Only a Business Owner Can Sell Like a Business Owner

This was my first real career—I started in real estate sales and migrated toward the property management specialty.

How did you transition from real estate sales into property management?

When I was a kid, I worked on our house with my dad.  He painted, finished basements and did all the maintenance and yard work.  Sometimes, for a few extra dollars, he did some of this for others.  I tagged along.  I’m talking about doing this work at 8 or 10 years old.  And I never stopped.  I painted houses while in college.  I never bought a nice house for myself-only fixer-uppers.  And I got my home improvement license so I could do it for others.  As you can imagine, knowing how to fix just about anything is a definite plus for a property manager.  Now, 33 years later, I still do all of it.  Today, we have the home improvement business to help support the property management business.

Customer service is more than answering the phone nicely; it’s being able to get to the root of the problem and suggest a solution.  With the maintenance skills in my pocket, I answer a call expecting that the caller really doesn’t understand the real problem.  If the refrigerator is stopped, I want to know whether the bulb comes on with the door open.  If not (assuming it did yesterday), there’s a pretty good chance we don’t need an appliance service call.  We may need a breaker reset or an electrician.  All we need to do is run an extension cord from another outlet.  Similar efforts can aid in diagnosing the real source of a water leak, an air conditioning or heating problem or a water problem.

For me, the transition was crying out, I belonged on the rental management side.

What does property management entail?

Everyone thinks we collect rent, take our fee and send the rest to the owner.  But there can be a bit more.  Certainly, balancing the desires of the tenant, the orders from the local inspectors (or the knowledge of the housing code) and the financial wishes of the owner can present challenges.  We are big believers in fixing things before they deteriorate to the point where replacement is the only option.  Real estate is a long-term investment and we should look at the big picture from the maintenance perspective.

Today, property management is an information business.  Our services, including receipt of payments, rental applications and processing, maintenance service requests, owner payment disbursements and more are online.  Often, we juggle two or three software packages, all online (ASP), to fulfill everyone’s desire.  All these packages must talk to each other seamlessly.

But what is information without the knowledge to back it up?  In our jurisdiction, virtually every rental unit must be licensed by the county or the city.  Many are eligible to or mandated to participate in a state-run lead poisoning prevention program.  Owners need counsel on property insurance, taxes, mortgage planning, home remodeling and more.  We are expected to provide enough information to give owners the intelligent questions they need to take to their insurance or mortgage brokers, attorneys and accountants.  We don’t give advice; that would be illegal.  Alternatively, if we don’t, we would be negligent.  We walk a tightrope!

Other services include property inspection; not the type you would pay $400 to a property inspector to obtain, but a periodic visit to the property to examine the overall property maintenance condition and the tenancy performance.  These visits, every six months at our firm, are followed by a written report to the owner, often with photos.  We prepare vacancies for market, we advertise for tenants, we screen applicants for credit, income and rental history, we prepare leases, we collect rents, pay bills, disburse owner funds and report all of this on an income statement each month.  When tenants vacate, we inspect for damage, assess the costs, account or the security deposit, make the disbursements and start the vacancy marketing process all over again.

Again, it’s a long term investment.  Owners need information and help maximizing the long-term profit, much of which comes from the eventual sale.  That information comes from our real estate experience and our REALTOR membership.  We have access to MLS data and know how to sell.  Thus, we are in a position to keep owners apprised of the value and marketability of their properties – not all rental managers are licensed as it is not required, even here in Maryland.

When did you go into business for yourself?  What prompted the decision?  What was initially necessary?  Did you form a business entity (what type – LLC, Corp., etc.)?  What services did you outsource initially?  Legal services?  Accounting?   Did you talk to a CPA?

I made the jump to property management in 1982, at a time when many real estate companies were failing.  The firm I was with had 27 offices and closed.  I jumped to a small, franchised real estate company hoping to retain a portion of my management portfolio, and I did.  After 4 years, I found that my department remained a stepchild.  I had absolutely no support, even though I was generating more income than any other agent in the firm.  I left and struck out on my own.  I did it with a credit card and my eyes closed!  Fortunately, half of my portfolio from the other firm came along.  I opened MMI in the basement of a rented home with a copier, a 2-line phone, a computer and a file cabinet.  Sometimes I long for those days!

But, having no money, I sought very little advice.  I prepared my own Articles of Incorporation and filed them myself.  I did ask an accountant whether to opt for Subchapter S and I did so.  There was no outsourcing.  From 9:00 to 5:00, I answered the phones and coordinated repairs.  After 5:00, I was a leasing agent – showing property until it was dark.  Saturday morning, I was often found at a property doing cleaning and painting.

Most of my forms came from prior companies or from REALTOR associations.  Yes, it would have been better to get all that advice.  Today, I would say it’s essential.  Times are very different today from 23 years ago.  At least, in Maryland, there is plenty of regulation and what we can do varies from county to county, city to city.  I would not try it today the same way I did it in 1987.

Did you create a business plan?  If so, what did the plan entail?

I’m going to treat this like a trick question – you didn’t ask when I created my plan.  So, no, I did not create a plan in 1987.  In fact, I knew nothing about running a business back then.  All I cared about was staying in business and generating enough cash to keep the wolves away.

Then, I read a business-changing book, The E-Myth Revisited by Michael Gerber.  This book convinced me I was working IN my business instead of ON my business.  After more than 15 years, I realized that all I owned was a job.  I had nothing to sell and no plan to make my business grow.  So I started working on that condition.  I had a couple of property managers working for me and I needed more.  I planned some expansion.  With that, I would have to train people to do what I do just the way I would do it myself.  So, I wrote a 200 page training manual and started teaching.  Today, I have 9 managers – some of the best in the area.  I developed checklists to enable them to properly inspect a property, how to secure a new account and turn-in the right paperwork, how to lease a property, and, again, turn-in the right paperwork, how to close out a tenancy and even how to close out an owner’s account.  Today, we manage more than 200 homes and I don’t manage any of them!  We have now expanded into condominium and homeowner’s association management, and, in about 5 years, have 12 communities with more than 1,100 units.  Already, I have a business!  I stopped doing the clients accounting and I stopped answering the phones myself.  In fact, I never check my voicemail – someone does that for me.  My job: get new business, hire and train the staff.  I’m working on my business!

What were some of the greatest challenges you faced in getting your company off the ground in the beginning?

Of course, money is always and issue.  But, the truth is, it is not as important as one might think.  Plan to spend only what you can make it go as far as it can.  There are lots of ways to get business without spending a ton of money on advertising – and some of those means are more effective and generate better quality business.  I’m talking about networking.  Those early days, you’d hear me say I don’t have time to do that.  Today, that’s my #1 duty.  Only the business owner can sell the business like a business owner.  I have to be face to face with prospective clients and strategic partners on a daily basis.  How can I do that and still do the accounting and inspect the properties?

It all boils down to making choices.  You can do it all yourself or you can find ways to get the help you need and to use it effectively.  READ, READ, READ – read motivational books.  Read business books.  Read success stories.  Learn from everything you read.  For me, the challenge was that I didn’t know, I didn’t read, I didn’t listen to people who knew.  Now, maybe you’re listening to me;)

At what point did you hire your first employee, and for what position?  How did you recruit good employees?

I thought I needed a secretary.  Maybe I did – we still used typewriters in those days.  She did answer phones when I was out – that was good for business.  My next hire was a bookkeeper – no reason why I couldn’t get away from the computer a few hours a day.

I made good hires only when I was lucky.  I made my share of bad hires, too.  Why did this happen?  Well, I didn’t develop job descriptions.  I didn’t visualize the perfect hire.  Most importantly, in the early days, I did no training.  I told them what to do and left them to themselves – it’s not wonder they often failed in their positions.

To recruit good employees, provide a work atmosphere where everyone wants to work.  Provide free training and support.  Provide fun.  Be professional, sure.  But, you don’t need a stuffy environment.  As a leader, balance the desire for work performance with the need for a healthy work environment.  If you’ve made a bad decision, reverse that decision quickly.  Bad employees NEVER get better!  That’s N E V E R.

Of course, benefits and top wages are important.  But it is often said that an employee values flex time or vacation more than an extra dollar.  And, they’re cheaper for you.  Many of my personnel are out in the field all day – that’s what they tell me.  All I can do is evaluate their performance.  Hours are unimportant and impossible for me to track, so I don’t sweat it.  And, you know, I often see them in the office in the evening or on weekends.  The concept must work.  I once heard that the best investment a company can make is to buy its executive a laptop.  They’ll take them on vacation and will steal away from the beach for an hour or two to check their email.  But, it’s their decision and their schedule.  They’ll love it.

Oh, and that networking thing – it doesn’t just get business.  I have hired people right out of my networking groups.  These are people that I have personally come to know.  What better way to hire?

Any employee horror stories?  Any doozy interview questions?  How many employees do you currently have?

Not every reference is as valuable as it might seem.  I once hired a person because a close friend recommended the guy.  Turned out, this guy had become a coke addict and alcoholic.  He was partying in my office with wine, women and drugs – all night long.  But, during the day, he was stealing money from our clients.

I’m not the best person to ask about how to interview, but I do have three pieces of hiring advice: (1) shut up and listen; (2) ask questions that force the interviewee to tell stories of how they deal with problems they may face and (3) have at least one or two other members of your staff interview each applicant.

I have 5 full-time employees in the management company, one in the home improvement company.  All tolled, there are 15 of us, but the rest are independent contractors.  We’re basically a two-tiered management structure with me as the CEO and our controller serving in an executive capacity.  All the rental and community managers report to me; paid staff reports primarily to him.

Hire out of promote from within?

Promotion from within in a nice concept, but there can be too great an emphasis placed on giving to the existing staff when they may not have the skills to advance.  Back to that job description – if the existing staff can fill the job and their job would be easier to fill than the current vacancy, it’s a no-brainer.  Otherwise, give them a chance to compete, but open the position to outside applicants, too.

What equipment, software, knowledge, etc. are required to start/run a property management company?

We have to know everything about everything!  I still have a small firm, but we’re now growing at 30% or more annually.  So, our computers have had to be linked through a network.  Now, our property managers have to have remote access to email and files (and you want them using YOUR systems so you retain the data when they leave).  Even the phone systems have become complex: IP phones, Blackberries and SmartPhones.  We have to support all of this – whether we own the equipment or our staff owns it.

Accounting software has evolved into information databases and the internet access portals for the clients.  That’s not too complex!  So, either you have to know everything about everything or you have to hire someone who does.  If you have the luxury of hiring, see the previous interview question, you must hire your contractors and vendors with equal care.  Then, it’s better to hire, but try to keep-up on technology to help ensure that everyone is performing.  It’s no different for me than evaluating a painter.  I used to paint, so I know how long it takes to paint a room.  I also set-up our computer systems and I know what I want them to do – I just don’t want to troubleshoot the problems myself.

How do you get customers/business?  What kind of marketing materials do you use?  Has your approach to getting business and growing your business changed significantly over time?

We spend a great deal of money on advertising – most of it through the internet.  We use pay-per-click services; some targeting property management, some not.  Making the phones ring is not that hard.  Having them properly answered, having a skilled salesperson on your end of the line is the real challenge.

Over time, we’ve learned that people who call on ads have no one else to call – they have no experience and they have no knowledgeable friends.  Referrals are your best source of business.  Today, there are all kinds of referral networks, trade associations and networking organizations – join them!  You can’t eliminate advertising, but you can sure enhance the results.  Develop a plan to approach and evaluate your best strategic partners and work that plan.  The business will come.

What do you wish you had known about business when you were first starting out?  What advice would you give to a new business owner or someone looking to start or  acquire a business?

It can no longer be done of $5,000 and be competitive.  Our software alone took $18,000 to implement and we pay almost $10,000 annually for licenses.  Our computers would cost $50,000 or more to replace.  When you have the finances, spend carefully and in a controlled manner.  Budgeting is a lost art.  Develop a budget and look at it regularly – I recommend quarterly.

Spend your time and effort growing the business, but make sure you handle it when you get it.  Referrals are only good when they’re good referrals.  You don’t need bad PR when you’re starting out.  You want every customer to be your ambassador.

Do you have or have you ever had someone you’d consider a mentor?  What did you learn from them?

I’m a worker.  I always have been.  Although not necessarily an answer to the question, it’s good to recognize that running a business takes long hours for several years.  I don’t know how many years – I’m still working long hours.  I do it because I love it.   But, if you’re not a worker now, you won’t be much more of a worker when you own the joint.  If you’re more into punching a clock, punch someone else’s.

Yes, I worked with a partner when I started in real estate, a guy who was old enough to have retired from his first career and was starting another.  He saw my energy and was generating more business than he wanted to handle.  I’m not sure I had the willingness to do some of the hard things – the networking and marketing – that he expected, so it didn’t work out.  But, I certainly learned that those were the things that made him successful; not the busy work.  His name was George.  George carried a briefcase to work – and eventually carried a larger, file system case.  No, not instead, in addition to the briefcase!  One day, George walked in with nothing but a clipboard.  Everyone noticed.  George decided all he really needed to carry was a listing form and a contract.

It’s really easy to get bogged down by paperwork.  And, there is important paperwork, no doubt.  But, in the end, unless you’re getting and keeping business, none of that paperwork will pay the bills.  Dump the briefcase and get to what’s important just as soon as you possibly can – that’s what separates the business owners from the rest.

How has the real estate business changed since you were first starting out?  What do you think about where your local market is right now?

Look outside right now.  Look again in 12 hours – that’s how much change there has been.  George would need the large case just to carry the forms to complete a single sale!  We’re much more disclosure-oriented today and the paperwork reflects all that.  In fact, some of us not so jokingly say that we think if we disclose enough, we won’t disclose anything.  If you buy them in paper, they won’t read it.  Case in point: The US Congress.  No more 2-page bills.  They’re a thousand pages and no one reads any of it.

Disclosure came because people were getting raw deals.  Governments required the forms.  Lawyers suggested more.  Then, as our government is all too good at doing, they found ways to spend money they didn’t have.  In the name of consumer protection, they started licensing agencies and programs.  I know for a fact that there’s no way to stay in full compliance.  I monitor the performance of my staff with regard to such compliance and it’s a never ending job.  they just can’t meet all the deadlines and still have time to make all the money.  So, we’re forced to do the best we can do and resolve to strive for better, but we’ll never get to perfect.

I’m in the Washington, DC market.  Even here, we’re suffering, but not like other places in the US.  Government is growing and with it, all the support systems.  Values have come down, but mainly because they were, here like everywhere else, artificially inflated due to an unrealistic expectation that the euphoria would never end.  Well, it ended here, too.  But, there’s always room for a good company to grow and we’ve never stopped marketing, networking and training.  As a result, both our rental department and our community management departments are growing by double digits.  They’re carrying the home improvement company along for the ride.  It’s a good thing I’m finally working on running my business because I believe we are doing a better job now than when we were struggling.

What do you attribute your success to?

I found my niche.  I have knowledge of construction and maintenance and I have a good understanding of accounting.  That covers about 90% of what we do.  But, my networking efforts and my quest for designations have taken me places all around the country where I have been able to learn from people who were not my next-door competitor.  People half way across the country are much more willing to tell their secrets.

After reading The E-Myth, I began to redirect my efforts to growing staff and it has paid-off.  Our gross revenues are up 400% over 6 years.  With a few extra bucks, you can hire more staff, buy better software, move to more impressive space and simply look more successful.  People are attracted to success – success breeds success, they say.

Also worthy of mention is age.  Yes, I’m getting older.  A wise, Jewish neighbor of mine once told me, on my 40th birthday, that “40 is a good age – people will grovel to you – let them.”  I don’t know how much they’re groveling, but they sure seem to respect my staying power and accumulated knowledge.  That helps get those referrals.  But, I digress, this isn’t at all where I was going with the age thing.  With age comes patience.  We understand that there will be another opportunity; even a better one.  We know that fortunes are generally not made overnight.  We understand that our patience gives us an advantage over those who have not yet learned the skill.  Several years ago, I was so close to making a purchase – three fixer upper townhouses for $150k.  I’d fix each for about $10,000 or so and sell them for $75,000 each.  A healthy profit in about 6 months.  Well the owner wanted more and she got it.  I couldn’t believe people paid $68,000, $73,000 and $88,000 for those places!  One of them actually hired me to do the renovations and we charged a lot more than $10,000.  And, I think all those people flipped them and sold them for a profit.  I was wrong.  I did not see that we were in the early stages of the housing boom.  Well, my patience paid off.  I refused to pay those prices.  I did not get caught-up in the buying frenzy.  Did I miss a deal or two?  Of course.  But I know so many people who kept buying and flipping and, surprise!  They got caught with their pants down.  Today, they’re losing one at a time to foreclosure and many will lose it all.  Oh, and I’m still here – I’m not ready to buy all those properties they’re losing…for half of what they may have paid.

Where do you see yourself in 10 years?  At what point do you think you’ll become less involved in the day to day operations of your business?  Will you sell the business or tap a successor when you’re ready to retire?

I see myself floating on my yacht in 10 years.  Three if I’m lucky.  Property management businesses take about 30 seconds to sell, so that’s an option.  My preference would be to find a successor and retain a piece.  I’m also willing to merge with another firm if we can complement each other and become greater than the sum of our parts.  I think about retirement.  Funny you shoud ask about the 10 year number – that’s kind of the target.  Meanwhile, I’d like to slow it down and I do see that in the future of my firm.  All I really need to do is more of what I’ve been doing for the last 5 years.

What are you reading?  Fiction or non-fiction?  Do you have a favorite book?  Real estate book?

I never was a reader.  Only recently have I really started to enjoy reading.  And, I do now enjoy a bit of fiction.  For someone who doesn’t read very much, Chesapeake took me nearly 4 months with some 800 pages.  Yesterday, I finished Abraham Lincoln: Team of Rivals – just shy of 750 pages.  I am absolutely NOT a reader of real estate books.  I’ve never read one that taught how to do it right – it’s all about doing it with no money and no risk.  What I know about real estate enabled me to recognize (a) that you cannot use the no money concept in conjunction with no risk and (b) that most of what they taught was totally illegal.

Soccer or baseball?  Europe or the beach?  New York or LA?  Orioles or Nationals?  Redskins or Ravens?  Wine or scotch?

Sunshine and water.  We have a nice boat – some might call it a yacht, but we know what we really want.  Lazy weekends anchored on a Chesapeake tributary with a rum drink and some music…that’s life.  Now, I need to find it somewhere I can do it for more than 5 months out of the year.  We have a lot of summer hobbies: the boat and a big Harley, but nothing in the winter.  We do have a few favorite spots in Mexico and try to get there once or twice a year.

I’m looking for a sports team that will wear my company logo just because I’m paying for their kids educations by attending a single game…haven’t found that yet.  I like baseball, football, hockey and NASCAR, but I’m tired of the money being more important than the game.  So, I’ll get off the couch and workout or row a boat.  It will make me healthier and help me retain my money so I can retire, even if not to the same neighborhood as the athlete.

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