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Real Estate Asset Management Explained

May 29, 2020 by Liz Brumer

Large real estate portfolios often require dedicated real estate asset management to help monitor and maintain the real estate portfolio. Whether you're an investor with a growing need for outside asset management for your real estate business or are simply interested in learning more about real estate asset management and how it works, this article will explain what a real estate asset manager does, how it differs from being a property manager, the pros and cons of working with a portfolio manager, and what investors should look for in an asset manager.

What does a real estate asset manager do?

In real estate, an asset manager is in charge of reviewing and managing a real estate portfolio, analyzing the performance of the individual investments and identifying areas or opportunities for growing the portfolio.

Large investment firms like an institutional investor or hedge fund have dedicated asset managers that solely focus on improving the financial performance of the real estate investment. However, there are third-party asset management companies that handle the management of real estate assets for individual investors, which can include:

  • Conducting financial analysis of the assets including a real estate stress test if needed.
  • Providing investment advice to the property owners, which could include what capital improvements could be made to increase value or drive rent prices up or ways to increase cash flow.
  • Suggesting an investment strategy that can improve the performance of the investment based on the current real estate market.

What does a property manager do?

A real estate property manager is in charge of handling the day-to-day management of an investment property, which can include:

  • Collecting and reporting rental income.
  • Communicating with the tenant.
  • Handling leasing for new tenants.
  • Lease expiration, tenant move-outs, and showing vacant units.
  • Coordinating property improvements and repairs with outside real estate professionals.

Which should you use?

While portfolio management is most commonly used in commercial real estate, it can also be utilized by individual investors, especially those with large residential real estate portfolios. However, an asset management company could benefit anyone who is unable to consistently review and analyze the performance of their real estate asset and determine the best strategies to improve income regardless of the number of investments they own. Though smaller investors will need to determine whether the income or size of their portfolio warrants the cost of hiring a professional asset manager.

Investors looking for assistance with the day-to-day management of a property should focus on finding and hiring a suitable property manager.

If you are able to consistently monitor your own portfolio, including the acquisition, disposition, and investment strategy in the relative market, then a professional portfolio manager typically isn't worth the cost. As your portfolio grows in size or your properties get bigger in scale, your need for a real estate manager may change. If you do feel you would benefit from real estate management, make sure to conduct due diligence on the manager and the firm before entering into a contract.

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