Asset Management

The Importance Of Good Asset Management

When it comes to Real Estate investment, there is a lot of focus on the high profile actions of buying and selling.

Everyone wants to talk about hot deals, the profit made from a recent sale, or the next big thing coming on the market.

But there is an important aspect of property investment that is hardly ever discussed. And it should be. That aspect is Asset Management.

What Is Asset Management?

Asset management is the process of managing an asset (or series of assets) to ensure it is performing as it should and showing a good return.

Whether it be yourself doing it or a company you employ, an Asset Manager’s responsibility is to make sure everything is done right at your properties. Working at a higher level than a Property Manager, the Asset Manager needs to execute your business plan successfully. That means following the vision you have for the property.

If they are not focused on executing your plan, then suddenly you could find your property in trouble.

Why Is It Important?

Asset Management is one of the most important factors in creating a successful Multifamily Real Estate Investment.

An Asset Manager will keep your Property Managers on track and accountable for the service they are providing. Also, they will ensure the right kind of community is being built for your resident.

Most importantly, an Asset Manager will make sure your business plan is carried out. A multifamily investment deal can look absolutely amazing on paper. But, in all honesty, a deal is just a few numbers and other data recorded in a document.

A good deal only remains good if the property generates results. A good Asset Manager can generate those results for you.

If you are running a syndicate, a found or a partnership, investors will want to see returns on their investment. If you can’t show them a good return, they will not be satisfied. That lack of return is caused by your business plan not being followed and executed well.

What Makes A Good Asset Manager?

With such an important role to play, having the right Asset Manager in place is essential to the success of your portfolio. Choosing the right one is vital. You need to ensure that your Asset Manager has the following qualities…

  • Great Leadership: Are they able to guide Property Managers and contractors to ensure work is executed in the right order successfully
  • Excellent Storyteller: A good Asset Manager is able to convey the story of your business plan to the relevant people, create a welcoming community for your residents and a profitable investment for you.
  • Analytical Skills: Can they process and analyze the relevant data and Key Performance Indicators for your properties? Do they understand rent rolls, occupancy rates, evictions and bad debt? This data is all essential to running a profitable property.
  • Communication Skills: You are going to be speaking to your Asset Manager a lot, you want to make sure they can communicate about the information you need. They also need to be able to communicate effectively with Property Managers, lenders and contractors.

Without a good Asset Manager, your property will not see the success it deserves. And you will not be honoring the investors in your syndicate. After all, when investing through a syndicate, people typically pay 1-3 percent in asset management fees. You need to ensure their money is being spent wisely!

The Role Asset Managers Perform

Many investors wonder why they don’t see great success from their properties. It is likely a result of their business plan not being executed well.

The answer to this problem is for the Asset Manager to be in weekly contact with the Property Manager. This doesn’t just mean dropping them an email once a week to check in, but you should set up a regular call with them. That way, you can ensure they are performing to the standard you need.

Use these calls to keep your Property Manager on track. Discuss the following…

    • Rent Collections – what is happening with rent?
    • Occupancy Rate – is it consistent with the rest of the market? Could it be better?
    • Evictions – have any taken place, or do some need to happen?
    • Bad Debt – is there any bad debt to consider?

These discussions points are just the beginning of the conversations you should be having with your Asset Manager. If you want more information, then advise them so they can have it prepared for your next meeting.

“What Can We Do Better?”

This is a question that should be discussed on every call with your Asset Manager. No matter how well a property is doing, it could be doing better. There will always be areas to improve. Could the rent be tweaked? Maybe expenses could be lowered, or tenant retention could be improved.

Whatever the situation, always strive to do more.

Have The Right Focus

As an Asset Manager, it is vital that your Property Manager understands your story and what you are trying to achieve with a property. If you do not educate them, then it is likely they will focus on the financial aspects of the property. While you want to see a return on your investment, focusing solely on the figures is not the way to do it.

Instead, you want your Property Manager to focus on caring for your residents. If you can create a caring community both in your property and the wider market, then you will generate a positive impact.

Your residents are the lifeblood of your property. Without them, you will have no success at all. If you take care of them first and create an amazing place for them to live, then the financial success will follow.

It may take some time to see your vision come to life. But, if you can take regular steps towards it on your weekly calls with your Property Manager, then you will start to see the effects of a well-executed Asset management plan.

Remaining In The Loop

Once you have secured the deal and appointed a third part Property Manager, your role as a General Partner or and Asset Manager does not end there. Even if you find the perfect Property Management company, you still need to play an active role in your properties.

That doesn’t mean you need to be down there changing light bulbs or supervising upgrades. But you need to ensure that your Property Manager is performing and that everything is running as it should. There is still the high-level financial supervision and business strategy to execute.

As an investor, an integral part of that strategy is having the right team. Your Asset Manager is a huge part of that. If you are not comfortable with the job they are doing, it might be time to find a new one.

Breaking Ties With An Property Manager

It can be difficult to break ties with a company that is so entrenched in your own business. But, if they are not displaying the kind of leadership qualities you need, they do not offer their team the right support, or if they repeatedly misinterpret instructions, then it is time to break ties.

Before you sever the relationship, take a look into your own communications. Have you set the right expectations for the management company from the start? And have you regularly been in touch to ensure those expectations are being met?

If not, then it might just mean you need to make your expectations clear and have a plan in place to work towards achieving them.

If you have been clear on your expectations and the company is simply not able to execute them, then it is time to find someone who can.

As you can see, Property Management is a key component in the success of your properties. That is why it is essential to select the right company to work with. Set clear expectations and manage them on an ongoing basis. That is your path to successful properties!

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