Transcribed by https://otter.ai
ABOUT DAVE SCHMID
Dave Schmid lives in Saint Louis, Missouri and has experience working in corporate IT and sales engineering for more than the last 20 years. With a philosophy of simplifying the complex and eliciting value from every opportunity, he focuses on creating, experiencing, sharing, and doing. An avid lifelong musician and composer, travel enthusiast, personal finance geek, and amateur life hack, Dave also tries to balance the benefits of chasing new experiences against the pull of his restless technology gadget obsession.
You can find out more details about Dave at his Web site: daveschmid.com/therichergeek.