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This talk was an interesting one as we were able to corral a long-term customer in Steve Rozenberg to join us for this interview. He’s a commercial pilot for United Airlines, and he also runs one of the fastest growing property management businesses in Empire Industries located in Houston, TX. He shares his story in how we grew Empire Industries into the power that it is today. Below is a transcription of the interview:
Q: Steve, welcome to the show. Can you give us a quick introduction of who you are and what you do?
A: Thanks for having me. I live in Houston, Texas and I was sort of backwards in getting into what I’m doing now. I never wanted to be involved in real estate or thought about becoming an entrepreneur. I was thrust into the world because of a day that a lot of us remember, which was September 11th. I’m what people call a 9/11 entrepreneur, which means for me that day dramatically affected my life and my livelihood as an airline pilot. That safe, secure job that I thought I had as a pilot really ceased to exist on September 12th. Being an airline pilot is really specialized, and I didn’t want to find myself out of a job and on the street. I was luckily able to keep my career – I’m still an airline pilot. But hundreds of thousands of planes were grounded for the week after 9/11, and that was my “why” moment. I decided I wanted to start learning about real estate. I began buying single family homes and then apartment complexes.
Q: So you got that jolt to your life and your career, and you thought that real estate would be a good way to have your money in something physical; an asset that’s not likely to disappear. Did you use a property manager when you began buying properties?
Q: Why not?
A: I didn’t know a lot of the things then that I know now. It’s one of those things that you think you’re smart enough to figure out on your own. Real estate is a safe and secure investment, but as an investor, making the wrong acquisitions without the right business model can take away that security quickly. I bought some properties without the right property management structure in place, and if you don’t know what you’re doing, it can be a financial disaster.
Q: So the question is, how do property managers convince people – a starting investor – to think along the lines of getting help right away to avoid losses and failures?
A: It’s a matter of educating them. You don’t want to tell people how good you are at property management. They don’t care. What’s important is finding out what their goals are, what they want, and how you can help them realize what they don’t know while they’re achieving those goals. So many things can happen with tenant rights, fair housing, and discrimination. Landlords are often sued because they don’t treat their property like a business. I always tell investors: you are playing with people’s lives, and that makes you liable and responsible. The IRS and the Texas Property Code and the Fair Housing Act says you’re a business. Once they start seeing it that way, they know a property manager is a necessary part of the team. It’s my job to explain how we will get them to their goals.
Q: Knowing what I know now, I will never get into an investment property without first consulting and working with a property manager on the acquisition, management, and eventual sale. You are right when you say education is what’s needed. Listeners, if you go to the Empire Industries website – empireindustriesllc.com, you’ll be amazed at how many videos and books are available. If you are looking for resources and answers, this website is it. This is why Steve wins all the business. It’s education. So let’s step back a bit, how did you end up as a property management company?
A: I met my business partner in a real estate investment group in Houston and we partnered on an apartment complex. After we sold the apartment complex, we took the revenue and bought some houses. We bought 20 single family homes in about a year. We bought the wrong properties.
Q: What was wrong with that portfolio?
A: About 70 percent of the properties we bought were in low-income areas. They weren’t bad properties, just wrong for us and the business model we were using. Our cash on cash return was high on paper – around 60 percent. We bought the homes for $50,000 or $60,000, and rented them out for $900 or $1,000 per month. But with low-income properties, what we didn’t know and what a property management company would have told us, is that our average tenancy rate was eight months. Our turnover costs were three times our other turnovers. So the tenants didn’t stay and the maintenance costs were killing us. That sucked up all our revenue and we did not account for that.
At that point, we tried to hand the properties over to a management company, but we couldn’t find one that would agree to work with us. That’s when we realized we did something wrong. This was in the middle of the 2008/2009 recession, and we were stuck with these homes. Instead of learning from our mistakes, we bought another 15 properties that were similar. I was fixated on proving that I could fix this. That was not the way to go.
Q: So how did you get out of it?
A: We decided we could either sell them and take a huge loss or come up with some kind of structure that would result in better management. So we put some processes and policies in place and decided to manage these homes until they began performing the way we wanted them to. It took us about six months to lay the foundation of turning these properties around. We held ourselves accountable and put procedures into place. Then, our properties began to stabilize. We kicked out our deadbeat tenants and even though it cost us money, we saw it as a means to an end. It broke the cycle we were stuck in. Those properties never got to the point that they were making us a lot of money, but we weren’t losing it either. Other investors began to approach us and tell us about their problems. They asked us to manage their homes, and at first we said no. But then we realized that if we did it well, we could get discounts with vendors and real estate agents through economies of scale. That started our property management company in January of 2011.
Q: Did you work full time during this period?
A: Yes. I was still a full-time pilot and Pete was in charge of a big IT department. We did this while working full time. After about six months of taking on properties and looking at it from a business standpoint, we realized we could actually make some money. People were handing us their properties and we had no idea what we were doing. We began to educate ourselves on the property management industry.
Q: How many properties did you have after six months?
A: We had about 70 or 75 properties, and half of them were our own. We still weren’t smart enough to realize we needed help. In June of 2012, we got a business coach and set up the foundation and structure of our business. Pete went part time in his company because he knew this was going somewhere. Then, six months later he quit his job entirely.
Q: How many properties did you have at that point?
A: We had about 127 properties at that time, and we hired our first employee as well. We knew we couldn’t afford her, but we also couldn’t afford not to have her. She was a certified property manager with 20 years of experience, and she saw the vision of what we were building. Or maybe she felt sorry for us. Three months after joining us, she fired about 67 of our clients. She completely cleaned house and said she was dropping the people who would get us sued because they were bad owners. We didn’t know what was a good or bad owner. She came in with a lot of experience, and we let her run the show. It dropped us down to 67 properties, but at least those owners we had left were good owners. Then, things really took off. So if you flash forward to today, we now have over 550 properties. Our largest client has 43 doors, but he purchased them one by one. We didn’t buy any clients, we fought hard for every single one. We are always marketing as much as we can. Because it doesn’t matter what business you are in, you’re a marketing business. If you do not have inbound marketing, you are going out of business. You just don’t realize it yet.
Q: How do you define inbound marketing?
A: To me, it’s simply when someone comes to me and tells me that they found me through the Internet or through my eBook, educational blogs, or whatever, and they want to talk to me. They contact us.
Q: Exactly. They ask, you answer. And when you can do this on the Internet, your reach multiplies on its own. People are looking for answers. If you are the one providing the answers, they will call you and demand you as the company they use because they are emotionally already connected.
A: That’s true. Fourandhalf educated me on the importance of content marketing and video blogs. You said to start with 10, and I think we ended up with 50 in the first few months.
Q: You tested it and it worked, so now you keep going.
A: We took what you told us to do, and it’s not magic, we just do it consistently. We test and measure every single thing we do. We know what is working and what isn’t and what we have to tweak and adjust. It’s a learning process.
Q: I’m impressed and proud because I keep telling clients that once we get to two years of content marketing, they will reduce their dependency on Pay-Per-Lead and other forms of paid marketing. They will get that needle out of their arm. You don’t rely on Google Ads as your single source of customers, right?
A: Absolutely. That’s how you grow. We were on page 80 of Google when we first started. We did everything you suggested and had our YouTube videos and transcribe our blogs. We also paid attention to our reputation in property management. We have the most reviews on Google, and when people call us, they aren’t looking for the cheapest service, but the best service. Someone just told us he spent 10 hours watching our YouTube videos, and he was ready to start working with us. One of the best pieces of advice I got from Fourandhalf was about pain points. Now, when someone tells me about their pain point, I make sure I have a video and a blog I can send that shows them how to handle it.
Q: That is definitely no secret, and the next step after putting a sales process in place. One fear many people tell me about is that they don’t want to be the ones making the calls and sending the emails. But it doesn’t have to be the president of the company or the CEO that people talk to.
A: That’s true. We started off as just Pete and me, so we were the only ones answering the phones. But now I have 19 people working for me. We have a marketing coordinator and a business development manager, and even though it’s my name on the emails people receive, when they’re talking to a sales person, nothing misses a beat. It’s not a hard transition. We are averaging 84 new business opportunities a month, and most of them are from our website or some other trigger. Those are all inbound because we don’t do any outbound marketing.
Q: Would you say the whole thing boils down to this single fact: that you need to become an authority in your space? People are looking for a thought leader.
A: Yes. You have to grind and come out on top as the one who is the educator. You don’t have to be the smartest, just the one they see when questions are answered. People don’t’ like to be sold, they like to be educated.
Q: We have had long conversations at NARPM events, and you have really grown over the years. You have done everything right. You always have great ideas that we discuss in detail. Then you go and implement those ideas. You don’t just talk. When did you crest? When did you feel that everything was on the right track?
A: Last year is when we noticed that we were really getting some traction. We had about 976 inbound leads for the year. This year, we’re way over that and may even double it. But it was last year that we realized we were getting referrals from owners and agents, and these were not singular. We were getting multiple people coming to us, and we thought everything was working. In last year we also got to the top of Google and we are constantly on the front page. That has been a huge plus, but what our “aha” moment was involved real estate agents. We once went door to door every day to talk about our referral program with agents. Now, we only go once every few weeks because we have so much traction and people know us. We definitely have the momentum we need.
Q: So to boil this podcast down to a single sentence, I would say: to compete on competence instead of price and still win, you need two things. You have to be a thought leader and you have to hustle. Hustling means falling on your face and failing once in a while. It’s engaging every partner you have, every vendor and friend. You need to ask questions and use the opportunity to glean new ideas and go and implement them. Does that sound about right?
A: Absolutely. You have to be a grinder. You have to get up and make it happen. If you don’t, someone else will take your place. I always tell people we are looking to expand in other cities, and you probably don’t want to compete with us on marketing because we take big actions daily. If we come into a new city, we’ll take the same approach. If you’re sitting back and passive, you’ll get pushed away if not by us, then by another company. People are afraid to fail and they don’t want to look dumb. But some of the most famous people in the world fail.
- Henry Ford was considered illiterate.
- Michael Jordan didn’t make his high school basketball team.
- Einstein didn’t pass ninth grade algebra.
All those people failed but they didn’t give up. We have failed so many times in so many ways but if we hadn’t then we wouldn’t have the business we have today.
Q: Spoken like a true entrepreneur. We get people to Fourandhalf through education, and speaking of education, we are doing a conference with LeadSimple.com. If you want to come and hear Steve speak and talk more about his success story, come to the Property Management Grow Summit on January 26, 2017, in West Palm Beach, Florida.
A: Very excited about that. As I’ve said, Fourandhalf gave us the foundation to build, and if I didn’t have the information you shared, I would not have known how to grow. There are so many great people to learn from, and that’s why I’m going; to mix with people who can teach me things.
Q: Thank you for your time. How can people find you?
A: Look us up at empireindustriesllc.com. We are also on Facebook, and you can always call us at the office: 888.866.6727. We love when property managers call us about business and questions. Feel free to call us because no one would give us those answers when we were growing. We had to figure it out by making mistakes, so I’m happy to talk to other property managers.
This was helpful. Thanks for joining us, Steve. You’re a true entrepreneur and a good guy to know.
If you need help with sales or marketing for property management companies, or you’re interested in learning more about the PM Grow Summit, please contact us at Fourandhalf. Thank you for listening, and we’ll see you next time.