Commercial Real Estate Asset Management Vs. Property Management: What Passive Investors Need To Know

I remember the first time I truly learned the difference between asset management and property management, and the importance of each. At the time, I had built a small but growing portfolio of rental properties that I had purchased out of state.

I had interviewed multiple property managers and hired one to oversee my rentals. With a property manager in place, I figured, my job would be easy peasy. They would take care of everything, and I could just sit back and enjoy the ongoing cash flow.

Unfortunately, while it was extremely valuable to have a boots-on-the-ground team to take care of day-to-day operations, I soon learned that there was another layer of strategy and insight that my property management team needed.

In other words, they needed an asset manager – someone who could oversee the performance of the properties and strategize on things like whether and when to increase rents, whether pets should be allowed, whether we needed better signage and lighting at the properties, and more.

Each time I hopped on a check-in call with my property management team, I was essentially acting as an asset manager. I was thinking about the overall investing goals I had for the properties, as compared with the occupancy and performance of the properties, and directing the property management team on strategic decisions to make to improve the properties.

Related: How To Grow From Single-Family Landlord To Multifamily Millionaire

Both roles are extremely important – particularly when it comes to larger properties, and particularly in a shifting economic landscape like the one we’re currently experiencing – to ensure that the investment stays on track toward the original intentions and projections, and that strategic pivots are made along the way as needed.

When it comes to real estate investing – including investing passively in real estate syndications – understanding the roles and responsibilities of real estate asset management professionals and property managers is crucial.

These experts play an essential part in maximizing property value and return on investment. So, what do they do, and how do they work together? And most importantly, what do you as a passive investor need to know about asset and property management? Let’s find out!

Key Takeaways

  • Real estate asset management and property management are two distinct roles that work together to maximize returns on investment.

  • Asset managers focus on financial strategies while property managers handle daily operations like maintenance, rent collection, tenant communication, etc.

  • When selecting a real estate syndication team for investing with, consider their experience level, track record, and communication style.

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Understanding Real Estate Asset Management

As part of our asset management, we make regular visits to our properties.

 

Real estate investing plays a significant role in real estate asset management, a crucial aspect of the real estate industry, which focuses on maximizing property value and return on investment through strategic financial decisions in the real estate market, such as real estate investments, acquisitions, dispositions, and financing. Passive investors and real estate portfolios are a key component of this process.

This contrasts with property management, which is primarily concerned with the day-to-day operations and maintenance of properties.

The Role Of A Real Estate Asset Manager

A real estate asset manager is responsible for:

  • Overseeing the management of a real estate portfolio

  • Working with property management to optimize efficiencies, maximize NOI (net operating income), and reduce expenses

  • Overseeing the business plan for an asset, including any value-add components

  • Ensuring adherence to the budget, as well as projected occupancy, turnover, and expenses

  • Identifying potential investment opportunities

  • Acting as financial strategists to ensure the best possible return on investment for their clients

  • Managing the assets effectively

An asset manager has several key responsibilities, including:

  • Crafting an overall strategy for each asset

  • Reducing expenses and increasing income to improve asset value

  • Hiring and managing the property manager

  • Preparing, monitoring, and adjusting property financial projections and financing strategies

Key Strategies In Real Estate Asset Management

To ensure the success of an investment property, real estate asset managers employ several key strategies, such as diversification, market analysis, and optimizing property performance.

Diversification involves spreading investments across different asset classes, sectors, and geographic regions to reduce risk and maximize returns.

Market analysis is the process of evaluating current market conditions, identifying potential opportunities or risks.

Finally, optimizing property performance involves making strategic upgrades to the property to increase its value and maximize returns.

What Passive Investors Should Know About Asset Management

When you’re using a real estate asset manager to manage your own rental portfolio, the asset manager can be similar to personal financial advisors, helping to decide which properties to buy and sell based on the individual’s needs and optimizing the investment portfolio for the best possible returns.

However, when you’re investing passively in a real estate syndication, you may not have much direct contact with the asset manager overseeing the assets you’ve invested in. Nevertheless, it’s important for you as a passive investor to keep a pulse on the overall performance of the asset.

This is typically done through reviewing the monthly property updates and quarterly financial statements that the syndication team sends to passive investors. Be sure to review the occupancy numbers, trends, and business plan progress.

For the financial statements, while you don’t need to go in depth with every number and line item, it’s important to review the overall numbers to see if they’re in line with original projections.

Whenever you’re in doubt, be sure to reach out to the syndication team you’ve invested with, to gain further clarity on the performance of the asset and to share any in-depth questions you may have for the real estate asset manager.

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The Goodegg Approach To Stellar Asset Management

The 4 cornerstones of Goodegg Asset Management: People, Price, Product, and Promotion

With the continuing shifts in the market, we continue to focus on asset management with our partners by evaluating each property’s performance, including the market and its competitors, each and every week. The markets are constantly changing, and it is vital to review market data carefully and regularly in order to make the necessary adjustments to stay competitive. 

Our focus has always been and will continue to be on perpetual improvement. By focusing on our signature 4 P’s of Asset Management – People, Price, Product, and Promotion – we break down each category in an organized approach, which sets Goodegg properties apart at this critical time. 

It takes a subpar performance in just one of these categories to negatively impact a property’s performance, which is why we work hard to maintain excellence and balance across all 4 categories.

People

This includes our on-site manager, leasing staff, maintenance, and grounds.

Is the property managed effectively?

  • Leasing

  • Maintenance

  • Grounds

  • Marketing

  • Ready apartments

Price

Are we competitive within our market?

  • Pricing 

  • Concessions and special offers

  • Marketing and advertising

  • Comparable offers

  • Consistent follow-up

Product

Product includes the assets at hand, which for us are largely apartments and hotels.

  • Ready apartments or rooms

  • Cleanliness, including both looking and smelling good

  • Well-maintained

  • Unit type availability

Promotion

Marketing & advertising

  • Corporate outreach

  • Advertising – local and online

  • Referral programs

  • Apartment locators

Our top priority is to preserve and protect your capital. As part of that, our asset management goal is to provide the highest quality apartments and hotel rooms at the most competitive prices. Constantly checking on the four P’s to ensure each section is working as close to its optimum level as possible gives each asset the opportunity for the best possible outcome.

When considering whether and whom to invest with, it’s of the utmost importance that you get a good sense of track record when it comes to asset management, so you can see whether a team can actually deliver on their projections.

As you’ll see with the Goodegg Portfolio, even in the face of rising interest rates and economic uncertainty, the assets remain steadfast and resilient, and we continue to beat nearly all pro forma metrics in our current portfolio.

While we are not immune to the rising interest rate environment and shifting lending requirements, we are working hard behind the scenes to explore and exhaust all potential options that we believe will minimize the impact and provide long-term stability to all assets.

It’s important to note that the performance of all assets in the portfolio remains strong. In fact, all our properties have exceeded market occupancy averages when compared to their peers within the last quarter.

Overall, the Goodegg Portfolio continues to outperform their respective markets in terms of occupancy and leased positions.

Check Out Our Track Record Of Success

Curious whether we can actually do what we say we're going to do? Compare projected versus actual returns in all the deals we've exited to date.

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Delving Into Property Management

A property manager inspecting progress on renovations at a commercial property

 

Property management, on the other hand, is all about taking care of the day-to-day operations, maintenance, and tenant relations of residential properties. It involves ensuring that the building runs smoothly, tenants are satisfied, and the property is maintained in good condition.

It requires a lot of attention to detail and a good understanding of the local laws and regulations.

Functions Of A Property Manager

For large commercial real estate properties, property managers are typically on site

 

A property manager’s primary responsibilities include:

  • Leasing

  • Rent collection

  • Maintenance

  • Tenant communication

  • Ensuring the property is always rented

  • Dealing with evictions when necessary

  • Maintaining the property to maximize its value and leasing income.

In the realm of commercial real estate, the purview of property management typically encompasses maintenance, gathering rent, and staff oversight. Property managers hold a pivotal role in upholding and enhancing property value by making sure it remains in proper condition and tenants are satisfied.

What Makes For Effective Property Management

Efficient budgeting, prompt maintenance, and robust tenant relationships are the components of effective property management. By creating a budget tailored to the needs of the property and its tenants, monitoring and adjusting it as needed, a property manager can ensure efficient budgeting.

Timely maintenance means regularly checking up on the property and addressing problems promptly, ensuring that the property remains in good condition. Building trust and communication between the property manager and the tenants is vital for maintaining strong tenant relationships, leading to a more comfortable and secure living environment.

Passive Investors: How To Know The Property Management For Your Investment Is Effective

Passive investors can gauge the effectiveness of their investment’s property management by considering factors like tenant satisfaction, occupancy rates, and the property’s overall condition. These indicators can provide valuable insights into how well the property is being managed and whether the property manager is doing their job effectively.

In addition, passive investors can assess the property management team’s financial management, such as budgeting, rent collection, and expense tracking. They can also evaluate the team’s communication with property owners, tenants, and service providers to ensure that everything runs smoothly and transparently.

As a passive investor, you can also secret shop the property if you’re in the area, to walk the property, talk directly to the property management team, and even meet current tenants.

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Comparing Real Estate Asset Management And Property Management

Discussing the performance of our real estate portfolio with our Director of Asset Management

While real estate asset management and property management share the common goal of maximizing property value and investor returns, they have distinct roles and responsibilities, particularly as it relates to the overall real estate syndication and returns to investors.

Asset management places more emphasis on financial strategy, whereas property management revolves around daily operations.

Similarities Between The Two Roles

Regardless of their distinct areas of concentration, both real estate asset managers and property managers partake in property management aimed at maximizing value and profitability. They both require knowledge of property maintenance, tenant relations, and lease agreements, and they both play a part in financial management, such as budgeting, rent collection, and expense tracking.

Effective communication and coordination with property owners, tenants, and service providers are essential in both roles. This ensures that everything runs smoothly and that the investment property is managed in a way that meets the objectives of the passive investors.

Key Differences And Distinctions

The chief distinction between real estate asset management and property management is rooted in their respective areas of specialization. Asset management focuses more on financial strategy, such as capital upgrades and optimizing return on investment. The real estate asset manager has their eye on the overall business plan, as well as larger macroeconomic factors, to ensure the investment moves forward smoothly and efficiently while mitigating risk.

In contrast, property management is more concerned with daily operations, like maintenance, collecting rent, and ensuring tenant satisfaction. They are the boots-on-the-ground team that serves the tenants on a day-to-day basis.

This difference in focus means that:

  • An asset manager is more involved in the business side of things

  • A property manager is responsible for the property’s operations

  • The asset manager looks after the financial strategy for an investment property

  • The property manager handles the daily running of a rental property

How Real Estate Asset Managers And Property Managers Collaborate

Discussing real estate asset management and property management with our team

Effective collaboration between real estate asset managers and property managers is vital to ensure the success of an investment property. This involves:

  • Aligning their goals and strategies

  • Communicating and coordinating regularly

  • Keeping passive investors informed about property performance and management decisions

Aligning Goals and Strategies

Clear communication and a good understanding of each role’s responsibilities are key for aligning goals and strategies between asset managers and property managers. They collaborate to generate consistent rental income, maintain or increase property value, and drive overall value for the investors.

By implementing cost reduction measures, addressing deferred maintenance issues, and identifying new methods to create longer-term revenue potential for the properties, the real estate asset manager and property manager can align their strategies and work together to maximize the value of the real estate assets and achieve the highest possible property value and return on investment.

Communication and Coordination

Effective collaboration between real estate asset managers and property managers requires:

  • Regular communication and coordination

  • Interpersonal skills to handle tenant interactions, work with leasing agents, and negotiate with investors

  • Use of centralized communication portals to stay up-to-date and foster strong teamwork

Regular communication and coordination help ensure that the investment property is managed in line with the passive investors’ goals, allowing both asset and property managers to work together effectively to maximize the property’s value and return on investment.

Keeping Passive Investors In The Loop

Maintaining trust and transparency necessitates keeping passive investors updated on property performance and management decisions. Real estate asset managers and property managers have a responsibility to provide timely and clear updates on investments to keep investors in the loop and ensure that they are aware of any changes or potential opportunities.

Consistent communication and updates, including regular calls or meetings to go over the property’s performance and financials, can help passive investors stay informed and confident in the management of their investment properties. Providing reports and documentation is also an essential part of keeping investors up-to-date and informed about the progress of their investments.

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Choosing The Right Real Estate Syndication Team For Your Investing Goals

Be sure to find a real estate syndication team whose values align with your own

Choosing the correct real estate syndication team is crucial for realizing your investment goals. Consider the following factors when selecting a team:

  • Experience: Look for a team with a proven track record of success in real estate syndication, particularly in the assets and markets you’re looking to invest in.

  • Track record: Research the team’s past performance and success in managing investments, and look to see how their actual realized returns measure up to their projected returns.

  • Communication style: Ensure that the team communicates effectively and keeps you informed about your investments.

  • Reviews: Research other investors’ experience working with that syndication team, to see whether others have had a positive experience.

By considering these factors, you can partner with a team that can manage your investments effectively and help you reach your objectives.

Related: 101 Questions To Ask Before Investing In A Real Estate Syndication

Factors To Consider

Consideration of experience, track record, communication style, and reviews is crucial when choosing a real estate syndication team. An experienced team with a strong track record can demonstrate their capacity to manage investments effectively and tackle any problems that may arise.

In a shifting real estate landscape like the one we’re currently experiencing, that track record and experience weathering previous storms will make the difference between investments that meet or exceed projections and investments that looked good on paper but in reality end up being a complete flop.

The communication style of a real estate syndication team is also essential, as it gives you insight into how the team interacts with investors and handles communication. Make sure to choose a team that is transparent, responsive, and keeps you informed about your investments.

Take note of whether they take time to thoughtfully respond to your questions, offer to hop on a call with you, and follow through with what they say they’ll do. If you don’t hear back, or if you receive incomplete, disrespectful, or curt responses, that could be a red flag showing you the less-than-ideal communication you might receive throughout the life of the investment.

Tips For Selecting The Right Syndication Team To Invest With

Selecting the right syndication team to invest with requires thorough research into their past performance, seeking referrals, and evaluation of their investment strategy. Networking with other investors and asking for referrals from those who have had good experiences with the team can help you find a reliable and reputable syndication team to partner with.

When evaluating a real estate syndication team’s investment strategy, take a close look at the properties they manage and do your homework on the syndication team to ensure they have a history of success. This will give you confidence in their ability to manage your investments effectively and help you achieve your investing goals.

Summary

In conclusion, understanding the roles and responsibilities of real estate asset managers and property managers is vital for anyone involved in real estate investing, including both passive and active investors.

While asset managers and property managers have distinct roles, they share the common goal of maximizing property value and investor returns. Collaborating effectively, aligning their goals and strategies, and keeping passive investors informed are essential aspects of successful real estate investment management.

By choosing the right real estate syndication team for your investing goals, you can ensure that your investments are managed effectively and reach their full potential.

Frequently Asked Questions

What is the difference between asset management and property management in real estate?

Asset management and property management in real estate are two distinct roles: asset managers focus on maximizing a property’s value for investment purposes, while property managers oversee the physical structure and operations.

In commercial real estate, both roles are critical in ensuring the health of the asset, particularly with shifts in the financial landscape.

What skills do real estate asset managers need?

Real estate asset managers need strong financial analysis skills to assess property performance, evaluate investment opportunities and make data-driven decisions. They should also have great communication and analytical skills in order to analyze asset performance and work closely with property managers to oversee ongoing asset performance.

Furthermore, understanding financial statements and conducting investment property analysis is also essential for success as an asset manager, as they are responsible for maintaining the health of the asset.

What are real estate asset management fees?

Real estate asset management fees are recurring fees charged to the property partnership, typically between 0.5 and 3 percent of the total monthly gross income. This fee covers the cost of ongoing portfolio management within a particular investment.

As a passive investor, you don’t pay directly for this fee (i.e., you won’t be charged a monthly fee on top of your investment); the asset management fees are already included in the underwriting and thus are already factored in.

Check Out Our Track Record Of Success

Curious whether we can actually do what we say we're going to do? Compare projected versus actual returns in all the deals we've exited to date.

download track record

 

Next Steps

If you’re looking to invest in real estate syndications with strong asset management practices, we invite you to join the Goodegg Investor Club, so we can keep you in the loop on opportunities to invest alongside us.

You can also check out our open deals page to learn more about our current or upcoming opportunities.

Learn More

If you’re not yet ready to invest but are curious about how all of this works, we invite you to dip your toe in the water with us through our free 7-day email course – Passive Real Estate Investing 101 – or to get a copy of our book – Investing For Good.

To learn more about us and our experience, be sure to download a copy of our track record, which shows the projected and actual returns we’ve achieved across all the deals we’ve exited to date.

Connect With Us

If there’s ever anything we can do to help you on your journey, feel free to email us at [email protected] or call / text us at (888) 830-1450

Want To Invest With Us?

You're invited! Join the Goodegg Investor Club to get access to our open investments and to stay in the loop on upcoming opportunities.

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