RG 273 – How We Got to $4.3 Billion in Assets in 20 Years with Mark Hamilton

We’re here with another real estate CEO this week, one of the biggest in the nation, to talk about bootstrapping, investing in the right areas, and building a business from the ground up. Listen as Mark Hamilton and I talk about Hamilton Zanze came to be, and the highs and lows he encountered in the process.

Mark Hamilton is the CEO and Founder of Hamilton Zanze, a San Franciso-based real estate investment company with more than $4.3 billion dollars of assets under management. Throughout his career, Mark’s main focus has always been locating value-add properties and changing urban neighborhoods into high-value properties across the country.

In this exclusive interview, Mark touches on highly relevant topics like finding the best locations for real estate investing, investing in the right people, and re-working urban neighborhoods into higher-quality buildings. Tune in and learn more about value-add properties and multifamily investing all from one of the very best.

Key Takeaways

• Sometimes, life is going to take you off course, which would end up the right path after all.

• One of the key pillars to success is investing in great people, regardless of age.

• Buying cheap is not necessarily a guarantee to success.

• Look for places where jobs are growing.

Be Bold, Be Brave and Go Give Life a Crack!

Mark Hamilton (00:00):

Your job is not to buy cheap. Your job is to buy well. And it’s hard war you will look at, you will look at countless opportunities, uh, and you may grow weary of it. Uh, but it’s hard work. Um, and looking for, looking for opportunities to invest well, rather than buy cheap or just buy pretty, you know, we got all on real estate in fifth, out on fifth avenue in New York, but none of us would make any money. So, um, yeah, your job is to invest well.

Reed Goossens (00:39):

Welcome to investing in the U S a podcast for real estate investors, business owners, and aspiring entrepreneurs looking to break into the U S market join Reed as he interviews go getters risk-takers and the best in the business about their journey towards financial freedom and the sheer joy of creating something from nothing

Reed Goossens (00:59):

Good day, good day a ladies and gentlemen, and welcome to another cracking edition of investing in the US podcast from Los Angeles. I’m your host Reed Goossens good as always every with us on the show. Now, I’m glad that you’ve all tuned into learn from my incredible guests and each and every one of them are the cream of the crop here in the United States. When it comes to real estate, investing, business, investing, and entrepreneurship, each show, I try and tease out their incredible stories of how they have successfully created the businesses here in the US how they’ve created financial freedom, massive amounts of cashflow, and ultimately create extraordinary lives for themselves and their families life by design. As I like to say, hopefully these guests will inspire all of my cracking listeners, which are you guys to get off the couch and go and take massive amounts of action.

Reed Goossens (01:46):

If these guys can do it. So can you now, as you know, I’m all about sharing the knowledge with my loyal listeners, which is you guys, and there’s absolutely no BS on this show, just straight into the nuts and bolts. Now, if you do like to show the easiest way to give back is to give us a review on iTunes, and you can follow me on Facebook and Twitter by searching at Reed Goossens. You can find the show wherever you podcast on iTunes, SoundCloud, Stitcher, and Google play, but you can also find these episodes up on my YouTube channel. So head over to Reed goossens.com, click on the video link, and it will take you to the video recordings of these podcasts, or you can see my ugly mug or the beautiful faces of my guests each and every week. All right, enough of me let’s get cracking and into today’s show to end the show. I have the pleasure

Reed Goossens (02:32):

Of speaking with Mark Hamilton co-founder of Hamilton’s Zanze at San Francisco based real estate investment company with over $4.3 billion assets under management Mark’s main focus has always been locating value, add properties in changing urban neighborhoods across the United States, then reworking them into high quality buildings with higher incomes, improve tenant profiles and higher resale values. Now, mark and his business partner, Tony founded company way back in 2001. And since then the firm has gone on to acquire over 20,000 units across the United States. I’m really pumped and excited to have him on the shutter Denisha. He’s incredible insight and background, but nothing to me. Let’s get him out of here. Can I mark, welcome to the show, how you do so much.

Mark Hamilton (03:15):

Um, good read. Thank you for having me on. And we come to our shores.

Reed Goossens (03:19):

Thank you very much. It’s uh, after interviewing over 300, uh, incredible entrepreneurs here in the United States, it’s a, it’s, it’s been a bit of a journey, but really pumped to have you on the show and we’ll get into your story in a little bit, but, but I ask all my guests who come on the show is rewind the clock. And tell me how you made your first of a dollar as a kid.

Mark Hamilton (03:38):

Well, that’s a good question. So I’m just going to take a stab at it. It’s probably mowing lawns. Um, our parents gave us allowance based on chores that we did, and I probably, you know, mowing the lawn, probably put a few dollars in my pocket, you know, back in that day. Yeah. We really did do lemonade stands and we were across the street from, uh, a community college. So a lot of community college kids came and went and bought lemonade at our lemonade stand, you know, from humble beginnings. Right,

Reed Goossens (04:06):

Right, right. And then, and then that’s always a good introduction into the show because this show is about trying to tease out your story. And so, you know, you, you are quite well, uh, you have a huge, impressive portfolio and you’ve you build a Hamilton’s dance from scratch, but for those people who don’t know, you know, your background, do you want to give us a little bit of a journey trip down memory lane and how you got into the real estate industry originally, and then how you stumbled across wanting to start this company back in 2001?

Mark Hamilton (04:36):

Well, so I, I will tell you it was, uh, it happened completely by accident. Um, and, and, uh, I should thank my lucky stars because it was a pretty happy accident back in the day when I graduated from college in 1981, I was quite certain that I was going into a career as a, as a, as a writer, as an academic and probably as a college professor, fate, fate interceded, and put me on a different path. I, I, I, I started out of college. I took a job at a commercial real estate firm just to put money away to go to graduate school. And I knew I was only going to do it for a year. I just took the first job that came along. And it didn’t matter what it was. I mean, I don’t know what I was going to flip burgers, but, uh, you know, it was, it was an office job.

Mark Hamilton (05:26):

And so I took it and after a year I said, my put, I put money away. I set my fare, the Wells, I got into graduate school. And I went and thank goodness it was a one-year program because if it had been a two year program, I don’t know that I would’ve stayed because it didn’t suit me and I didn’t suit it. Um, but I, you know, I finished, I, I succeeded, I got my master’s degree. And then, and then that was that right. That was going to be the end of that. And so, um, I came back to San Francisco and, uh, and went back to same firm to, again, just to have a, just to have a place to, to, to busy myself and make money. And at that time, uh, the gal I would later marry, she and I had decided because I hated graduate school.

Mark Hamilton (06:10):

And so we, she had decided that she and I had decided that we would get jobs teaching English in Japan so that we could, you know, put off worrying about careers in the future and the like, and then at the last jobs, but at the last minute she got cold feet. And so I was stuck in the same real estate firm again. And I just like, it never occurred to me. It never would have occurred to me. It’s like that, that’s where my career was going to come from. It was a, it was a high pressure, uh, kind of boiler room, shark tank kind of place. Um, there were a lot of good people there, but it just, it just wasn’t for me, I didn’t see myself being a real, uh, commercial real estate salesman, but one of the, one of the people that I worked with ended up after my wife and I had bought our first place.

Mark Hamilton (06:53):

We, we, we decided that we would look for something to renovate, um, in San Francisco and, you know, roll up our sleeves and work at night, work our day jobs and work at night and renovate and renovate a place. And we bought a duplex. It was kind of a wreck. Um, it, it was so bad in fact that it made my wife’s mother cry if you first saw it. And it was in, uh, something of a rough neighborhood at the time, but we liked it, right. It worked out clearly, it was going to be profitable. And my boss at the time at this commercial firm said, you know, can we make money doing that? And I said, yeah, of course we can make money doing it. He said, well, why don’t you go out and find some more? Right. So he gave me even the opportunity to basically move, like while I was working for him.

Mark Hamilton (07:36):

And he was the angel investor, my wife, and I would go out and find the properties and, and handle the transactions. And my wife, uh, who would later get her general contractor’s license, uh, ended up doing all the renovation and property management. And it just felt like it was hard work. Right. And in San Francisco was, it was a charter and environment even then, but we really liked it. And then, uh, another married couple kind of did the same thing. They, they, and the four of us through our lot in, uh, together to start this little business, uh, renovating, you know, buying properties with investor capital and, and renovating them. And we were pretty good at it. And, uh, so I did that off and on also did I also worked as a broker a bit to make ends meet when I needed to. Um, but that, that basic model lasted for 16 years.

Mark Hamilton (08:26):

Um, and it was very opportunistic. It was really based on San Francisco and then eventually Oakland. And then I met Tony’s and and, uh, in 2001 and he hit his career was very different. He, uh, uh, he had an MBA from Wisconsin, which is the premier real estate MBA. And, uh, had had a, had a Cooper, had a corporate pedigree, pedigree and resume that was exceptionally strong. And he just decided he was tired of the institutional world and trying climb the corporate ladder. And, and we met through a friend and kind of ran side-by-side for a while. And finally, one day in the summer, he said, I don’t want to be your partner. And I said, the worst thing that could happen to you is that I’d say, yes. Why, why in the world would you want that? And say, you have this great career, you have a job that people would kill for.

Mark Hamilton (09:14):

You don’t want to do that anymore. He said, I’m tired of doing it. I’m tired of making everybody else’s money for them. And I’m ready for a change. I just said, look, there’s no downside for me because I’m going to keep doing whatever, what exactly what I’m doing. If this doesn’t work out, I worry about you, but if you insist, then let’s do it. And that’s what we did. And so Hamilton Zanze was formed in 2001 and it was Tony and I, and one other person. And, uh, I had, uh, I had a portfolio of probably, you know, a small portfolio of maybe a dozen buildings at that point in time, uh, you know, a few hundred units. He had, he had less than a hundred units. He had two buildings, um, and we just threw our lot in together. And the first thing we bought in December of 2001 was 16 units.

Mark Hamilton (09:58):

We bought a 16 unit apartment property, and then 2002 came along. We get a little more, 2003, did a little more and, and so on. And the engines kinda really ignited. And, uh, eventually we decided to leave the bay area because the prices here were just so breathtakingly high and we really want it to be able to distribute current returns. we didn’t wanna, we didn’t want to follow a path of just assuming we would make money because it was San Francisco. Uh, we wanted to be, to be able to validate that with a distributable income and, you know, one thing led to another, and now we’re in, uh, um, I’m going to tell you that we’re in 28 markets, um, in 15 states and, you know, we, we never set out for it to be that way. Um, but we’re, we’re passionate about it. We’re students of the game. And when we, when we pick up a new market, we do it almost defensively because we’re, you know, we’re constantly being transactional and we have to have places to work. And some places, you know, some places quite frankly, just get too expensive. And, and we either sit on those or sell them. We’ll, we’ll, we’ll do some of both. Um, but we’re always looking into new markets because we, you know, we’re always looking for those that next wave of transactions that will pay cashflow.

Reed Goossens (11:15):

Right. Such incredible. Where do I even stop it? You know, going from, you know, bootstrapping your first duplexes with your wife. And I want to just dug a little bit of that, because that’s interesting to you, your boss at the time just said, here’s a bunch of money go nuts. Is that essentially

Mark Hamilton (11:32):

What happened? It wasn’t quite that. But like I said, we, uh, you know, the, the, the, the idea of going into Japan fell apart. And so we were at loose ends, and then we just kind of started, started, like, what do we do next? And I don’t remember whose idea it was. It was probably mine, uh, to, to, to find something we could renovate and then renovate it. And, um, this was in a part of San Francisco that was, I mean, it’s come a long way. Uh, it’s now called Hayes valley, and it’s one of the most expensive neighborhoods in San Francisco. But at that time, it was still very transitional. And, uh, we bought this duplex for $32,000. Uh, with 10% down, the seller carried a note for 10%, we got a new first loan. My parents co-signed on the loan. Laurie’s parents helped us with the down payment.

Mark Hamilton (12:22):

And we started and, and literally worked our day jobs and then came home at night and worked on the property. You know, we paid tradesman as we could. And, and, uh, and we hit it. Right. You know, we, we found something where the neighborhood really was improving and we were able to improve the property. And within, uh, within about two years, we sold that. Uh, and then, uh, did it turn the 10 31 exchange into a bigger, a much bigger three unit property around the corner, uh, in the same neighborhood and did the whole thing over again. And, uh, we own that property for 26 years. Wow. Wow. That’s incredible. That’s incredible. We converted into condominiums. The, uh, we bought the property for three big units, very, very big units. And, uh, we bought the property 420 grand right away through about another 150 into renovating it, and then just renovated it more as time went by. And we eventually converted into condominiums and, uh, my wife and I had the top two floors and we sold that for almost two and a half million dollars. So, you know, even I can do math like that. I think, I think you make, you might make a little bit of money when you bought it or

Reed Goossens (13:36):

Florida 20,000 bucks. Yeah, exactly. Just pivoting a little bit into the growth of Hamilton’s and what what’s been looking back in 2001. So we’re going on 20 years of the company, what’s been the biggest lesson you’ve learnt growing 20,000.

Mark Hamilton (13:53):

Oh, that’s a really good question. But I would say invest in great people. I mean, if I could only pick one thing, I would say, uh, invest in great people seek out really promising. I will say young adults. I mean, we don’t discriminate against anybody. Who’s, you know, one age or another, but we’ve had a lot of success by, um, investing in people who are early in their careers. A number of our most, most important staff I’ve started as, as interns or trainees or, you know, analysts they’ve started in one beginning position or another. And, and many of those people have stayed with us for 10, 12, 15, 18 years, and risen through the ranks. And, you know, it’s, it’s, it’s just really important to have, to have the opportunity to work with like-minded people, people who are really passionate about the work, and then, you know, you gotta take care of them, right? You gotta take care of those that take care of you. Um, and, and, you know, if you maintain a good and you help people move up the ladder, right. And you, and you make sure that you create a ladder, that they can move up and, and open the doors to participation in, in the revenue and the, and the equity in the properties. Um, you’re, you’re going to have a pretty good yup.

Reed Goossens (15:09):

And I, the benefit for those listeners out there of actually interviewing, um, mock CFO, Ashley, uh, Kimbell, and she was, she was explaining to me how she started as an intern, like yourself back in the day and worked her way up to CFO, which was pretty incredible. And it’s, it’s in one of the previous episodes, but I do want to go into one something you mentioned earlier, which I thought was quite interesting from where we are today in today’s market is you mentioned overpriced and trying to go into new markets when things become too expensive. Cause you originally left San Francisco because stuff was just getting too out of control. Where are you seeing more affordable stuff today, particularly multi-family space because, you know, you look across any secondary market. It is going bonkers, you know, three, 4% like cap rates. So what are you doing to stay ahead of that and way we try and look, you know, you can tell me all the secrets of your source, but you know where you’re going.

Mark Hamilton (16:02):

Uh, that’s a great question. And there are no bargains right now, right? I mean, there just there aren’t, um, we worked, let me think 2018, uh, when interest rates started to go up curiously, there was, uh, there was, uh, uh, a massive surge of buyer demand of capital demand for apartments. And that was, that was a year that we worked harder, uh, to find deals that year than we ever had. And curiously, it came as interest rates were going up, which to me seemed a little intuitive, but, um, probably, uh, capital wanted to tie up debt while dad was still cheap. And capital looked at the prospect of rising in interest rates as being a response to, you know, surging economic activity. And so that was a really hard year. And we ended up probably over the last three or four years. We bought properties in, in Oregon, uh, Las Vegas, Colorado.

Mark Hamilton (17:03):

Um, and then we’ve, we’ve, uh, we’ve also bought on both sides of Kansas city, the Kansas side, and the Missouri side we bought in St. Louis. Um, we’ve bought in a number of different markets, uh, in Tennessee, mostly around Nashville. I we’re buying our first asset in Charlotte, Virginia. We bought about eight properties in Charlotte, North Carolina. We bought about eight properties in Virginia and we’ve bought a few in Maryland and Connecticut. So we, we kind of went just wherever we could, right. Wherever we found pricing, that made sense and, and some opportunity for cashflow. Um, but what I, but what I would say is this, and this is maybe an another thing that I’ve learned along the way, buying cheap isn’t necessarily the guarantee of success. You know, you can buy stuff that’s cheap. It’s just gonna, it’s gonna stay exactly as it is no matter what.

Mark Hamilton (17:54):

And I mean, w we, we, we were, we had, uh, refer to it as Katari house when there’s, when there’s no compelling reason to live in a place at the main benefit that a resident going to get is going to be cheap rent that that may not really be the basis for a successful investment plan. And what we’ve found, uh, looking back is that innovation centers, places where there’s a lot of innovation going on, um, are going to be where you have the kind of economic activity that, that will support successful apartment, uh, investment. And then I would just say, you know, if you look at the Puget sound, it became, uh, you know, we went from being logging in and shipping and fishing to being tech, right, Oregon. So the same stuff, the bay area, certainly as an exemplar of the value of innovation and, and, and technology.

Mark Hamilton (18:49):

Uh, but that’s also been true in Arizona. I think our number one market, uh, over the years has been the I 25 corridor in Colorado. And it, and it’s just because of the kind of jobs that are going there. And so if there, if there are high wage jobs going there, if, if people who are going to drive, um, those, those, those economies, those business economies and those real estate economies are going to be happy there, there’s going to be amenities that they like, there’s going to be good transportation. Um, there’s going to be quality of life. That’s, that’s a sign. And you need to take that very seriously because a lot of the biggest decisions that are getting made in the business world are about where can they locate facilities and jobs centers, where people who can work in innovation are going to want to work.

Mark Hamilton (19:42):

Austin, Texas, as a prime example, you know, Austin, Texas is probably drawing more technology investment right now than the bay area area, Colorado. Again, a lot of jobs are going there. Atlanta, lot of OBS are going there and they go there, you know, Microsoft or Amazon, or whoever goes there because they think that they’re going to be able to build the workforce that they right want in those places. And so, I mean, that’s what I would say, follow innovation, you know, follow places where there’s a lot of science, technology, engineering, math jobs, they call those stem jobs, but that’s where you’re going to, that’s where you’re going to get your best rewards. And then I also think historically, we tend to look at places, um, maybe, maybe perhaps by default, where we’re home prices are high, um, prices are high, again, that’s a function and wages in that area, but we’re home prices are high. Yeah. It’s going to make it a little bit more likely that someone’s going to live in an apartment for awhile before they go out and buy their first home. So, I mean, that’s, that’s what I would say. Uh, you know, look at places where they’re growing jobs, how

Reed Goossens (20:48):

Do you then couple the returns, because particularly say like, I’m an active investor in Austin, Texas, when you, you have such a transition over the last 20 years in that particular city to say a coastal market type of cap rate, uh, and, and the supply demand issue, whether you got a lot of demand, but the supply is hard because, you know, municipality makes it a little bit difficult to get construction out of the ground. So how do you try and still create that yield that everyone’s chasing, particularly in this environment as we’re on today?

Mark Hamilton (21:16):

Well, there’s an old adage in this business. You’ve probably heard of that. You make your money on the buy, right? And, um, we bought a property in Colorado Springs, gosh, probably 15 years ago or more, um, it was brand new and it was beautiful, beautiful real estate. Um, and it’s the kind of thing that we would not have thought we could get ordinarily because, you know, the, the better, the real estate, the higher the price, the lower the returns, and people tend to pay more for, uh, what I would call pride of ownership or Jewelbox properties, right. They’ll accept lower returns. And when I say the prices are high, am I really be saying the returns are too low. Um, but we bought this property and we got, uh, we got into the final. So the buyer pool, um, because the, the owners who had built it, which were a California group, decided it was built a condo specifications.

Mark Hamilton (22:11):

And they decided like almost at the last minute, um, that they didn’t want the exposure for condominium defect litigation. So they were only going to sell it to somebody who would, who would put in a covenant that we, that there, that there wouldn’t be a condo conversion. And so that knocked the other condo that, that knocked the condo converters out of the box. Um, and, and we got the deal and, and again, it was better real estate than, than we would ordinarily have God. We loved it. We did very well with it. I think we probably started paying out paying a five or 6% cash on cash, but the, that economy of the Colorado Springs economy really strong a lot of technology, a lot of defense installations, higher education are to build there. Um, and, uh, after, after 10 years of, of rising income, we were able to basically, uh, refinance the property and return all the investor capital and, and, and still own it.

Mark Hamilton (23:12):

Uh, and the investors are still a majority owners in it and it turned out really well. And so, you know, you just gotta, you have to be able to look, you gotta have a little bit of a crystal ball. You have to be able to look forward and make, you know, you have to be careful with forecasting, but you have to be able to dissipate the certain things that are going to happen. And we’ve in recent years, we’ve really found that paying a high prices is, has got negatives and positives. Uh, one of the negatives is that it makes your distributions low. Then that’s a problem on the other. What we’ve found is that the properties that are the better properties with the higher income households on the, like, it’s easier to model, uh, expenses on a forward going basis. And it’s easier to model, um, uh, income movement on a forward going basis.

Mark Hamilton (24:01):

Whereas when you buy the older stuff, stuff, it’s maybe a little ragged, um, it’s got a different, different demographic. It’s harder to, to anticipate, uh, what you’re going to have in terms of major maintenance and repair, uh, projects on systems, lighting, underground, electrical, water, sewer, you know, the whole nine yards that, that stuff breaks. It, it wears out over time. And what we found was that, uh, by buying, by buying newer stuff, that was larger scale and, and more what we would call core plus rather than value add was that by, uh, by purchasing the core plus stuff and being really meticulous about it, we were also able to do very well and actually probably have more upside, uh, over time in the amount of income that we are going to be able to distribute to investors. So it’s, uh, you know, you do make your money on the buy and, you know, if you see something that just that you see an opportunity aspect to something, um, and you see how you’re gonna be successful over time, you’ve got to trust your judgment.

Reed Goossens (25:13):

Looking forward back to the crystal ball analogy. Because a lot of people that I talk to very much in Austin because Austin is blowing up, but they compare it too much to coastal cities like, okay, here in Los Angeles here in San Francisco, you’re paying two 50 to 300 K a door for 1980s asset and a V you know, in mid city, Los Angeles, right. And then people then say, well, you know, the rent for that for, for one bedroom is 2100 bucks. And that’s for on the low end. So thus Austin, or these interior cities, like Colorado’s have a long way to go to get to that price per pound and the rent.

Mark Hamilton (25:47):

You know, I don’t want to say it’s a myth, um, that a coast that coastal coastal cities are gateway cities are, are myths. Um, there’s certainly a lot of institutional investors, whether it’s pension funds or reeds or sovereign funds that want to invest in Seattle, they want to invest in LA Jolla. They want to invest in Palo Alto. They want to invest in Miami. Um, they want to invest in Washington DC. Um, but I do think that that a lot of these places that are not coastal Austin, for example, Atlanta, for example, um, even Kansas city, we’re getting a lot of the drivers. Um, and, and let’s face it. The drivers are people, right? The drivers are people who have good jobs and want to live in certain places and they’re the drivers. Um, and a lot of those drivers are going places like that.

Mark Hamilton (26:37):

They’re going to, they’re going to Detroit, they’re going to Spokane. They’re going to Cleveland. There’s a justifiably famous real estate economist, whose name is Peter Lindemann. And, uh, he was a professor at Wharton for many, many years, but he’s, he’s probably one of the two or three premier real estate economists in the United States. And, uh, for his, he listed five cities that he thought were going to have, um, the most upswing in, in NOAA for apartment owners coming out of the pandemic. Maybe I’ve been repeating myself. I can only remember four of them, but one of them was the orange county. One of them was the empire inland empire in, in Southern California, which is Riverside and San Bernardino county, Riverside. You know, obviously, uh, he, he thinks it’s a strong place that you have a choice to go to LA Jolla or Palo Alto or Bellevue Washington, or Riverside.

Mark Hamilton (27:32):

Most people are not going to choose wherever, but he was going at the economics of it. The other two were Detroit and Cleveland right now. He, for some reason I forgotten the fifth one, but, you know, he see, he, he sees a lot of household formation going in there and he also looks at, um, uh, new construction, uh, deliveries. He, he, he always comes back to supply and demand. And, um, he, he felt that he, he seems to feel that the supply and demand economics are going to be that those are the, the, those are four of the top five where you want to go. And so, you know, on these coastal cities, whether it’s, uh, Seattle, um, San Francisco, Santa Monica Capitola so much capital wants to go to those places that the returns get pressed, and we have to follow returns. We have to be the master that we serve.

Mark Hamilton (28:22):

First. The last is returns. We also want to buy real estate that we’re going to lie. Um, but then it has to catch up. And we’ve, we’ve, uh, notwithstanding the fact that we’ve probably owned 20 properties in the metropolitan Puget sound. Um, over the, the last 15 years, we’ve never bought a single property king county, Seattle, right? We’ve never bought a single property at king county. We never bought in LA Jolla. We’ve never bought in, in orange county. Uh, you know, in our early years, we did a lot of work in San Francisco and Oakland, but the, the impetus for us to, to go elsewhere was that when we had made money, um, where we had executed business plans and, and had successful outcomes, um, with our investors and we’re getting ready to sell it, we’re going to do a 10 31 exchange with new capital in order to stay in these markets in order to stay in San Francisco in Oakland, we’re going to have to face ever lower returns.

Mark Hamilton (29:22):

Um, and, uh, we, we liked being able to forecast cash flow that, that that’s above what people can get. Um, the other means, and if we have to go to our investors and say, well, we’re going to, we’re going to put up 50%, right, where you’re going to get a loan for 50%, and we’re going to distribute 2%. Nobody’s going to be in that. Right. You know, when we tend to be, uh, uh, what I would call an intermediate leverage up, we’re gonna, we’re gonna leverage 65 to 70%. Um, but we want to be able to, we want to be able to make a distribution. Um, that’s compelling. And, you know, and as prices go up in Seattle or Santa Monica or LA Jolla or Palo Alto, um, returns get compressed, and you just have to put a lot of capital in to get a very small, to get a very small, uh, distribution.

Mark Hamilton (30:11):

And you have to hope that just because you bought it in one of these places that someday it’s going to be worth more. And that’s, you know, we decided a long time ago that that was a tricky thesis, and we really want to see, we want to see the underwriting. We want to see the facts on the ground for the return. And so we’ve gone elsewhere. And, you know, you started with an incident, innocent question about gateway cities, and I took you through. But, um, I think that, um, in a way, Austin is a gateway city, right? It’s an international city. People are going there, people are flooding. They’re like my, you know, might as well be Miami, right? That’s a gateway of sorts. Um, it may not be a gateway for shipping, um, but it’s a gateway. And, uh, if you don’t, if you’re not sure if it’s a gateway, look at the cap rate. If the cap rate is really low, you’re probably looking at a gateway city. And then you’ve gotta be careful about finding your returns if the cap rates really. So,

Reed Goossens (31:04):

Are you actively not looking in places that have started to compress like an Austin or Denver or the like, where they’re starting to really, really become quite compressed, but I know that it’s tight correlated to interest rates, but what cities are you looking at to try and chase that yield because of this low cap rate environment that we see ourselves in.

Mark Hamilton (31:22):

So what I would say is this, I, I wouldn’t say that we’ve, um, like isolated certain markets that we’re not going to look in anymore. We, we look in all the markets we’re in, we’re in the Puget sound, we’re in metropolitan Portland. You know, we haven’t bought our apartment property, a multifamily property, California in almost 20 years, probably 17 years. So we’re not really looking or not looking at our home state just because of pricing. Right. But other than that, we’ll look anywhere. Um, and brokers that know us and know what we’re looking for. We’ll take every single one of those calls if it’s in a market where we are. Um, and you know, we’d like all the markets that we’re in and we’ll go, we’ll go. Any of those markets, if the deal, if the opportunity underwrites, uh, what I would tell you is that some markets are really hard right now.

Mark Hamilton (32:11):

Like, like for example, we can’t, we can’t get into the Phoenix, uh, to save our life because the prices are so high and the returns are so low. Um, but what I would say is that where we are still hoping to find, uh, deal flow, uh, would be in, uh, Georgia in, uh, Kansas city, Kansas, Kansas city, Missouri St. Louis, Missouri, uh, north Virginia, Maryland, Tennessee. Um, we do have, uh, we do have properties in Connecticut. I don’t know. I just don’t know that we’ll see more opportunities in Connecticut, but right now it seems like we think, uh, the Midwest and, uh, uh, on the mid Atlantic are, are, are, are going to be the most fruitful for us. Um, and so we’re probably doubling down on our searches in those markets right now. Um, we would also look in, um, we would also look in Florida, but we probably wouldn’t, we probably wouldn’t look in Miami or Fort Lauderdale again, just because of pricing. Uh, we’ve, we’ve chased opportunities in Tampa, um, and never, and never come away the winner. Um, but you know, we would also look in Charleston, South Carolina. Uh, so again, I would say the Southeast, uh, the mid Atlantic and parts of the Midwest are where we’re really hoping to find more transactions flow. A lot of, a lot of

Reed Goossens (33:39):

It come to the end of the show. Um, I want to ask you where you see Hamilton Zanten and what your future, both professionally and personally, in the next couple of years, let’s say next five to 10 years.

Mark Hamilton (33:52):

That’s a really good question. Um, we’re building it to last, um, and you know, that comes back to one of the first things we talked about is, is having great people in your shop. Um, and, and we’re building it to be, um, to be eventually, uh, B. So the Tony and I, and Kurt, how Cooper, who’s our, who’s our third partner, he’s younger than we are. And he joined, he joined after we started the company. We all want to be rich. We all want to be able to retire. Uh, I used to think I would die with my boots on, and I’ve grown up a little bit, um, since thinking that way. And I do think that retirement has a place in my life, but we hope to be, uh, succeeded in the organization by our, the great staff that we have. And, um, you know, we’ve been able to build a little bit of a diversified business because we also, we also have, uh, we’re vertically integrated with our management company, which is called mission rock residential.

Mark Hamilton (34:42):

And then we have a, uh, commercial arm, uh, Graham street Realty, which does a little bit of urban office, more suburban office and a little bit of, uh, light industrial reflects. Um, we, uh, so we, we, we also acquire that kind of property, uh, through Graham street Realty, which is a sister company. And then we have a commercial management company, which would, which oversees our commercial, uh, investments, but also does third-party business. Um, mission, rock oversees our apartment business, but also does third-party business. So we want these, these, these companies to continue to grow and thrive, and we want people to rise up through the ranks and, and really get a place at the table, um, in terms of where the economic participation happens. Um, and I, you know, I hope, um, I, I’m going to be telling myself that I’m going to work another 10 years.

Mark Hamilton (35:34):

Uh, we’ll see. Um, it’s certainly, it’s certainly possible. Um, my wife and I both think that I’ve got another 10 years in me and she probably enjoys having me out of the house somehow at some point, but we hope that every year just gets better and stronger, and then we have a stronger organization. And then by the time, you know, by the time the old guys retire, that there’s a very strong organization behind, that’s going to have that. You know, if I, if I last another 10 years, I hope that 20 years from now, they say the best 10 years have been the last 10. You know, I want, I want the life of the business to get better every year, um, whether I’m in it or not. And I think that’s what all the partners, uh, with the three primary partners are, are aiming for. I think

Reed Goossens (36:18):

That’s an incredible vision to have for such a company that’s being created from nothing. Um, at the end of every show, do a quick lightning round, which is five lightning questions. Uh, you ready to jump into it? Go ahead. But what is the habit you practice to keep on track towards your goals?

Mark Hamilton (36:33):

I spread out all of my tasks and deliverables. I sometimes refer to them as my make goods. You know, the little things, the little loose ends that I need to tie off my to-dos. I spread them all out on a table and I put them in a calendar. I try to knock off as many of those as I can every single day. That’s awesome.

Reed Goossens (36:55):

Big to-do man question. Who is the most influential person in your career to date?

Mark Hamilton (37:00):

Uh, truly, um, there there’ll be a few good candidates. Um, all of them have, you know, uh, uh, sprinkled pixie dust on me at different times at different ways. Um, but I would say Jacob Levy and Jacob Levy was the gentleman who early on saw the opportunity to make money, um, by renovating little buildings in San Francisco and he didn’t blink, he didn’t flinch. He just said, go do it. And I got to do my day job, uh, while I was doing that and I got to go running around town, looking at stuff to buy. And, um, that was the real breakthrough. Um, and you know, my wife and I ended up, um, spinning up a little con uh, a little enterprise out of that, that led to the next enterprise and so on until Tony and I hooked up. Yeah. I would say Jacob Levy. That’s awesome. Right?

Reed Goossens (37:51):

Yeah. Without any mother that you’d be here today, right? Question number three, what is the most influential tool and you’ll business? When I say tool, it could be a physical tool, like a phone or an iPad, or it could be a piece of software that you cannot run the business without. What is it?

Mark Hamilton (38:05):

Anything that facilitate facilitates communication? Um, back in the day, I would have said a telephone. Then there would come a time. I would’ve said email or text messages. Um, certainly now you and I are conversing on this thing called zoom, which you know, who her knew about this two years ago. So I’d say anything that facilitates communication and allows you, it allows anyone to have a meaningful piece of dialogue, you know, real dialogue, a real exchange of thought and discussion about interests and, um, is, is far and away the most important tool. That’s awesome.

Reed Goossens (38:41):

And second, last question is what has been the biggest failure in your career? One, one sentence. What has been that biggest failure in your career? What did you learn?

Mark Hamilton (38:50):

We, um, we had, uh, we, we also do it. We do a lot of business with the, you’re not going to get one sentence out of me, but we do a lot of businesses. Most of our businesses with Institute with us, with individual investors, but we also do business with institutional investors and we did a, uh, we did an institutional joint venture with, um, with Wacovia, um, back in the day, back in the, uh, the late two thousands. And, uh, we put five-year money on it. Um, and so when, when, when, when those loans came due, nobody was getting loans, right? It was the, it was the de-leveraging era. And, uh, at that point in time, Wells Fargo had taken over walk home and become, uh, and become our joint venture partner. And, uh, Wells Fargo was not going to de-leverage the lungs, right? And so we were going to have to come up with some very large checks, a Wells Fargo said, we love you.

Mark Hamilton (39:48):

You’ve done a great job. We really respect you. We want to do business with you going forward. And we like you so much. We can give you each one of these two properties for $1 each, right. All that’s off sale for you. But the problem was we were going to have to come up with like 25 million bucks and he leveraged the lungs and it just wasn’t going to happen. And so, um, we, uh, Tony occurred to myself where this were the biggest investors that were not Wells Fargo. Wells Fargo just said, guys, game’s over, but let’s check out. And so we had to make an orderly surrender of the property to the, to the loan servicer. Uh, we went about it at a good enough way that Wells Fargo as probably continues to be our number one, uh, as has probably been our number one lender. Uh, since that time we do business with others, uh, and, and the lender that took it back and servicing and doing business with us also. And so, you know, we just had to accept the pain. Um, it didn’t make anybody feel good, but that was, that was where we, that was where we landed. And we got into that position because we didn’t take out long-term debt.

Reed Goossens (40:50):

Long-term debt is the key. I can imagine that right now, in terms of some of the deals that I wish I’d got long-term built on, but, uh, not to be. And my last question is where can people reach you to continue the conversation? They want to find out a little bit more about what you do at Hamilton Zan?

Mark Hamilton (41:04):

Um, they can just go ahead and email me. Um, my email address is mark M a R K at Hamilton, H a M I L T O N Z as in zebra, a N as in Nancy, Z as in zebra, E as in edward.com market Hamilton’s Dan’s dot com. And if you’re, if you’re having trouble falling, if any of your listeners are having trouble falling asleep at night, they can go to the website. Website’s pretty good. Uh, the tells our story pretty well. It’s straightforward. It’s easy to look at. And, um, you know, it might make somebody curious about business or about our shop. Oh, well,

Reed Goossens (41:43):

I want to thank you so much for jumping on the show today. I just want to reflect some of the things that I took away from today’s show, which I think is really, really key for, for taking the tidbits out of what you have grown over the last couple of years is always trying to understand where the value is in the, in the deal. So understand that you can chase the return, you go chase the returns, because that’s the number one metric you’ve got to give those returns to as investors, but also understanding where those, where are you going to find that? And who’s going to support that. And as you saying, there’s, sometimes it’s just commodity housing. That can be, be nothing, and you can’t really push those rents. He can’t really create those foreseeable, you know, capital expenditure items or OPEX items, but, but if you invest in the right areas with high job growth, with high incomes, with high S high single family housing, you can have a good bet that your deal’s going to adjust fond over the longterm. And I think that was probably the number one thing that I took out of today’s show. Um, did I leave it to the

Mark Hamilton (42:38):

End? No. And in fact, just to paraphrase what you just said, you know, your job is not to buy cheap. Your job is to buy well, and it’s hard war you will look at, you will look at countless opportunities, uh, and you may grow weary of it. Um, but it’s hard work. Um, and looking for, looking for opportunities to invest well, rather than buy cheap or just buy pretty, you know, we got all on real estate in fifth, out on fifth avenue in New York, but none of us would make any money. So, um, yeah, th your job is to invest well. Yep. Yep. Love it.

Reed Goossens (43:12):

Well, look, I thank you so much for jumping on the show today, enjoy the rest of your week. And we will very, very soon. We’ll let you have it another cracking episode yet. That was an incredible advice from mark. What can I say? He’s a truly incredible dude. He has built Hamilton’s ants over the last 21 years, over 20,000 units in the portfolio up until this point. And he built it all from scratch, and he was just so humble in the way that he told us about his investment approach, the different markets. He’s looking at different metrics to look at in terms of transitioning cities from coastal markets, into the interior markets that he likes in terms of GDP growth, in terms of jet wide growth, in terms of where people are moving around the country. So I hope you’re all taking notes. I took nearly three pages of notes in this interview.

Reed Goossens (44:05):

So I highly encourage people to go back, rewind this episode and listen to it over and over again. I also encourage people to reach out to him, mark@hamiltonzandt.com, that’s H a N Z E enhanced Hamilton’s dance.com. And if you have any questions for him yet, definitely reach out and give him a, give him a shout. And he’s an awesome dude. And it sounds like he’s very readily available to talk to up and coming investors who want to learn from the big guys or guys. I want to thank you all again for taking some time out of your day to tune in, to continue to grow your financial IQ, because that’s what we’re all about here on the show. We’re all about growing, growing your financial IQ. Remember if you want to hear or step to date with any of the latest investment opportunities that I have going on, please head over to Reed goossens.com. Sign up for the monthly newsletter and click on the invest with read button. And that will take you to a one-on-one call with myself. And we’ll talk about new up and coming investment opportunities. All right, gang, we’re going to do it all again next week. So remember be bold, be brave, and go give life. [inaudible].