Hiring a real estate asset manager is a natural step for rental property investors as they grow their property portfolio.
Often, however, investors confuse property management with real estate asset management and wonder if two different professionals are really needed.
The fact is that property and asset managers play two very different roles, and the more successful investors in their rental property investment, use a real estate asset manager, get higher returns and greater portfolio growth.
WHY DO RENTAL PROPERTY INVESTORS NEED AN ASSET MANAGER?
As real estate prices continue to rise and competition for good rental properties increases, the demand for professional asset managers who can maximize returns and market values for investors continues to grow.
A real estate asset manager monitors the market, keeps abreast of the latest real estate trends and research, and stays abreast of macroeconomic, political and financial trends. In doing so, an asset manager helps an investor’s portfolio grow and ensures that each rental property meets and exceeds its fair market value while mitigating any potential risks.
The best real estate asset managers also go beyond hard data by understanding the subjective nuances of each client. This is because each investor is unique and, to one degree or another, investment goals and objectives are based on background, family situations and work histories, health, financial and knowledge resources and desires.
Thus, a professional real estate asset manager can offer invaluable insight to rental property investors who may be too busy with a 9 to 18 job to fully appreciate and capture the profit potential of each asset in the portfolio.
REAL ESTATE ASSET MANAGEMENT VS. PROPERTY MANAGEMENT
As rental property investors expand their real estate portfolio, it becomes increasingly important to include a real estate asset manager as a key part of the team.
A property manager focuses on the day-to-day operations of a rental property, while an asset manager is concerned with the broader, long-term financial picture.
Asset management
Asset managers focus on the strategic big picture to maximize the value of each rental property and obtain the highest return on investment (ROI) for the owner.
The key tasks and responsibilities of an asset manager include creating an overall strategy for each rental property and the entire real estate portfolio; enhancing asset value by wisely reducing expenses and increasing revenues; hiring and supervising the property manager; and preparing, monitoring and adjusting real estate financial projections and financing strategies.
BASIC RESPONSIBILITIES OF A REAL ESTATE ASSET MANAGER
Real estate asset managers generally specialize in different types of assets, such as single-family rental properties, multifamily, certain geographic regions of the country, and specific investment strategies such as buy and hold for the long term.
The goal of a real estate asset manager is to achieve the highest possible property value and return on investment for each asset and for the owner’s overall portfolio.
Real estate asset managers achieve this by strategically reducing expenses, maximizing rental income streams and reducing risks and potential liabilities for the rental property investor.
Primary responsibilities and objectives of a real estate asset manager include:
- Advise the investor on how best to structure equity and direct ownership versus joint ventures or partnerships.
- Assist the owner in choosing the best investment strategy, form of ownership and investment, and the potential pros and cons of each approach
- Selecting and monitoring KPIs (key performance indicators) that define investor performance and key asset controls
- Recruiting and working with key members of the investor team, including real estate agents, property managers and leasing agents
- Generate, review and report the financial performance of the property and portfolio and recommend adjustments necessary to achieve the investor’s long-term objectives.
- Manage the cash flow of the individual property and the overall investment portfolio.
- Working directly with proprietary investment partners and lenders to determine the most effective use of leverage
- Allocate capital and investment resources across the rental property portfolio to complete capital improvements and add value
- Determine the holding period of each property by understanding the life cycle of each rental property through acquisition, holding and eventual disposition.
3 PHASES OF REAL ESTATE INVESTMENT MANAGEMENT
Throughout the process, the asset manager uses a balanced combination of experience and instinct with market knowledge to help owners improve investment performance.
Phase 1: ACQUISITION
Real estate asset managers provide investors with consistent and reliable advice on the best time to invest in single-family rental properties in specific geographic markets.
For example, transaction prices may be rising so fast in some markets that fair market rents may not be high enough to cover debt service and normal operating expenses. Other markets, such as Cincinnati and Florida today, may offer better opportunities for the rental property investor due to long-term fundamental factors such as population and employment growth combined with a lower cost of living.
Additional criteria:
- Interest rates and cost of capital
- Projected market rental rate movements, absorption and vacancy forecasts
- Opportunity to add value and increase existing revenue streams
- Market-specific capitalization rate and yield trends
- Stage of the real estate market cycle
Phase 2: HOLDING
Oversees the daily activity of the property manager while constantly monitoring asset performance with a view to increasing revenue.
It is regularly communicated to measure the financial performance of each rental property against investor expectations and investment strategy objectives:
- The short-term strategy requires a quick return on invested capital through rapid appreciation of the property over a shorter holding period.
- The long-term strategy focuses on stable cash flow and improved returns through steady income and long-term market value appreciation.
Regardless of the specific investment strategy, a real estate asset manager will constantly monitor the market to weigh the benefit of selling today versus continuing to hold.
Phase 3: SALE
They consider a number of factors when deciding when, how and even whether to sell a rental property.
For example, the asset manager may believe that capitalization rates have bottomed out, or have become so low, in a specific market due to unprecedented demand from other buyers that the capital gain from the sale generates cash that can be better used for other real estate investments. .
On the other hand, low cap rates created by a temporary supply shortage in a market with new product under construction can also be a signal that it is time to sell. This is because as new supply becomes available, markets typically see an increase in vacancies and a temporary decrease in rents due to an increase in property for tenants to choose from.
THEREFORE
Rental property investors hire real estate asset managers to maximize the value of each property and the total portfolio, and to generate the highest possible returns. Real estate asset managers guide investors through the three stages of acquisition, holding and disposition.
The main objectives of real estate asset management include:
- Focus on long-term financial performance and property investment objectives.
- Hire and supervise a property manager to handle day-to-day activities such as rent collection, lease compliance, and routine repairs and maintenance.
- Advise on how best to structure debt and equity, manage cash flows and work with key partners and team members of the real estate investor.
- Understand each stage of the real estate market life cycle and how to invest in each phase of the market.
At Your Real Investment we are a professional team that covers all areas of management, guaranteeing security and efficiency of the investment, for the investor’s peace of mind and growth.
We take care of every step of the process, from start to finish, taking charge so that you can invest from wherever you are, without worrying about anything.
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