There is no success in real estate with proper real estate management. Most real estate investors do some sort of asset management themselves but many large entities and expert investors usually hire asset managers who take care of the whole investment portfolio. Asset management is both a skill and a career.
In this guide we will discuss what asset management in real estate means and what are the duties of a real estate manager. This is your comprehensive guide to learn all about the topic and familiarize yourself with the concept of asset management.
What is Real Estate Asset Management?
The process of maximizing the property’s value and Return on Investment (ROI) is known as real estate asset management. Real estate asset management generally has four focus areas and they are discussed below:
Finding the Highest/Most Consistent Revenue Sources:
It always feels good to find a property that has huge potential. If you are able to find a property that looks promising and can deliver some solid returns, you have hit the jackpot. As much as these types of avenues are important, a constant source of revenue is equally important. Expert real estate investors look for properties that can offer the highest streams of revenue.
Reducing Expenditures: Managing a property that you own can be an expensive avenue. Closing costs, maintenance, operations costs and taxes can accumulate and you might be looking at a significant amount. Lucky for you, there are several methods to reduce the cost of a property. For example, secure loans with good rates, fix and flips and best-value contractors are some good options to reduce the expenditures.
Risk Management: Investment of any type doesn’t come without risks and real estate is no exception. But real estate properties are more riskier than others. Containing or minimizing the risk is very important for any successful real estate venture. Asset management is not complete without proper risk management.
Portfolio Building: In a perfect world, the more you invest the more profit you earn. Real estate asset management is all about expanding and diversifying your portfolio by taking a smart approach.
Using Real Estate as an Investment Asset
There are various types of investment properties. Some of them include:
- Vacation Rental
On the very basic level, a real estate property resembles a bond or stock very closely. You buy a property at a certain price with the expectation that it will appreciate in the future and you will be able to sell it with a profit.
However, as compared to standard security, real estate investment is quite complex. It demands and requires more patience, effort and time. For example, after buying a stock you don’t have to do much. Sure, you have to keep an eye on the price of the stock to see the progress but other than that there is nothing much that you can do.
Your stock’s value is not affected by vacancies, poor market growth and lousy tenants. The real estate market has tons of such nuances and if you don’t manage your property efficiently, you can incur some very huge losses.
What Does a Real Estate Asset Manager Do?
A person or entity that manages real estate assets for a client is known as a real estate asset manager. Clients that might need services of a real estate asset manager can be anyone from the following:
- Private Company
Asset managers can be hire to manage any type of property whether it’s residential, commercial, industrial or a mixed-use.
Typically, asset managers in the real estate sector are expected to perform the following duties:
Managing Cash Flow: Many real estate investors are looking to earn a steady cash flow in order to finance their investments, boost their monthly income or pay off their mortgage. This cash flow is usually generate by rent payments from commercial or residential tenants. Asset managers are expect to bring efficiency to the whole process so the cash flow remains constant.
Find Lenders: Investors might need financiers to purchase or update a property. Asset managers help by finding the suitable lenders.
Assisting in Property Transactions: Asset managers help with all the nuances that are a part of purchasing or selling any property.
Negotiate Property Leases and Agreements: Asset managers help draft agreements and leases for investors. Asset managers draw up agreements and leases based on the mutual understanding and agreement of both owner and tenant.
Asset Marketing: Asset management might also be task with advertising the property if the owner intends to sell it. Creating a listing and finding suitable realtors come under the duties of a real estate asset manager.
Improving Property’s Values: Asset managers are responsible for taking steps that can help improve the value of a property. This is something very important for asset managers who are working for fix-and-flip investors.
Conducting Market Research: Asset managers need to have good market research skills. Asset managers closely study market trends and predict any ups and downs. These up and down trends let investors know what to expect in terms of property prices among other things.
Making Financial Projections: Asset managers study an investors portfolio and then make predictions regarding the future revenue.
Developing a Budget: The real estate asset manager will develop a budget for expenses and future investments.
Developing/Revising a Financial Strategy: The real estate asset manager will develop a strategy to achieve whichever financial goals the investor desires.
As it can be seen from the above points that a competent real estate asset manager needs to have a comprehensive knowledge of the real estate market. It can be a very lucrative career option and asset managers rank among the top earners in the United States.
The process of maximizing a property’s value and returns is known as asset management. Asset management is crucial to be successful in the real estate industry. As a career choice, asset management offers many unique benefits and can be a lucrative option for those who have sufficient knowledge of the real estate world.
Investors hire asset managers to manage their holding and help them devise strategies that bring efficiency to the whole process. An asset manager is different from a property manager where the former deals with investment-related tasks and the latter with day to day operations of the property.
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