Real estate investment management is essential to be successful in the real estate industry. Most real estate investors do at least a minimal amount of asset management themselves, but larger entities and experienced investors may enlist an asset manager to handle their investment portfolios. Essentially, real estate asset management is both a skill set and a career.

What exactly is real estate asset management, and what does a real estate asset manager do? Here’s a comprehensive guide.

What is Real Estate Investment Management?

Real estate asset management is the process of maximizing a property’s value and return on investment. But how exactly does one do that?

Generally, there are four areas of focus in real estate asset management:

It’s important to note that there’s a major difference between real estate asset management and property management. We’ll touch on that later.

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Using Real Estate as an Investment Asset

There are several different types of investment properties, including:

An investment property is really not so different than a stock or bond. You buy at a certain price with the expectation that you can sell for a higher price in the future.

However, real estate is a more complicated type of investment than your standard security. Real estate typically requires more time, effort, and patience.

For example, when you buy a stock, there’s little work you have to do after the initial purchase. Sure, you might watch the stock market and decide when it’s time to buy or sell, or maybe you’ll even participate in shareholder voting. But your stock’s value probably won’t be affected by lousy tenants, vacancies, or poor market growth. The real estate market has many nuances that, if improperly managed, can detract from the investor’s profits or even cause a loss of profit.

Investors who buy stocks or bonds seek either short-term profits—through dividends or penny stocking, or long-term profits—through appreciation and sale. There’s a similar dynamic in real estate investing.

Real estate investors seeking short-term profits might look for opportunities to buy rental properties or fix-and-flips. Real estate asset management would focus more heavily on reducing operational costs and increasing rental profits in this instance. Keep in mind that “short-term” is always relative when it comes to real estate.

Real estate investors seeking long-term profits might look for opportunities to buy properties that will significantly appreciate in value after a few or more years. In this instance, real estate management would place special emphasis on making upgrades to improve property value.

Both investment strategies require skills in market research and risk management.

What Does a Real Estate Asset Manager Do?

A real estate asset manager is someone who manages real estate assets for a client. Charles Weinraub, CEO at Handsome Homebuyer, says that “a real estate asset manager is the captain of any good real estate investment company. He or she is responsible for identifying hot real estate markets, trends, and taking advantage of those arbitrages while there is money to be made”. Clients who may need the services of a real estate asset manager can vary from:

The asset manager may be hired to handle all types of investment properties, including residential, commercial, mixed-use, and vacation rental properties.

A real estate asset manager typically has the following duties:

As you can probably tell, a real estate asset manager has comprehensive knowledge of the real estate industry. Real estate asset management can also be a lucrative career. According to Indeed.com, the average 2019 salary for a real estate asset manager was over $77,000 per year.

How An Asset Manager Chooses Investments

Asset managers often choose investments based on their specific area of expertise. Many asset managers specialize in a specific region or locality. Managers also focus on certain property types such as retail, office, industrial, or single-family and multifamily residential properties. The purpose of these specialization is to help asset managers decide which investments to take on quickly and efficiently.

That being said, asset managers still value a certain degree of diversification in portfolios. These professionals are often experts at the fundamentals of real estate analysis. These skills allow them to choose the best mix of commercial or residential properties, and the best markets to get involved in.

In larger real estate management firms, asset managers are more formally divided into certain specialities. In these cases, asset managers are typically able to work with an acquisition specialist when choosing investments. Specialists are more qualified to analyze investment types and can provide an asset manager with a more comprehensive overview of the potential investment value.

Real Estate Portfolio Management

A real estate asset manager helps the investor build a diverse portfolio of investment properties. An investor can benefit from a diverse portfolio in a couple of ways. First, a diverse portfolio can help an investor earn both short-term and long-term profits. Second, a diverse portfolio protects the investor in case one of their revenue streams falters.

The asset manager will suggest properties to invest in and allocate revenue streams from the investor’s other properties to finance new purchases.

The Difference Between Asset Management and Property Management

There’s a difference between a real estate asset manager and a property manager. The asset manager handles the overall financial strategy for an investment property. The property manager handles the daily operations of a rental property. They’ll typically handle such tasks as:

While a real estate manager drafts the terms of rental agreements, the property manager finds tenants who agree and want to sign a lease. While the asset manager chooses upgrades that will increase the property’s value, the property manager will call in the plumber when the toilet gets clogged.

Leonard Ang, CEO of iPropertyManagement, says one way to think of it is that an asset manager is more focused on profitability. According to Ang, “an asset manager is an expert on market value to give the ownership a better chance of increasing their returns.”

There may be some overlap in responsibilities. For instance, a property manager might be tasked with marketing a vacant property instead of the asset manager. These day-to-day responsibilities will depend on the client. However, for the most part, the asset manager is focused more on the business side while the property manager deals with operations.

In some cases, it might be necessary for an investor to hire both an asset manager and a property manager, especially if the investor has many rental properties. An asset manager might not have the time to keep tabs on each of the properties.

Summary

Real estate investment management is the process by which you maximize a property’s value and returns. Asset management is a necessary skill set for any professional real estate investor, but it may also be a good career. Investors often hire asset managers to oversee their portfolio of properties and devise strategies to boost their long-term value and profitability. An asset manager is a different role than a property manager. While the asset manager handles investment-related tasks, a property manager handles the daily operations of a rental property.

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