Rental Property Management Mistakes Investors Must Avoid in Tenant-Friendly Markets

Steve Isemann (00:00)
Yeah, don’t ever try to be Mother Teresa Property Management. This is a business. It’s a business. It is not a charity to find homes for people. Your job is to make your house profitable for you, monthly in the rent, making sure it’s maintained. Just, know, if you’re gonna invest in yourself and buy an investment property, then keep investing in yourself with that property. And get educated. Doesn’t hurt to get a real estate license, even if you use it or not.

Scott Bursey (01:59)
Welcome to the Real Estate Pros Podcast powered by Investor Fuel. I’m your host, Scott Bursey. And today we are sitting down with a true powerhouse who brings the kind of hyper local systematic scaling fuel that every investor needs to master. It’s one of the toughest niches in the business, property management. We’re talking Maryland real estate, specifically the Baltimore market. Get ready to fuel up your tank because we’re talking to Steve Isemann

Steve Isemann (02:00)
Emma.

Scott Bursey (02:28)
the expert behind SWI property management and leasing. Steve, thank you for being here.

Steve Isemann (02:33)
Hey Scott, thanks for having me.

Scott Bursey (02:34)
It’s just wonderful to have you here. And if you could tell our audience how your career began and where are you putting your fuel now?

Steve Isemann (02:43)
⁓ Well, my career in real estate started 20 years ago, but even during the Great Recession and everything, I didn’t actively use it, but I kept it in reserve. A real estate license is something that you only got to use it once or twice in your lifetime and it’ll pay itself off. So it’s not hard to keep up. ⁓ I can’t tell you the amount of money I’ve saved my family in selling their properties.

or buying properties just because they’re my family. So, you know, it’s quite advantageous to have it. So with that being said, got into it with, I bought in with two other very skilled investors into a building that had a liquor store and some rental properties that had four units upstairs, three units downstairs that were commercial. So I got lucky to buy into that. I bought into a liquor store.

as well and we kind of hacked it out then the recession hit but I certainly got my feet wet in the first three or four years in real estate with property management and being a multi-family ⁓ or a multi-unit investor or whatever you want to call it. At that time I was an investor so.

Scott Bursey (04:45)
Wow, Steve, that’s quite a journey. You know, what really caught my attention about you was the way that you’ve been able to scale a property, specifically property management operation, you know, while mastering the nuanced, rapidly changing regulations that define a major area like Baltimore. That’s not easy.

Steve Isemann (05:03)
Yeah, I agree. had last year the governor changed a bunch of laws that made Baltimore more tenant friendly. Now, ⁓ you know, there’s nothing wrong with being tenant friendly. But, you know, at the end of the day, the landlord and the owner of the property carries the bulk of the burden of fees, expenses and payments and having to ⁓ turn properties from new tenants.

And it seems to me that the current political environment ⁓ is with the Democrats and the Republicans, and not to get too political, but I believe that the Democrats are pushing very hard for rent stabilization across the country because they feel that that builds them votes, ⁓ where the Republicans are certainly not as concerned about building votes other than maybe ⁓ amongst American citizens.

So, know, I just find that Baltimore has lots of opportunity for the right person and the right mindset, but the political environment is very tough right now, ⁓ especially in terms of, we just had a new tenant, Bill of Rights that came out last year, a new mole brochure, all these certain things, the tenant’s first right of refusal in Maryland. So,

all these new rights that come out that you have to include in a lease ⁓ can make it a bit of a challenge sometimes. And not to mention that it’s not like we’re calling from the cream of possible tenants in this corridor we’re working in, a Baltimore, D.C. We have a lot of struggling tenants, lots of people who have been in court for lots of reasons. ⁓ maybe it’s good for maybe the…

the governor of the state and maybe the politicians, but it ain’t so easy and good for the landlords. You have a lot of people that are, and I hate to sound, I’m not discriminatory, but I’m just calling out the facts as I see it, and that is there are a lot of uneducated tenants, a lot of people who exploit the system because they’ve learned how to do it. And so what that means is we have to work extra hard to vet the tenant to put them into the house.

So the onus becomes more on the owner as it does the tenant saying, hey, look at me, I’m a standup person. you ⁓ know, you have a lot of, I have a client, ⁓ two clients who are selling all their properties and getting out for that exact reason. It’s just too difficult for them to make a living on it.

And a lot of owners, they don’t have that 20 or 30 thousand in the bank to make sure everything’s taken care of. And they’re going paycheck to paycheck now as well on repairs. You know, if the things aren’t fixed, you might not have to pay the rent. Tenants like that. Although they’ll say they don’t.

Scott Bursey (08:02)
that note,

walk us through how does that affect your bottom line?

Steve Isemann (08:07)
Well, know, at end of the day, my bottom line doesn’t change drastically. It’s just maybe the amount of work I gotta put in. So, you I get a fee every month from managing the property, whether it sits vacant or not. ⁓ You know, we get the leasing fees that we place when we place tenants. And we do have some minor repair and maintenance that we might make, a leaky toilet or something like that. So there’s plenty of ways to make income.

Not to mention, I get to sell properties when the clients want to sell them occasionally. ⁓ And I still have my real estate business that, we just did a couple of transactions last month where a little bit of vacation money you can put to the side. there’s always, my income doesn’t change. It’s just the amount of workload I got to put through. And then the amount of, for a landlord, is your criteria for a great property manager? That’s a question I’m asking you.

Scott Bursey (09:00)
Okay,

well thank you for bringing that to our conversation. And you know, there’s a lot of different vetting strategies. Let’s touch on that. I appreciate that. Steve, what is your main step for pre-qualifying tenants in the unique Baltimore market?

Steve Isemann (09:55)
⁓ Well, you got to a background check for sure. So you just have to. even whatever system or platform you’re using, it’s critical that it’s done. ⁓ You know, as I was trying to say earlier, there’s only a couple criteria that you have as a landlord for wanting to hire me as a property manager. So it’s probably my experience. Number one, but number two, if I give you bad tenants that don’t pay the rent, or I give you tenants that destroy your house, you’re not going to keep me around very long.

Some of it I have a lot of control over, some I don’t. So when it comes to vetting tenants, it’s been a long hard road. I’ve had to lose clients because, I didn’t do enough, or I didn’t go further enough. And that was something I learned early on. And it’s embarrassing ⁓ when you have to explain to an owner that you made a mistake and that you’re sorry that you didn’t do a better job. But with that being said,

⁓ Some of the things that we will do besides a background check is ⁓ we will of course talk to their employers or verify employment. Or also, it’s hard for us to really take a referral from a prior landlord. Because if you’re a bad tenant, that landlord is probably not going to tell me all the devil’s details concerning your tenancy if they really want you out. So.

the longer they stay, the worse it is for you, the landlord, trying to get them out. So you’re really biased, in my opinion, towards giving me a really good recommendation on that tenant. So now we have to look at really, and that’s somebody that really should be ⁓ transparent in that regard. It should be a law. In my opinion, the law should state that I have to talk to you, you have to give me information, and it must be accurate.

Unfortunately, the tenants’ rights supersede that, meaning I can only ask a couple questions, would I re-rent to you? That doesn’t really give me any information that I need to know to make a good choice. So, the best one is this. I’m gonna go to your house and I wanna see how you keep it. If I can see that you have job stability two years or more, rental stability,

I mean, you could stay a year, but no evictions or failure to pay rents, then I’m really starting to feel much better about my tenancy. So, but, you know, it’s a difficult thing to broach asking a tenant, or a possible tenant, can I please come look at your house? So it’s not against the law to look at their house, but some people may take offense to that, like, you you’re going over the top, or, you know.

I’ve never had to do that for anybody else before. So ⁓ we find that the properties sit a little bit longer currently today in this market, but rents are coming down, so that’s part of it. And then the other reason is, we can’t put lock boxes on doors anymore because of squatters. There’s just all these different ⁓ stratagems you have to take into play in order to be successful.

You know, again, last thing the owner wants to hear is, I got squatters in my house. Because that’s going to be thousands of dollars there.

Scott Bursey (13:09)
We talked about some challenges, Steve. What do you feel is a couple opportunities in your market?

Steve Isemann (13:15)
Opportunities are, know, stick outside the box, be creative. You know, have good brand awareness as best you can. Our certainly could improve, nonetheless, good brand awareness, a good, what’s the word, have good credibility amongst the other investors in the area. You know, I would say that,

getting more properties, if you do it, if you can talk to the landlord one-on-one and get him to understand the numbers and not just, hey, I don’t make money every month on my house, ⁓ I think it would be a lot easier selling the service. ⁓ A lot of owners I have found come into it, they buy their first house and they don’t understand why they don’t make any money every month or they’re only making a couple hundred dollars.

not really appreciating that. If you buy a restaurant like McDonald’s, it’ll take you five to seven years to pay it down to where you’re highly profitable. So the same is similar with a house. You have to take into consideration with investments, explaining to tenants, or not to tenants, but to owners, the first thing you get with being a property owner is appreciation of your property.

That’s your first income and it’s a quiet passive income. You’re not gonna see it to your face unless you’re in a volatile market, I guess. The second is depreciation. So all the money you’re putting into your house and your interest, you’re gonna be able to depreciate. What a great deal. The third is mortgage pay down. Those first three are very quiet. The owners don’t really see that till they do their taxes. And if they don’t have a good CBA,

CPA or property managers that can explain it to them, then they might be thinking they’re in a bad deal, right? And then the last thing is cash flow. So if you’ve had your investment properties for five or six years and they’re paid off, you know, now is your happy time. Now is the great time. I have a client who literally at one point had over 50 units. I only have four or five for him right now, but he had over 50 units and he’s been doing it for over 50 years.

And if there’s anybody as knowledgeable as Mr. Duar, it’s him when it comes to property management. He knows it all. And he’s been a very good mentor of mine as well as a client. So I find that I can actually get a lot of my clients to have a lot of experience. ⁓ Good advice from them as well. So there’s plenty of opportunity out there. You gotta make opportunity. Action creates emotion.

Scott Bursey (15:50)
Steve Curious.

Steve Isemann (15:55)
Emotion creates direction, direction creates activity, you know, et cetera.

Scott Bursey (16:40)
Absolutely, absolutely. What ⁓ new or potential city ordinance in Baltimore are you currently adjusting your operational contracts to mitigate?

Steve Isemann (16:51)
As far as, ⁓ repeat that for me, I’m sorry Scott.

Scott Bursey (16:55)
Yes, yes, as far as mitigating contacts. ⁓ What is the toughest obstacle right now as far as adjusting your operational contacts to mitigate city ordinances and things of that nature?

Steve Isemann (17:08)
⁓

Well, ⁓ Baltimore City is notoriously hard to get in touch with. I’ve heard rumors that it’s quite corrupt. I haven’t seen anything to show me different, but I don’t know for sure. However, with that being said, I have had to take coffee and donuts at eight o’clock in the morning or 8.30 in the morning to the planning department or the zoning department in order to get an inspector to come out to my.

my property because they don’t answer their freaking phone. know, so those types of things you just have to think outside the box and creative. Now it did work. That actually worked the first time. Second time it didn’t work. ⁓ you know, having a relationship with a code enforcement person that you can call or somebody that’s in zoning and planning or permitting, it really gives you ⁓ some quick access to a question possibly.

I mean, we have an attorney that’s on retainer as well. any time that, there’s plenty of resources for me to reach into usually to get them, provided I can find the time, because a good property manager’s in the field and he’s not sitting at a desk.

Scott Bursey (18:20)
Thank you for that. And Steve, real curious on this, what’s the best piece of advice you can give an investor looking to outsource their first property management ⁓ contract?

Steve Isemann (18:31)
Call me. No, if you’re just anybody, I would say make sure you do your homework and make sure you got enough capital to maintain the property and look at it as a five year project. You know, I see a lot of landlords who look at, they treat their investment not the same way they would treat their own house. So you live in your house, Scott, and I’m sure you look at it and your wife looks at it or your partner looks at it as an investment in your future, just like we all do.

Right, so my property’s an investment of my future, but my investment for my tenants is not? That makes no sense to me. So the one thing Mr. Duvall taught me to give props to Don is that taking care of your property and maintaining its market value protects you. Not maintaining market value, letting it get run down because you don’t want to spend $25 or $100 this month.

only hurts you in the long run. So I would say have your your bank account, have your money, make sure you know what you’re getting into, hire somebody who’s got experience ⁓ in property management. I’ve seen plenty of owners come to me and say, my last property manager was somebody who was living in one of my houses. And I let them do this job. And now I got a huge problem. So

I would say don’t ever commingle your tenancy with your business just like you wouldn’t with real estate funds. So you’re not gonna commingle your tenants with your operations of your house. How do you know he’s a qualified plumber? You know, I went and did this, I went and did that. So, know, don’t go into it blind, but you gotta go into it being smart and you can’t… ⁓

Don’t think the cheapest way is the best way or the least expensive way. I see a lot of that. So I currently have one house where the landlord’s got the property, the grass, it’s sitting at three feet tall, and he wants to know why it’s not rented. And I tried to explain to him that we have to cut the grass. It’s just like real estate, it’s presentation, it’s curb appeal. You know, I mean, at the end of the day, people don’t want to look at it and think you don’t take care of it.

What are they going to think about the inside? They don’t even go in. They’re just driving by. So, you know, having to explain that to an owner ⁓ after more than several years as their property manager can be trying. But, you know, it’s my job.

Scott Bursey (20:59)
You raise some really good points and Steve, you have given us some really good perspective. Is there any additional golden nuggets or advice you can leave with our listeners today?

Steve Isemann (21:08)
Yeah, don’t ever try to be Mother Teresa Property Management. This is a business. It’s a business. It is not a charity to find homes for people. Your job is to make your house profitable for you, monthly in the rent, making sure it’s maintained. Just, know, if you’re gonna invest in yourself and buy an investment property, then keep investing in yourself with that property. And get educated. Doesn’t hurt to get a real estate license, even if you use it or not.

Scott Bursey (21:36)
Steve, this has been pure gold. And for our listeners that would like to this conversation moving or collaborate with you, what is the best way for them to plug into your pipeline and reach you directly?

Steve Isemann (21:46)
I would say just call me. you know, I’ll give you my number if you want it, but 301-674-0172, or you can email me at steveisemann I-S-E-M-A-N-N, at gmail.com. Now we will have a bigger ⁓ online presence soon. I have my sister coming back to work with me. She was gone for a while, but she’s coming back with me and she will help get some of these loose ends back tightened up. ⁓

But that’s the best way to get in touch with

Scott Bursey (22:16)
Thank you for joining us today, Steve. This has been really a clinic. Thank you.

Steve Isemann (22:21)
Thank you very much for having me, Scott. Wish you the best.

Scott Bursey (22:24)
And to our listeners, we appreciate each and every one of you. If you got value from today’s episode, please subscribe. We’ll be fueling your tanks with the lineup of elite guests, just like Steve, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.