While the titles sound familiar, there’s a difference between property management and asset management. If you’re ready to dive into purchasing property as an investment, it’s important to know the distinction between them and how each is essential to your success.
What Is Property Management?
Property management is the management of day-to-day operations for properties, such as overseeing staff, maintaining the property, and collecting rent. Property managers are often on-site to perform these tasks or have a team perform these duties for them, depending on the size of the property management firm. Examples of responsibilities include:
- Managing risk associated with the property.
- Leasing or renting the property.
- Performing or supervising the maintenance of the property.
- Collecting rent and any associated fees.
- Handling and correcting tenant issues and complaints.
- Enforcing property rules and regulations.
- Managing and collaborating with contractors and staff.
What Is Asset Management?
Conversely, asset management refers to the financial aspect of managing the property. It doesn’t include the financial aspects of maintaining the property but focuses on managing it as an investment. Asset management involves negotiating with lenders, handling any legal or tax issues, and acquiring and disposing of property to maximize long-term profitability. An asset manager has responsibilities like:
- Securing commercial financing.
- Performing comprehensive due diligence throughout the property acquisition.
- Collaborating with investors to develop the encompassing investment strategy and proactively handling any issues.
- Developing and executing marketing strategies.
- Decision-making and investor advisement regarding any tax and legal implications related to owning and running the property.
- Working with investors to calculate how long to hold the property for maximum return.
- Assisting appraisers in accurately determining the value of the property.
- Performing analysis to determine how the property fits into the larger scheme of the investor’s real estate portfolio.
- Establishing a slush fund for improvements and replacement.
As expected, the business plan for commercial properties is determined long before the property is purchased. However, if new information is uncovered during the acquisition process, an investor may modify the plan. While the decisions are ultimately up to the investor, a good asset manager will find the best ways to maximize the value of each transaction and advise them accordingly.
An asset manager is usually most involved in property acquisition when an investor wants to purchase a property they’ll hold for an extended period. The asset manager will then determine any repairs or renovations that would need to be done to maximize the return on investment. They’ll establish a marketing strategy to ensure full occupancy of the property while procuring the highest possible rent or lease. The asset manager also advises the investor on the proper holding time to maximize profits in both returns and eventual resale.
Working With Investment Portfolios vs. Working With Properties
With asset management, the manager seeks to advise on decisions that will give the best overall return on investment throughout the portfolio instead of what’s best for any individual property, although those goals often overlap. Asset management is very much like being a personal financial adviser. These managers help the investor determine what properties they should sell or buy based on their needs by considering several factors. These factors include how active the investor wishes to be in the process and how the financial situation, background, work-life, and family will influence their needs as a property investor.
Property management isn’t concerned with long-term overall portfolio health or the macro view of the investor’s portfolio. Property management functions on a microscale, handling all the day-to-day operations, ensuring the property is in excellent condition, and handling all repairs and tenant issues.
Are the Roles of Property Manager and Asset Manager Blending?
We’ve established that the role of a property manager differs significantly from the role of an asset manager. However, there are several scenarios where there’s an overlap and blending of the roles and responsibilities. This blend occurs when a property manager takes on some of the responsibilities typically entrusted to an asset manager.
One example would be having the property manager have an input in the marketing and financial management of the property they’re managing in addition to the routine tenant management and repair and maintenance responsibilities. This could result from an asset manager expecting more from a property manager to make their job easier. With the influx of software and other financial tools, it’s easier for a property manager to absorb some of these responsibilities.
Redefining the Roles
While the roles are beginning to blend a bit, they’re not becoming one role. Instead, it’s more akin to an evolution of the roles. It’s advantageous for the property manager to understand how the property fits into the grand scheme of things. That way, they can tailor the day-to-day decisions, such as renovations, repairs, lease/rent establishment, and tenant management, to fit the big picture.
Being a part of this bigger picture through the marketing of the property and handling the lower-level financial aspects of the property allows a property manager to understand where the property fits. They also know how to help by maximizing the viability of the property as an individual entity and by maximizing its place in the portfolio. It’s a natural progression with the advanced technology and tools that allow automation of the more menial tasks a property manager would typically perform, such as rent collection, reporting, building data updates, and renewing leases.
With the extra time, property managers can absorb more responsibility that an asset manager would typically undertake. This frees up some time for the asset manager to handle a larger portfolio or more responsibility within the portfolio management. More can be accomplished with fewer human resources, allowing for an expansion of services.
Castle Development Group offers property management services that consider the asset management portion of your investment. If you’d like to learn more about what we can do for your investment portfolio, contact us today at 817-337-3433 or via our secure online form. A team member would be happy to answer any questions you may have on property management or any other service we provide.