What Is Real Estate Asset Management
Real estate asset management is the process of analyzing real estate investment assets in order to help investors build strategies that minimize risk. Traditionally, asset managers will do this by sourcing profitable investment opportunities, make predictions in order to mitigate risk, find ways to reduce costs associated with purchasing and maintaining a property, and create a solid financial plan for each asset.
The Difference Between Real Estate Asset Management and Property Management
Real estate asset managers are very different from property managers. Asset managers oversee the entire life cycle of a real estate investment transaction. They source deals, develop and execute smart economic real estate investment strategies for the investor, and maintain the investors portfolio in a way that maximizes returns.
Property managers are hired to maintain the grounds of the investment property and manage the day-to-day tasks; such as screening tenants, collecting rent, working with contractors to keep the property in good health.
The use of either, or both, services entirely depends on the investor’s goals and their portfolio. A quality to look for that both asset managers and property managers should have in common is strong communication. Even a passive investor should know what’s happening in their portfolio.
Real Estate Asset Management Life Cycle
The life cycle of real estate asset management is comprised of three phases: the acquisition phase, the holding phase, and the disposition phase.
During the acquisition phase, a property has been identified by extensive research and analyzing market trends. After an investor has gained ownership of the asset, the asset manager creates the most effective strategy for minimizing risk and maximizing returns.
The next phase is considered the holding phase because it is focused around maintaining and monitoring the health of the investor’s cash flowing properties.
The final phase is the disposition phase. During this time, asset managers will work with the investor to determine a plan of action for when or if the asset will be sold. This is also a time to utilize the asset manager’s expertise to compose a strategy for using cash flow to acquire a new asset.
The Benefits of Using a Real Estate Asset Management Service
Any investor can benefit from having an asset manager, especially if they have a substantial portfolio.
Individuals who own commercial real estate properties, such as large multifamily apartment complexes, would especially benefit from working with an asset manager. This type of asset includes multiple tenants, which means multiple streams of cash flow to keep track of.
Asset managers are responsible for monitoring the performance of an asset and keeping up to date on KPI’s which is a very important factor when it comes to maximizing returns. For an investor who owns multifamily or a significant amount of commercial real estate this precise and consistent management is vital for making well-informed decisions.
Individual investors who choose to passively invest in real estate typically use asset management services so that they can invest with ease, knowing a team of experts is in control. Most active investors learn about asset management early on and can devote the time and energy it takes to manage their own assets.
While an asset manager is not necessary for every investor, every investor can benefit from working with one. Consider your investment goals, financial standing, current knowledge and availability to determine whether or not collaborating with an asset manager is right for you.