118 Progress Requires Embracing Change - Brandon Elliott Jun 22 2022

Greg Bray: [00:00:00] Hello everybody, and welcome to today's episode of The Home Builder Digital Marketing Podcast. I'm Greg Bray with Blue Tangerine.

Kevin Weitzel: And I'm Kevin Weitzel with OutHouse.

Greg Bray: And we are excited today to welcome to the show Brandon Elliott, the CEO of Elliott Homes. Welcome, Brandon. Thanks for joining us today.

Brandon Elliott: Yeah, my pleasure. I appreciate you having me.

Greg Bray: So Brandon, let's just start off and help people get to know you a little bit better and give us that quick introduction. Tell us about yourself.

Brandon Elliott: I'm Canadian, from Toronto. I live in south Mississippi, the deep south. I used to be a hockey player. [00:01:00] That's what brought me here and started Elliott homes in 2011. We do home building and land development.

Kevin Weitzel: Did you seriously just say the hockey brought you to Mississippi? You're going to have to back up and explain that one because I don't get it.

Brandon Elliott: So, I was signed with Tampa Bay out of Florida, and in the NHL, and their farm team was here in Biloxi that year and I had an injury, a concussion. So, I was brought down to the farm team to play, and it was right after Katrina was in 2008. So, there was real opportunity. You know, it looked like Katrina had just hit yesterday. It was unbelievable. So, started building houses and here we are today, you know, just the old-fashioned way, one at a time.

Kevin Weitzel: And normally I would ask, can you tell some personal, but I mean, being a professional hockey player, that's kind of off the beaten path. So, that's the first time we've heard it. We have had a professional football player though.

Brandon Elliott: Oh, cool. Right on.

Greg Bray: So Brandon, what is the connection between hockey and home building? How did you kind of get into that different career path?[00:02:00]

Brandon Elliott: You know, it's actually kind of crazy. I'm writing a book about it right now but I didn't have a connection. It was really just like a heartfelt feeling of I need to do this. No background. Nobody could really understand it. I literally retired from hockey two years or three years into a four-year NHL contract and halfway through a season.

I just, one day decided I really want to start building homes and walked into my coach's office at the time, and I just said, hey, man, I'm going to hang it up, and he was like, oh yeah, well, you know, when, and I said right now, and he laughed and said, that's funny, but you're not because you're under contract and you don't get to choose that until it's over. I said, no, we're out of here. So, the NHLPA sued me. It didn't go very far, but they did.

 The first five years was a nightmare actually. It was a complete disaster. We could talk for an hour about it. I got hooked up with a partner who just did a whole bunch of criminal things. I ended up losing [00:03:00] everything that I had and going through all this crazy stuff, and she ended up going to jail for three years.

Kevin Weitzel: I was going to ask you, what would you rather face the lumps that you took in your first five years or the roughest toughest enforcer on ice?

Brandon Elliott: It's kind of the same thing. It's all an experience. You know, the difference, if you look at professionals and amateurs. An amateur, generally their skills and their ability are very similar, if not exactly the same, but the difference is an amateur will perform when the stars align, when everything's perfect and when things are ready and they're rested and everything's good. Where a professional will figure out how to perform the exact same way when they're exhausted after a three-day away game streak and they're injured and they've got a broken hand and whatever.

So, amateurs practice until they get it right, and then they say, you know, I've arrived and here it is, and professionals practice until they can't get it wrong, and ultimately it's a game of mental toughness. So, even in professional sports, you know, the physical of getting slammed into the boards is easy to say it's a very physical game, but [00:04:00] it's a lot more mental at that level than it is physical because if you don't perform one game if you're not playing your best, you're out of there.

You know, they'll send you down. So, that helped me. The first five years in home building was really tough. It was unbelievable. I'm actually physically writing a book about it right now. That education and that background just those habits from hockey helped transition through it.

Greg Bray: Well, tell us a little bit more Brandon about that moment where you're kind of hitting bottom, right? Your partner has done criminal things that have warranted jail time. Obviously, business is not flowing the way you want it to at that moment. There has to be this time where you're like, it's time to go look for a whole new career, or do I still want to do this? Just kinda talk us through that choice and why you kind of kept going.

Brandon Elliott: Yeah. So, that's a really good question. Actually, there was a point where she had kicked me out of the company that I didn't even own. She started a shell corporation that I put [00:05:00] all my money into and forged my personal guarantee on millions of dollars worth of material supply. I ended up proving it with handwriting experts and stuff in court for 10 years.

There was a point where I said, you know, this is crazy. I'm just going to go try out for the Nashville Predators. It was a couple of years into it. I was still young. I was only like 25. So, I was going to go do that and I flew up there and I went to Toronto. There was a home builder in Toronto named Sterling Homes, and I walked in and I talked to the guy for two hours, the CEO. I just walked in and he took the time to meet with me, which was amazing. They do like six or 700 homes a year in Toronto, so they're pretty big outfit.

I told him my situation. I told him what I wanted to do, and I said, hey, you know what? I'm either going to come back and work for a company. Which that's what most people do when they're going through hard times, they retreat to their comfort zones. Or I'm going to go back to hockey. So, I'm going to go to the Nashville Predators training camp and if it works out great, I'll stay there. If not, I want to come back and work for you.

He said to me, something that was really [00:06:00] interesting. Three years later, I sent him a thank you card. I was at the time building like 15 houses or something, not many. In one community, I told him what I was doing and he said, I'll tell you what. You finish those 15 houses, and when you're done, you come back up here and I'll hire you, and it was almost like he knew I was going through that time and I needed little wins. Like anything, when you're facing adversity, it's just how long you can get through it, and then the little wins that start adding up to big wins.

I guess he had been through it himself. He didn't say that. I'm just assuming that. So, the interesting part was we closed the first house, made a little bit of money. We closed the next house and made a little bit of money. Closed the next, and after the 15 houses were done, I didn't want to go back and work for him. I had like this confidence now to grow Elliott Homes and make it bigger and that sort of thing.

At the time he said it, I didn't really realize that it was a few years later when I was growing, and I read this article that talks about [00:07:00] how very successful people can overcome obstacles, and not only do they overcome them, they embrace them. They enjoy them because when everything is just flowing right, they're not actually growing. You know, because they don't know what the problems are. The best data points that we can get in life are, in fact, failure. So, they don't see it as failure. that's the difference.

I realized that that's what he was telling me. I didn't understand it at that moment. So, I sent him a thank you card a few years later and said, hey, today we're doing, at that point, it was like 80 homes a year, and I'm like, thank you so much for your great advice. You know, he didn't tell me, stay and work it out and if you want to come back. He said, once you're finished with those houses you'll have the experience, and I think he knew what it would lead to.

Greg Bray: That's an awesome story. Well, Brandon, give us the view of who Elliott homes is today as far as where you're building, who you're targeting from a home buyer perspective, and the types of homes you're doing.

Brandon Elliott: So, where on the Mississippi coast. We're going into Alabama. It's really funny today. It's like an illusion. When you look at building a business, any businesses, not just home building, but any [00:08:00] business, there's so much, like stress and anxiety and heartache that comes with it that all pays off generally in the end for those that are willing to grind through it.

When you get to a certain level, you think like, okay, I've arrived. I've made it. Then, you know, the environment today happens. I mean, you just walk in the door and sell the house. It's so easy. So, people look at it and say, what an amazing time to be a home builder or a land developer because everything is just so simple. You just make a sale, and from that perspective, it is, but from the operational perspective today with the supply chain and the affordability and changing prices, it's an absolute nightmare.

It's really interesting, those builders that aren't efficient and those builders that really don't know their numbers, this is going to create a liquidity crisis for them, or not those builders, those companies. It's in everything. It's not just home building.

Last year, we did roughly 300 starts. This year, we're a whole lot more. We're about 45 to 60 a month, depending on the month, starts right now, but we've [00:09:00] really changed our entire business model. You know, we've gone from like pre-sale semi-custom type stuff to like thirteen plans and no pre-solds at all. We're not selling houses now until after drywall.

It really weighs on your culture. For those companies that have a strong culture, they can create change and bring it into their company and their people embrace it and are excited about it. For the ones that don't, they get scared about it and it creates a lot of tension internally with their people. So, we've had to really change how we're doing things as a company over the last four months, really to adhere to a major demographic shift that's happening around the country.

People are moving here because of affordability. I think we're going to see it more. Those people can't wait for a pre-sold home because they're literally flying in to buy a home. It's extreme shortage of housing which is, you know, obvious. It's all in the headlines. Then obviously an affordability crisis that's only going to get worse, driven by interest rates and [00:10:00] inflation and lack of inventory. Not just for housing, but also for material that goes into housing. So, we've had to really pivot. Even more so than when COVID hit. Now we've had to because of that shift and because of the different dynamics that play into business today to make us successful.

Kevin Weitzel: So, I've a question for you because you're saying affordability and there is a difference in markets across the country. You know, like what you can buy in Virginia is different than what you can buy in Texas. What is your price range typically low to high in your market?

Brandon Elliott: So, our lowest price right now is about 230 and then our highest price is probably, we've got a couple like eight, 900,000, our beach houses, but that's just because the lots are literally on the Gulf of Mexico, but average in a normal subdivision, like about five 550.

Kevin Weitzel: Wow. That's very affordable. Two-thirty doesn't even buy you a home in Phoenix anymore. You can buy a, maybe a manufacturer or trailer. You might be able to get that, but that's about it.

Brandon Elliott: Yeah, and you know, if you look statistically [00:11:00] around the country right now, there are 67 million people today that are in the Boomer generation that are all going to be retiring in the next five years. They're still in the workforce. So, they're going to be changing their lifestyle. The question is, do they do it in their market, or do they look to relocate. A lot of them relocate, historically.

Today, you know, in a Northern state where the average price point of a home is 800,000, they're going to be very budget-conscious of that. They're going to be able to sell their home, even if it's lower, even if the price goes down, which you read some articles that we're going to have some decline in pricing in some of the Northern states or like California, but even if the price goes down 10%, they're still going to have $400,000 in equity. They come down here and pay cash for a house that's twice the square footage and a mile away from the Gulf Coast. So, great opportunity for people, and we feel like we are, location-wise, a solution to the national crisis today.

Kevin Weitzel: And being that you're from there, are you ever going to see a [00:12:00] market correction in Toronto or maybe a 600 square foot studio that doesn't go for $1.9 million?

Brandon Elliott: I would say so. I can't understand that frankly. The housing prices and income levels don't make sense. The difference is up there, they require 20% down. You know, so there's a lot more equity in the homes. So, there has to be a big slide for the banks to get upside down. At the same time, there's still a major shortage of housing. Supply and demand Economics 101 says if supply goes up and demand goes down, the price goes down. If demand goes up, supply goes down.

Kevin Weitzel: So, I have a question for you on just your marketing spend. Full disclosure, you have interactive floor plans with us, so we here it OutHouse. When you're building, you know, spec homes, you don't necessarily need to showcase those options anymore. What shifts have you made in this changing market to where you've redirected your marketing or maybe limited or reduced your marketing?

Brandon Elliott: So, the model homes is a big one. I think that [00:13:00] dynamic is going to change. It's not going to be fast. It's going to be slow. I think there's going to be more virtual things around. People being able to walk through a home and kind of understand where they're at, but we're starting to see a lot more people buy houses sight unseen, or online.

I've heard a lot of people say that's never going to happen. I disagree with that. I think it's going to. You know, we would've said the same thing about buying a car online. That's kind of normal now. So, I think from that perspective, very easily things are going a lot more digital, obviously. We don't do any print or anything like that. We just are focused only online as far as marketing goes.

Then giving the buyer an experience. Eight months ago, I would've said choice is the ultimate amenity. They want choice. They want selections. They want all that. Today, because of supply and COVID inflation and everything, affordability is the ultimate amenity. I mean, even in a house that's $600,000. You know, [00:14:00] affordability, is it 600 or 800,000? We're looking at simpler finishes, but still keeping curb appeal and space in the home and that sort of thing.

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Greg Bray: As you look at these trends and you talk about pivoting and culture change and all the impacts it's been having on your company, do you anticipate that we're now in the new normal, or do you think you're going to have to do this again next year and switch back or switch to something completely different?

Brandon Elliott: So, I don't think the market dynamic is going to change. I think it's going to stay this way for years, five to six years. I think our under supply is too much. I don't care what affordability gets to. People will find options for them. There's going to be a big rental, or there is starting to be now a big rental opportunity for new construction, build the rent, and that's going to be for people that get priced out of their homes and can't afford to buy and they're going to rent.

Now honestly, with work from home, there's 36 million people today that work [00:15:00] from home out of the 150 million workforce. That's going to organically grow from, well, I work from home an hour away from the office and don't have to commute, to I work from home in a different state a thousand miles away because I can't afford to live in my own. I think people are going to find options that work for them. They're not just going to wait. The Boomers are in the peak highest retirement phase we've ever seen in history, and the Millennials are in the peak highest household formation, you know, getting married and having kids phase that we've ever seen in history.

So, we have two of the largest demographics in history that are all forming, coming together at the same time. I don't think their options are going to be to just sit and wait. I think they're going to keep going. So, I feel like we're going to continue to have a supply. I feel like it's going to tighten things even more. I feel like it's going to create a real problem for home builders. You know, in 2008, it was [00:16:00] lack of sales and price drop.

You know, I think this time it's going to be cash flow. I think it's going to create a cash flow crisis with extended cycle times and extended costs and that sort of thing. So, it'll be interesting to see how that pans out. The other thing is, you know, you'll see a lot of Northern states, people that get priced out, they'll relocate. I feel like they're going to be relocating down here to our market or more of the Southern states that have a more affordable aspect to them.

Kevin Weitzel: Or even where jobs are because a lot of corporations, major industries are moving along with the population. They're moving mass exodus out of the Rust Belt. They're heading south, but I've got two questions for you, Brandon. One, because you mentioned it, are you seeing in your particular market, the BTRs, the build to rent, and then two, are you finding that with your affordable product line, are you seeing the same two groups, those Millennials and the Baby Boomers that are competing for the same homes in your market specifically?

Brandon Elliott: [00:17:00] So, first question, build to rent. There's definitely a demand, a major one. We're actually planning to build and own and keep 400 houses. You know, pro forma two months ago at three and a half percent compared to today, it's five and a half. That definitely takes an impact on cash flow, so we'll see what happens by the end of the jobs if the numbers still pan. We are definitely planning to do that because we think that there's going to be a large majority of people that do relocate from other states to here and they just don't know where they want to live yet. So, they don't want to commit to a home long-term.

So, yes is the answer to that, and then the other question, we do have a need here for specific active adult product. We're building two communities today that are targeting active adults, but I do see that the Millennial generation and the active adults kind of all want the same thing. You know, one might want 2500 or 3000 square feet where the other one might only want 1800 square feet, but as far as like lot size and finishes and that sort of thing.

We're definitely seeing people are wanting [00:18:00] smaller lot sizes. I don't know if that's because the out-of-state demographic is used to that and ours locally is not, but we're also seeing they still want nice homes. They want nicer amenities. We're not in like the low, low-end affordable price per square foot market. So, you know, we're not competing with DR Horton and Adams Homes and stuff like that, but the people that come into our models, no matter what the square footage, they're looking for quality finishes. Something, I guess the word is something that they're proud of.

Greg Bray: So Brandon, you mentioned folks buying homes sight unseen and online. Are you guys doing anything specific to make that even easier for your customers to do? Are you addressing that in some specific way?

Brandon Elliott: Yeah. So, we're reworking that right now. One of the things is online contracts. Just really simplify. Being clear with home buyers on closing dates when they buy a home. You know, so when they're looking at a spec home, cause we don't do pre-solds anymore, but when they're looking at a spec home online, they know exactly what the closing date [00:19:00] is on that home that they're looking at.

You know, rather than having to call someone and say, okay I'm looking at this house. Being really open with pricing, you know, is a big one as well. Like they just don't want to waste time, I'm seeing. You know, they're going to go online and if somebody has all that information available, they'll spend time on their sites rather than just seeing images of options that they could buy maybe, and then having to call salespeople to say, explain this to me. What do you have? Cause they don't want to say, I want this house. Oh, that's not available. I want this house. That's not available. They just get frustrated.

So, I think having more of like an online shopping tool. You know, kind of like Amazon, but not Amazon. You know, it's just specific to your homes, and then also being really clear on location and what amenities are. You know, the amenities are important to people, just their proximity. Everyone has their own ideas and needs and wants as far as like amenities go, and I'm not talking about like [00:20:00] community swimming pools. I'm talking about schools and shopping and proximity to things. So, having that information available for a buyer so that they can make a decision is going to be really important because without that they can not buy home online. They're going to have to go to the home and then drive around the area and look to see what's there. You know, so that's going to be an important aspect of it.

Especially for the Southern states where a lot of people are moving to. Those people literally fly in for three or four days to buy a house. They're not even there long enough to really see all the homes and really drive around and make decisions. They're doing all their research online. They're going physically to put their eyes on it and that's it.

Greg Bray: So Brandon, you've talked a little bit about some of the trends and things that you are seeing. Are there any other key trends that you're looking ahead to and saying, hey, we need to get ready for this now?

Brandon Elliott: From a sales standpoint, I think I've pretty well covered it. I mean, I could get into, you know, what we're seeing that people want in kitchens and [00:21:00] master baths and all that. I know that that's pretty clear as far as that goes.

Business operations, the biggest trends we're seeing is the most efficient and well-run home builders that really know their numbers are going to do well. They're going to be able to deliver product, and they're going to get the financing that they need because they're able to show the banks and the financing companies where they're at and make them feel comfortable with it.

The ones that don't know their numbers that well, I think they're really going to struggle. I think the 2008 crash related to finance today is going to be related to efficiency and cost. I think cost creep is really gonna hurt a lot of people.

Greg Bray: Well, Brandon, who do you look to as somebody that you're watching for ideas or looking ahead, and what are your sources of inspiration out there?

Brandon Elliott: So, I have lots of builder benchmark friends that I talk to, but honestly, the best ones today to watch are the publics. Back when we started, we were a hundred percent pre-sold company [00:22:00] until like two years ago. We were an 80% pre-sold company until like three months ago. If you watch their stock and how they're doing and who's performing the best and the way those companies are positioning themselves in the market.

It's really interesting, very Plain Jane, vanilla type builders, let's call it, that have a very simple business model, that's super scalable are killing it right now and their stock prices are showing it. So, the ones that are complicated with complicated product are not. One, I feel is because buyers just don't have time to shop that much cause everybody's lives today are super stressful and really intense. There's a lot of change in the world. There's a lot of change that's even going to continue to happen. No matter what industry you're in, no matter what's going on, things are difficult and people just want simplicity.

I'm seeing down here anyways, you know, the more complicated product experience, they just don't want it right now just because they don't have time for it. They probably don't have the [00:23:00] mental capacity for it. They don't have the stress level for it because their life is already chaos enough. You know, some states their kids just went back to school. Fortunately, our kids in school, they were only off for like a month, which was great. Thank you, Mississippi government.

They're dealing with a lot of change in their current positions and a lot of change in the world and fear from the news and, you know, Ukraine and just everything adding up to it. I think it's just driving a demand for efficiency and simplicity.

Greg Bray: I love that thought. I mean, buying a home is a rather stressful experience for most people because they don't do it very often and a lot of unknown, so recognizing that everybody's at the high level already. So, if we can bring that stress down, it can make a real difference. That's great. Great insight. Well, Brandon, any last words of advice? We really appreciate your time today and just want to give you that chance to share your last thoughts of wisdom with our audience today.

Brandon Elliott: Wow. I don't really have advice, but how about this? So, [00:24:00] within all change, within all chaos, within all areas that are kinda getting flipped on their head, that's where opportunity lies for every single business. Today in the world, it's such a changing thing in every single dynamic of every business. There is so much. It's unbelievable the amount of opportunity for business owners and for people that are really, really paying attention, and listening carefully, and willing to take a little bit of risk in order to pivot toward that. To those business owners out there, I guess my advice, there's probably a whole lot more that are way more successful than me, but is to pay a lot of attention right now because, for the next five years, I mean, not just in home building, but just everywhere, technology is shifting things in a pretty rapid way.

That just leads to an incredible amount of opportunity for those entrepreneurs and those businesses to create different and more value for the world and [00:25:00] for people that are within it. So, stay open-minded. Listen intently to learn and not to respond and enjoy it. You know, because I don't have any business owners right now that are saying, man, you know, I don't even know what to do with my life. It's just intense. I mean, everything they're doing. So, you know, just enjoy the ride and embrace it because I think we're going to look back on this time in history and say, remember when COVID started the biggest shift, you know, a new, a new age of life. I think it has. Be grateful that we get to be a part of that because it is pretty monumental.

Kevin Weitzel: And just out of curiosity, you look pretty fit. You ever throw the skates on and go work over a pickup game or anything, or no?

Brandon Elliott: You know, there's not a whole bunch of ice in south Mississippi. I don't. I live right on the beach. My front porch is on the Gulf. I kiteboard, or I hang out with my daughters, or I read. That's about it.

Kevin Weitzel: So, I'm a former professional cyclist and I used to just travel around and in my thirties. Now I'm fat. I [00:26:00] can't do anything anymore, but in my thirties, I used to go out, you know, just go put on some cutoff jeans and go get some clunker and just go work over a good group ride, you know, and, uh, just can't do it anymore. Now, I'm getting dropped off the back of the D groups, you know, so who knows?

Brandon Elliott: That's funny. Well, that's great. That's exciting, man. It's not too late to get back on the bike.

Kevin Weitzel: Yeah, yeah, it's just the tires hate me. They really do. The strength-to-weight ratio has to be increased just to hold my blobbiness.

Greg Bray: Brandon, we really do appreciate you spending some time with us today and sharing some of your experience and insights. If someone would like to connect with you, what's the best way for them to get in touch?

Brandon Elliott: Probably email. It's brandon@myelliotthome.com. Two L's and two T's and Elliott.

Greg Bray: All right. Well thank you again, and thank you everybody for listening today to The Home Builder Digital Marketing Podcast. I'm Greg gray with Blue Tangerine.

Kevin Weitzel: And I'm Kevin Weitzel with OutHouse. Thank you.