Which Do You Trust With Your Investment?
Investors, you want to know the difference between property management and asset management before you hire someone in which to entrust your investment. Because there is a difference.
Property management and asset management are two different professions.
Property management concentrates on the day-to-day operations of a property. People who work at specific properties are typically fulfilling property management responsibilities. A property manager maintains the value of a property. Property management includes, but is not limited to:
- Maintenance of the property and facilities
- Renting dwellings, sites, rooms, etc.
- Collecting rent and other charges
- Working with staff and contractors
- Dealing with resident, tenant and guest issues
- Enforcing rules, regulations, covenants, guidelines
- Risk management
In the last one to two decades, property management has changed and it continues to evolve. While there are still some “old school” property managers who think their only responsibilities are to maintain the property and collect the rent, the evolving property managers are acquiring the responsibility for financial analysis and making recommendations based on the financial impact to the property. They prepare annual budgets and work toward improving the net operating income of a property. But this does not make them asset managers.
Asset management is centered on financial matters; maximizing the return on investment and value of property. They are adept at streamlining operations and repositioning a property to reduce costs and increase income.
Asset managers understand real estate as an investment. Asset management includes tasks such as:
- Prepare long term financial forecasts and perform cash flow analysis and compute internal rate of return in order to determine a property’s financial performance.
- Perform due diligence for acquisition or disposition of property and provide recommendations.
- Determine value of a property and what can be done to increase the value.
- Find and work with lenders.
- Negotiate on behalf of the owner
- Market an asset to increase revenue.
There are asset managers who are very involved at the property level, but there are also some who are not. Much depends on the company environment in which they work.
Real estate investors, ask yourself the following before hiring a manager or a management company:
- Am I only concerned with the day-to-day operations of my property? (Property Management)
- Am I only concerned with maximizing income and/or eventually selling my property for more than I paid for it? (Asset Management), or
- Do I want my property managed AND realize a maximum return on my investment and value of the property? (Property and Asset Management)
Most real estate managers are either a property manager or they are an asset manager. In my opinion, the best real estate managers know how to perform both jobs.
Very seldom will you find a property manager who has made the transition to asset management. But if you want one person who does both, they are out there if you look hard enough – or you can simply call me.
For more helpful advice and information on real estate management, email me at marie@paradigmrec.com.