Large real estate portfolios often require specialized real estate asset management to help monitor and maintain the property portfolio. Whether you are an investor with a growing need for outside asset management for your real estate business or are simply interested in learning more about real estate asset management and how it works, this article explains what a real estate asset manager does, how it differs from a property manager, the pros and cons of working with a portfolio manager, and what investors should look for in an asset manager.
What does a real estate asset manager do?
In the real estate industry, an asset manager is responsible for reviewing and managing a real estate portfolio, analyzing the performance of individual investments, and identifying areas or opportunities for portfolio growth.
Large investment firms, such as an institutional investor or a hedge fund, have in-house asset managers who focus solely on improving the financial performance of the real estate investment. However, there are also external asset management firms that provide real estate investment management services to individual investors, which may include the following:
– Conducting financial analysis of the assets, including a real estate stress test, if required.
– Providing investment advice to property owners, including what capital improvements could be made to increase value or drive up rents, or ways to increase cash flow.
– Suggesting an investment strategy that can improve the performance of the investment based on the current real estate market.
What does a property manager do?
A property manager is responsible for the day-to-day management of an investment property, which may include the following:
– Recording and reporting rental income.
– Communicating with tenants.
– Handling leasing for new tenants.
– Expiration of leases, tenant move-outs, and inspection of vacant units.
– Coordinating improvements and repairs with outside real estate professionals.
What should you use?
While portfolio management is most commonly used with commercial properties, it can also be used by individual investors, especially those with large residential portfolios. However, an asset management company could be beneficial for anyone who is unable to consistently review and analyze the performance of their real estate assets and determine the best strategies to improve returns, regardless of the number of investments they own. Smaller investors, however, must decide whether the income or size of their portfolio justifies the cost of hiring a professional asset manager.
Investors seeking assistance with the day-to-day management of a property should focus on finding and hiring a suitable asset manager.
If you are able to consistently monitor your own portfolio, including acquisitions, dispositions, and investment strategy in the market at hand, then a professional portfolio manager is generally not worth the cost. As your portfolio grows in size or your properties become larger, your need for a property manager may change. If you feel you would benefit from a property manager, make sure you do your due diligence on the manager and the firm before entering into a contract.
Portfolio management involves asset allocation and selection made by experts in real estate development and maintenance. Selecting the right assets – in this case, real estate – should be consistent with the client’s investment strategy, risk tolerance and investment objectives, just as with any other type of investment portfolio. There are several factors to consider when selecting real estate for the portfolio, such as purchase price, maintenance costs, potential repairs, holding costs and, if possible, a sale price in the future.
However, an important point to remember about real estate portfolios is that most of the asset management takes place after the portfolio is selected.
A Property Asset Management Strategy & Plan
It is important to have a clear strategy over time to achieve these higher yielding property goals, rather than just bumbling along.
Even up front, it’s important to clearly define this end goal and whether it should translate into a higher value on paper or a higher rental yield in the shorter term and also the price you are willing to pay to achieve this goal, e.g. initial expenses for changes to the property.
You then need a plan to achieve this, including a realistic timeframe and how things should proceed in the right order.
This is where pure property management expertise can really help, something asset managers often overlook in the rush for deals and numbers.
An example how a real estate manager can benefit you, a landlord may want to take back the flats and treat them separately to get a higher return, but there can be all sorts of expensive issues to sort out, such as power supply and subdivision, and then separate access points and fire safety compliance, which could easily make things unprofitable.
At CPR Real Estate Asset Management, we have a group of dynamic professionals with expertise in providing a full range of management services such as property management, lease and rental management, advertising and promotion management, facilities management, financial and human resource management, and real estate development consulting services, to name a few.
We will discuss more on the various real estate developments that are worth spending your assets on.