When it comes to real estate, there are many aspects to take into consideration. This is especially true for real estate investors who own multiple investment properties. Therefore, real estate investment management is an essential aspect of real estate investing.
So, in order for you to get a better understanding of real estate investment management, we are going to dedicate this blog to the matter. First, we are going to define investment management and, of course, talk about the two types of it. Second, we are going to talk about the need for real estate investment management. Lastly, we are going to answer the question of what type of investment management you should go with.
Related: Become an Expert on Internal Rate of Return in Real Estate Investing
What is real estate investment management?
Real estate investment management is simply when you hire professionals to manage your investment property. These professionals are responsible for taking care of your property on financial and operational levels. Whether it is maximizing your profits or dealing with the tenants, it all falls into real estate investment management. However, you must know that there are two types of real estate investment management: property management and asset management.
Let us see what each of these types mean and what their areas of responsibilities are:
First: Property management
Property management is the part of real estate investment management that takes care of the day-to-day tasks associated with the investment property. These day-to-day tasks include but are not limited to:
Dealing with tenants: This is one of the most important areas of responsibility associated with property management. Dealing with tenants includes collecting the rent as well as dealing with requests and complaints in addition to ensuring that your tenants are not breaking the rules in the lease agreement as well as legal procedure such as eviction. Therefore, it saves you tons of time and energy as a landlord if you hire a professional property manager.
Marketing your investment property: Property management also includes advertising your investment property. Professional property managers are responsible for putting your investment property out on the market to attract clients.
Facility management: Facility management is an essential aspect of property management. This means that a property management firm is not only responsible for managing the property on the inside, but also on the outside. For example, basements, parking lots and playgrounds are all examples of facilities. Sure enough, if these facilities are managed well, they can maximize the return on your investment property.
The administrative aspect: The administrative aspect is all about paperwork. This is the part of property management that deals with official records and documentation. This is, in fact, the duty of a property manager. Professional property managers are supposed to keep records of reports and documentation required by the authorities. This will serve you in case of any legal issues as well as help you keep track of your own investment business.
Second: Asset management
Asset management is the other part of real estate investment management. However, unlike property management, asset management focuses on maximizing your profits as well as the value of your investment property over time. Therefore, an asset manager is responsible for putting together financial plans for the long term as well as coming up with strategies that minimize the costs while maximizing the return on investment.
Another area of responsibility for asset managers is the lease agreement. They are responsible for putting it together with the best terms that serve both you, as a real estate investor, and tenants in order to attract them. Moreover, financial reports are a part of asset management. An asset manager is responsible for providing you with reports on your investment property on a monthly, quarterly, and annual basis. Therefore, asset management is important for you to stay up-to-date with your property in terms of finances.
Related: Residential Real Estate Investing is the Best Investment Strategy There Is
When do real estate investors need to hire real estate investment management firms?
Just like any other business, you can choose to manage it yourself or let others do it for you. This is true for real estate investing as well. You can choose to manage your investment property yourself. However, eventually, you will need to hire real estate investment management firms if:
You have multiple investment properties, which makes it more difficult to manage them individually.
You are a new real estate investor and do not have a background in real estate investment management. In this case, you will need professional help.
Or, you do not have the time to do it because you are investing in real estate part time while having a career of your own.
These are the main reasons for real estate investors to hire investment management firms. After all, they are professionals who provide you with services in order to help you achieve your investment goals.
Related: How to Manage Multiple Investment Properties on Your Own
Which way to go with real estate investment management?
Whether you choose to go with property management or asset management, they both have the same goal: to maximize your profit. The only difference is that they have very different approaches to fulfilling this goal. Therefore, you, as a landlord, can rest assured that your investment property is taken care of. You can relax while they are making sure that your property is generating positive cash flow by maximizing your rental income.
However, there is an easy way to decide which way to go. The major factor that determines what investment management strategy to go with is your goal. If your goals are mainly financial, then an asset management service is the answer for you. But if you are looking for someone to take care of the daily operation of your property, then a property management firm is the way to go.
As you can see, real estate investment management is as important as other aspects of real estate investing. Therefore, hiring real estate investment management firms is a great idea for improving your rental income. It will make it much easier for you to accomplish your goals since you are dealing with professionals. Meanwhile, make sure you check out Mashvisor for more tips on real estate investing as well as becoming a successful real estate investor.