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How to Scale Commercial Real Estate


May 26, 2022

Today’s guest is Ellis Hammond, founder of Kingdom REI and Co-Principal at Symphony Capital Group. He started his career as a missionary on the college campuses of San Diego and has since acquired more than a hundred million dollars in real estate. The topic of money brings out different emotions in different people, and his advice is to shift conversations from money to value. By adopting an entrepreneurial mindset, we can create more impact in the world. He also gives his take on the future of real estate and his hope for a freer and more decentralized money system.

 

 

[00:01 - 09:21] From College Pastor to Real Estate Investor

  • Ellis on his passion for serving people
  • It’s not about getting rich, it’s about being profitable
  • Creating wealth and bringing value to the world
  • The moment that made Ellis decide to go to real estate 
    • Taking action and getting into their first deal
  • Why Ellis recommends going for larger deals
  • Learning as you go

 

[09:22 - 16:37] Building a Community Around Business and Faith

  • Using their faith to impact others
  • Everyone deserves better homes
  • Adding value and enhancing resident experience increases profit
  • Getting investors the best return on money in the shortest amount of time possible
  • The ideal play for Ellis and his team

 

[16:38 - 18:50] Blockchain Is Here to Stay

  • The impact of this technology on real estate
  • What their company is doing in the space

 

[18:51 - 20:15] Closing Segment

  • Reach out to Ellis! 
    • Links Below
  • Final Words



Tweetable Quotes

 

“There's a lot of people out there trying to do good things for the world and guess what? They need money to be able to do it. And someone's got to go make that money.” - Ellis Hammond

 “With profit, there's margin. And without margin, there is no mission. You can't do good things.” - Ellis Hammond

 

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Connect with Ellis! Check out his website and the Kingdom REI website and podcast. Don’t forget to visit the Symphony Capital Group website, too!

 

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Email me → sam@brickeninvestmentgroup.com



Want to read the full show notes of the episode? Check it out below:

 

[00:00:00] Ellis Hammond: You carve out more equity for yourself as you learn to operate and manage and do those things. But you'll never get equity in cause you just like, I would never trust you to asset manage our deal right now, you have no experience. So you're not going to get it anyways.

[00:00:12] Ellis Hammond: Quit trying to learn that right now, get into a deal. Learn as you go, and that's exactly what we did. 

[00:00:17] Sam Wilson: Ellis Hammond is a founder of Kingdom REI. He started his career as a missionary on the college campuses of San Diego. And today he is the co-principal of Symphony Capital Group, an investment firm currently focused on acquiring multifamily value add real estate. Ellis, welcome to the show. 

[00:00:45] Ellis Hammond: I'm pumped to be here. Sam, let's get this thing going, baby. 

[00:00:49] Sam Wilson: Let's do it. Same three questions I ask every guest who comes to the show: in 90 seconds or less, where did you start? Where are you now? And how did you get there? 

[00:00:55] Ellis Hammond: College pastor, no network. Actually, I take that back. I had a network. They were just all 18 and 19 year olds. No money, a lot of fun though.

[00:01:04] Ellis Hammond: And I was a college pastor, man. I wanted to live my life for a big purpose and still do. And that's why I went into missionary, pastoral ministry work. We ran out of money and you know, like it's not a marginal business. You know, we had big dreams and help people. And one of the young men on my teams, Ellis, I don't have money this month to buy groceries.

[00:01:22] Ellis Hammond: And honestly, man, that was like a life- changing radical time for me because it was life- changing because I couldn't help the guy. And all that are really wanting to do is impact people. Right. And that's where we made a decision, man, we're going to get wealthy. And if anything you can get from this podcast today is if you haven't made that decision, you should, because there's nothing wrong with it.

[00:01:42] Ellis Hammond: And because there's a lot of people out there trying to do good things for the world and guess what? They need freaking money to be able to do it. And someone's got to go make that money. And so that's what we decided to do, man. We're going to figure that out and real estate is become that vehicle and purchased more than a hundred million dollars last year and on our way to another couple of hundred more and excited to grow.

[00:02:01] Sam Wilson: That's really cool. I think that money discussion is an interesting one, right? There's the commonly misquoted verse that like money is the root of all evil. It's actually not. It's the love of money that is the root of all evil. There's obviously I got a friend of mine. I'm going to go off-script. 

[00:02:16] Ellis Hammond: I love it. That's what I always do to people, by the way, we never talked about real estate. So let's just go off. 

[00:02:20] Sam Wilson: Let's just talk. So, I got a buddy of mine. He said, Hey, you know, if you want to know something about somebody, he's says, only three things you need to know: how do they treat food, how do they treat sex, and how do they treat money.

[00:02:30] Sam Wilson: He's like, you figure out those three things and you've gotten to know to the core of who someone is. And I was like, it took me a while to kind of absorb that. I'm like, well, that's really interesting. It's because money is one of those topics that like, it brings out all sorts of different emotions for different people in different capacities.

[00:02:44] Sam Wilson: And so I think it's interesting, you know, you as a college pastor, sitting here going, all right, you know what? I wish I could help you, bud, but I can't, I can't help you buy groceries. And that light bulb went off where it's like, and I got a phrase that I've written down. It says I can do more good in the world as a rich person than a poor one.

[00:03:01] Sam Wilson: Like, once you adopt that framework, I think for your relationship with money, like, Hey Ellis, you could do more good in the world as a rich guy than you can at the broke one. Like it's just an economic reality. So I think that's a cool kind of shift. Maybe even, especially for people who are in ministry. Getting rich isn't exactly the thing that's talked about very often, 

[00:03:21] Ellis Hammond: A hundred percent. And it's not necessarily about getting rich. I mean, we can name this whatever, but like my point is like everyone wants options, man. And people need margin and the goal of a business is for it to be profitable. Why?

[00:03:32] Ellis Hammond: Because with profit, there's margin. And without margin, there is no mission. You can't do good things. Like if you and your company or your family or your budget is so tight. That's not serving anyone. It's not serving you. It's not serving your marriage. It's not serving the thousands of people you're probably called to serve and help. And so, we got to get comfortable, man, with this goal of like, let's be insanely profitable. Not at the sake of others, you don't have to do that. My point is like, if you're not trying, if you're in business and the goal is not profit, I'm like, what are you doing?

[00:04:05] Ellis Hammond: Because we're gonna need to go back to the starting point, right? Because what I've learned, man, over my journey is those who are insanely profitable are also the ones who are bringing insane value to the world. So actually, if we just shifted the conversation to say, how much value should I create, not how much money should I create?

[00:04:21] Ellis Hammond: Well, the answer is, well, that's an easy question, Ellis, it's infinite. Okay. Well, if you exchange the word value for profit, why does it change? You know what I'm saying? Like, because the value is tied to profit or profit is tied to value. Then that's what we should be doing. And we get paid to solve problems as entrepreneurs.

[00:04:38] Ellis Hammond: Anyways, man, that's my story. And we will be and are working on becoming an insanely profitable company because we want to do really cool things in the world. 

[00:04:45] Sam Wilson: I love it, man. That's really cool. What was the transition there for you? I mean, it's one thing to be like snap, I got to get out and figure out a way to be insanely profitable. Where do I start? 

[00:04:58] Ellis Hammond: I mean, I didn't know. And honestly, in some ways, like, you know, you still, you learn as you go. I just knew he had to take action. It's interesting, man. Maybe some people are listening to show today. And the only thing you know, right now is like, I need to change and I need something to change.

[00:05:11] Ellis Hammond: And I was open to that and that's where exactly where I was. And I remember it was this crazy. It was driving in the car. It was like a month for, I was getting married and I hear a radio ad that said, Hey, if you want to learn how to get rich through real estate, come to this workshop, like who's ever listened to responded to a radio ad like in their life.

[00:05:28] Ellis Hammond: No, but honestly it's because I was open. I think about how many times I maybe have heard that, or how many suddenly we listen to the radio? Back then I drove such a poor car that I think is, cause my CD player didn't work, I had to listen to the radio, right? So that was part of why I was listening to the radio.

[00:05:42] Ellis Hammond: That's true. Like I had one of those cassette tapeswhere you plug in your iPhone. Like I didn't even have a auxiliary cord. I had to use one of those cassette tapes that then plug into my audio phone, which was probably broken. And so I was listening to radio. Anyways, that's how I heard about it. And I went to the seminar and I think it was one of those fortune builders or something right? And they were about fixing flipping, and it ended up doing that. But what I learned in that moment was like, there's a lot of guys here that are middle-class, lower middle-class, poorly educated making bank in real estate. And I was like, if these guys can do it, I gotta be able to figure this out. And so I just left there, man, inspired of like real estate as the starting point, not the end game.

[00:06:23] Ellis Hammond: And our first deal was four months later, we bought a duplex and you know, the only way I found that deal is because I went and found him in tour. And a guy here in San Diego buying deals, I'll say, Hey man, I'll do whatever. I just need to get into something. And he was the guy who helped us find the deal, put it on a contract, everything, man, gave me the courage to buy it.

[00:06:42] Ellis Hammond: When we had to come up with the money of course, and do all the hard work. But that was it. That was our entry in. It's not how I would recommend most people doing it, but that's how we did it. 

[00:06:51] Ellis Hammond: When did you transition to commercial real estate? 

[00:06:54] Ellis Hammond: As fast as I could, cause that's what I'm saying. Like, if you're listening to this, do not take my advice and go buy and duplex.

[00:07:01] Ellis Hammond: It's just so much better ways to get into larger, more profitable deals if you want to life along your business. So it took us about nine months where we learned about syndication, that we could actually raise capital and go do larger deals. And so surprisingly, it took us nine months after that. So within about a year, we had went from no real estate education, no background, no network to we got about $10 million of real estate real quick. Now, as you know, that's vanity in terms of metric wise. Cause I didn't own all of that. I had investors, I had partners, but we were now part of $10 million of real estate from nothing, you know? And we got into that just so your audience knows, and this is why I always recommend is the easiest way to get into multifamily or get into commercial real estate is either raise the money, have the money, or find the deals. So forget trying to do all of this stuff. You know, it takes a lifetime to learn it, but you can break in in the year like I did, if you can focus on one of those two activities, either finding great opportunities that, you know, someone's ready to fund or have the funding and be able to provide that to someone who can find deals like yourself, Sam, or like me, right?

[00:08:10] Ellis Hammond: We have deals. We're always looking for great partners who can bring in capital to help us fund these deals. That's how this business moves forward. So that's how we got going. 

[00:08:19] Sam Wilson: That is awesome. Yeah, man, there's business is that you, like you said, it takes a lifetime to learn all the nuances to it, but it boils down to those two things.

[00:08:27] Ellis Hammond: I mean, honestly, right? I mean, those are the most profitable ways. Like you carve out more equity for yourself as you learn to operate and manage and do those things. But you'll never get equity in. Cause you just like, I would never trust you to asset manage our deal right now. You have no experience. So you're not going to get it anyways.

[00:08:42] Ellis Hammond: Quit trying to learn that right now, get into a deal. Learn as you go, and that's exactly what we did. You know, we've done six deals in now. Now we're really, we've learned, we built the team, understanding the operations where now we can begin to take over all of the deal, right? And all folks are like, oh, you guys know what you're talking about?

[00:09:00] Ellis Hammond: You know the systems, you have things in place? We're ready to write you a $10 million check instead of the other way around. It's like, you know what I mean? Like we had to build that man. We had to build that reputation, had to build that in this industry. And so, you know, it's taken a couple of years to be able to get to that place.

[00:09:15] Ellis Hammond: Yeah. I think most people are waiting until they have that. And I'm like, that's the wrong way, man. You got to get going now. And you'll never have that reputation. 

[00:09:22] Sam Wilson: Right? Absolutely. Tell me, you got into college ministry because you saw a need and said, I want to serve that need. How has that shifted for you if it has shifted and how have you kind of had to reprioritize the things that you are doing? I'm think I'm just going call it on your call it the philanthropic side. 

[00:09:44] Ellis Hammond: Yeah, it's interesting. A great question, man. So I'm wearing the shirt today being called Kingdom REI. I knew when I got in this business, what God has always called me to, he called me this on a college campus. He's called me to this, like throughout every season of my life is build communities like people need communities.

[00:09:59] Ellis Hammond: And so I love this industry for so many reasons. We've built a community for faith- based leaders in this space to do those two things, find deals and find capital and partner with other people. So, you know, we've built a community around this whole business, man. I mean, Kingdom REI is that. It is a ministry and yes, it's really cool.

[00:10:15] Ellis Hammond: I mean, a lot of our deals, a lot of our capital flow in and out of this incredible community that we built Kingdom REI. So, in some ways that's a big element of your question, right, is I get to teach. I get to share. I get to incorporate my faith into that. We run a podcast show too where we've had like 150 people now, 150 operators, all faith-minded.

[00:10:38] Ellis Hammond: And I get to share my faith. They get to share why they love this asset, this industry, and how they're using their faith to impact others. So I want to think about, I mean, that's been downloaded 80,000 times, you know, like how many people like that's impacted. So like it's my mission, man, is why get on here. I'm really bold about, like, quit worrying about being profitable. Like people are going to hate you for it, but guess what? We need some people who are thinking about this, cause this is how the kingdom is going to go forward. So in that regard that from an asset or operator level, you know this, man, walking deals. Speaking of community, you know, when we buy an asset and this is where I think this business becomes very spiritual, you're owning someone's home, right? This is where they raise their kids, where they do dinner, is like I live in an apartment. We rent, we sold our place in San Diego. Now we rent. I know how important it is to walk outside and trash is not laying everywhere. I know how important it is when I leave this house that my wife and my little girl are protected because there's not a bunch of homeless, crazy people living on my sidewalk. Right? So when I walk an asset, it's always amazing to see how many things people overlook, how many things the owners and property managers overlook, when I'm like, this is people's home, man. Everyone deserves better than this. So, you know, I think one just from the way we operate deals is different.

[00:11:53] Ellis Hammond: I don't think that necessarily has to be from a faith perspective. I think that definitely impacts that. I think in some ways, if you were a good human being, you know, like that would also come arise, but that also could be, I believe we are made in the image of God so that it has a lot to do with it. And then we're building some cares programs, right?

[00:12:11] Ellis Hammond: Like we want to be good operators, not just acquisition folks. And so the way that we're thinking about, you know, we brought on a manager now that has experience kind of with social programs, Bible studies, after-school care programs, things like that, that we can begin to incorporate into our communities that just increase resident experience, which would, by the way, this is not just because we're good Christian folks. It's, we also know that it increases retention, which saves expenses, which increases profit. You know, this like we're adding value, which increases profits back to our communities, which then flows back to our investors. So, you know, all of this is very strategic, but you know, it's all incorporated.

[00:12:48] Sam Wilson: And I liked that. I mean, it's that common, well, that's a rabbit hole. I probably don't want to go down, but I'll just, I'll reiterate what you said, which is yeah. That you provide value to the people that are living there. It then increases the bottom line for you guys, a true win-win where it's like, I'm going to do the best I can for you and them. And oh, look, you want to stay at my properties. 

[00:13:07] Ellis Hammond: Yeah. I'll give you a great example, man. We bought the sale in Kansas city last year. The woman owned it for 30 plus years and the goal, I mean, so we're going to go in there and we're going to innovate this place and increase rents like that upfront is what we're doing.

[00:13:22] Ellis Hammond: So I had a couple investors who were like, Hey, I'm just not comfortable with that model because I know people are going to have to move out. I'm like, I understand that. But like, trust me when I say these people need a better place to live. And here's what happened. We took over, some of those investors almost didn't, when we took the deal over, we had eight people illegally living there who just left so that all of a sudden we had eight units.

[00:13:42] Ellis Hammond: We had the property manager who was selling furniture out of another unit. Okay. So now we have nine units vacant and then like two or three more, we realize, you know, people weren't living in any ways. They were vacancies that we didn't even know about. So all of a sudden we have like 15 units vacant, so we didn't take anybody out.

[00:13:58] Ellis Hammond: Okay. And then we started renovating these units and people were coming to us saying, Hey, I am so thankful you guys are renovating this. Can I go ahead and get on that waiting list so that when that place is renovated, I can pay more to go live there. You know what I'm saying? This idea of like, you know, raising rents is the wrong thing.

[00:14:16] Ellis Hammond: I'm like, dude, that's not it at all, man. People want, need a better place to live and are willing to pay money for that. 

[00:14:22] Sam Wilson: Oh, for sure. Yeah, absolutely. For sure. So you had 15 vacant units out of how many?

[00:14:29] Ellis Hammond: 85 units. 

[00:14:30] Sam Wilson: Okay. 

[00:14:31] Ellis Hammond: We were a hundred percent occupied when we took over. 

[00:14:35] Sam Wilson: Sure, you were. 

[00:14:36] Ellis Hammond: And all of a sudden we were, you know, 75% or whatever, 80%, but it worked out well.

[00:14:41] Ellis Hammond: And you know, that's all in our underwriting. I mean, we, when we're going and stuff, we're underwriting 45% economic occupancy year one anyway. So, you know, our plan is we're renovating units and we know we're going to take a hit for that. 

[00:14:54] Sam Wilson: Right now, talk to me about that. I mean, it underwriting 45% economic occupancy.

[00:15:00] Sam Wilson: How are you making offers that sellers are even interested in when you're underwriting it like that? 

[00:15:05] Ellis Hammond: Well, one thing, we're not necessarily paying our cash flow to our investors, you're one either. So like, it's not as if we need to be cash flow positive, our investors know we're going to get you the best return on your money in the shortest amount of time possible. If you want 6% cash flow month, one, that's probably not the group for you to be honest. You know what I'm saying? We're not your dividend retirement plan. Like you want to make money and make the most amount of money in the shortest amount of time, we're your group.

[00:15:33] Ellis Hammond: So, I mean, that gives us like, we've just own that identity, right. And that's kind of who we are. But, I mean, we're looking for, we need to be able to go in and increase yield or increase revenue by 30% in the first 24 months. And you know, that's going to come from renovation first like some renovation or a lot renovation, and some of that is going to come from leasing, but that's essentially our goal when we're underwriting deals.

[00:15:57] Sam Wilson: What class of assets are you guys focusing on? 

[00:16:01] Ellis Hammond: You know, I mean, we buy deals, you know, if there's ways to increase revenue, but I mean, our ideal play is probably eighties, nineties, bill, maybe two thousands. A lot of the exterior is either okay or recently renovated.

[00:16:16] Ellis Hammond: And the big play is interiors. You know, that's an ideal play for us. I liked that play a lot. You know, when I'm walking deals. If I got to spend a lot of time and money that first year on exterior, I'm not super interested in that right now. I just really want to get working on units and being able to get people in and out that's important to us.

[00:16:35] Sam Wilson: Yeah. I think that's really, really cool. Tell me this. You know, one of the things that we're seeing right now is a big push in the real estate space, as it pertains to crypto, can you give me kind of a 60 second sound bite on what it is that you guys are doing to involve yourselves in that space and how you think this is all gonna play out?

[00:16:52] Ellis Hammond: We have no idea, but we do think that blockchain is here to stay, dude, the money system is terrible. I have a wire right now that I'm trying to send a fund, one of our deals, I don't even know where it is. Like a little, my bank doesn't know where it is.

[00:17:05] Ellis Hammond: Wires suck. Okay. The whole money movement thing is so terrible. It is prime, and that's a true story. I literally there's a lot of money in the air right now. It's a terrible flawed system, dude. Blockchain technology transforms, changes all of that, right? I mean, it's instant. It's on a ledger. That's here to stay.

[00:17:23] Ellis Hammond: It's decentralized. Our government's corrupt. The dollar is not here to stay, you know? And so people are going to rally. The world is going to rally around a free system, a decentralized system. And I think if that's going to change the way we do things, man, including real estate, and it's a really interesting time to be alive, you know, the way we can fractionalize shares.

[00:17:42] Ellis Hammond: And so what we're currently doing, to answer your question, there's language in our PPM that allows us to fractionalize shares and then put those on a blockchain for a future sale, which is a benefit to our investors from a liquidity standpoint. I think if this does take off and this begins to catch momentum, and this actually does work in a very easy way.

[00:18:02] Ellis Hammond: Think about how much capital from around the world can now flow into United States real estate and forget where the dollar is. The dollar could go away, but the reality is United States, real estate is still very good to own. And so if you fractionalize that and allow capital around the world to be able to own that.

[00:18:18] Ellis Hammond: You know, think about Ukraine right now. You know, like, man, if you're a Ukrainian, but you still have capital, what do you do when you're not going to go invest in Ukraine? You may not want to go park my money in United States real estate right now. That'd probably be a good place to put it, right? And so what will that do to asset prices?

[00:18:33] Ellis Hammond: Well, you have a massive surge of money coming in any asset class. That typically means values increase. And so I do, you know, we're big believers, man, and we want to understand blockchain and crypto we're going to prepare for it. But the most important thing is we're going to own real estate and then figure out how those come together.

[00:18:51] Sam Wilson: I love it, man. Ellis, thanks for coming to the show today and breaking down kind of everything from how you got involved in real estate, your views on money, being a tool that you use to really bring massive value to other people. I think that's super cool. We talked about your Kingdom REI, I think mastermind there and what Syymphony Capital Group is doing, and also just a little bit about how you guys are positioning yourselves to use crypto and the blockchain technology in your assets, in the future. So certainly appreciate that. Appreciate all that you do. And just want to say, thanks for coming on the show. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?

[00:19:24] Ellis Hammond: Yes, the kingdomrei.com if you are trying to break into this space in need community, mentor thekingdomrei.com. Or symphonycapitalgroup.com, symphonycapitalgroup.com. You get in contact with us there. We're buying deals. We're always looking for partners, man. We're always looking for folks to, we're multifamily guys, and we got big goals and always looking for people to connect and collaborate with so reach out to us. 

[00:19:47] Sam Wilson: Awesome. Ellis. Thank you so much. Appreciate your time. 

[00:19:50] Ellis Hammond: Yup.