Why You Need Both a Property Manager and an Asset Manager for Your Investment Properties

These past 18 months have been anything but normal for every industry, but they’ve been especially unique for the real estate market. From rising and falling home prices to historically low-interest rates and increased demand, the landscape changes seemingly every day.

Despite the uncertainty these factors created for homebuyers, they have led to a perfect storm for real estate investment. In the second quarter of 2021, in fact, investors bought almost 68,000 homes — the highest quarterly figure ever recorded. With rents at a high and Pew Research Center noting that more than one-third of U.S. households are renting, now is a great time to invest in rental homes.

However, once the check has cleared on a new rental property, what do you do with it? If this is your first time owning a rental property, you might be wondering whether a property manager is necessary. What about an asset manager? Each has unique benefits, but to make the most of your investment property, you need both.

The Differences Between Property Managers and Asset Managers

Although some would argue that the lines between property management and asset management have begun to blur, there are distinct differences between the two roles.

By and large, property managers handle the more routine, day-to-day tasks of managing properties for residential or commercial real estate owners. On the other hand, asset managers focus on the type of long-term, strategic goals investors have by maximizing the value and earning potential of each property in real estate portfolios.

With one or two rentals, investors can get away with just a professional property manager. As rental real estate portfolios scale up, however, it becomes increasingly important to include a real estate asset manager as part of the team. Due to these different skill sets, finding one person to take on both jobs is highly unrealistic. Even if you could locate a single professional, it’s often much more effective to split these duties between two or more people.

The Advantages of Staffing Property Managers

With any rental property, you need a local presence. Property managers provide that. And though they still handle many of the “traditional” duties of property management, the role has begun to evolve somewhat. It now encompasses more than merely enforcing the rules and regulations of a given property, collecting rent, or making repairs.

These days, property managers have become a strategic asset for many real estate investors, as they allow you to safely invest in any geographic area in the country. Their core responsibilities include, but are not limited to:

• Collecting rent, handling any payment delinquencies, and managing both collections and evictions should the need arise.
• Responding to maintenance requests and complaints, paying special attention that repair work and updates don’t violate current building codes or regulations.
• Conducting periodic property inspections to not only make any necessary repairs to the property, but also ensure that all tenants comply with the lease agreements.
• Managing expenses of the property and control maintenance costs with itemized estimates and statements for any repairs.
• Keeping up-to-date on landlord-tenant laws, regulations, and ordinances — and addressing any infractions.
• Marketing properties for lease as soon as current tenants give their notice to ensure that no units remain vacant for extended periods.
• Guaranteeing all properties are rent-ready by scheduling necessary repairs, replacing old appliances, and recommending any remodeling work that needs to be done.

The ultimate goal of property management is to save investors money by preventing any issues that could lead to vacancies, legal fees, and damage associated with botched or unprofessional repairs and renovations.

The Advantage of Staffing Asset Managers

Asset managers guide investors through the three stages of acquisition, managing and holding, and disposition — with the overarching goal of achieving the highest possible return on investment for the owner’s portfolio. Generally, this is accomplished by strategically reducing expenses, maximizing rental income streams, and reducing potential risks and liabilities for the rental property investor.

Core responsibilities include, but are not limited to:

• Advising investors on how to best structure the capital stack of debt and equity and direct ownership versus joint ventures or partnerships.
• Selecting and overseeing key performance indicators that define investor return and key asset controls.
• Generating, reviewing, and reporting portfolio financial performance and recommending any needed adjustments to achieve long-term goals.
• Hiring and working with investor team members, including real estate agents, leasing agents, and property managers.
• Managing cash flow from the overall investment portfolio, including allocating capital and investment resources across all rental properties to complete capital improvements.
• Determining the holding period of properties by understanding the life cycle of each rental through acquisition, holding, and eventual disposition.

Before hiring an asset manager, understand that, unlike most property managers, these real estate professionals usually specialize in particular asset types, such as single-family rental properties, geographic areas, and specific investment strategies (e.g., long-term buy-and-holds).

The Bottom Line for Real Estate Investors

When it comes to both residential or commercial rental properties, it would be an ideal proposition to fill the two roles with one individual — someone with vast knowledge surrounding the intricacies of real estate investments and the operation, maintenance, and regulations associated with physical properties. Unfortunately, talent like this is few and far between. Instead, maintain those lines by staffing a property manager and an asset manager. In this way, your investment portfolio will be in much better hands.

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(Featured image by nattanan23 via Pixabay)

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