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Many people confuse the terms 'Asset Management' and 'Property Management'. Both are important aspects of owning and managing real estate, but the two are quite different.
This guide covers the basics of both roles and the five main differences between the two.
Fundamentals of Asset and Property Management
What is asset management in real estate?
Real estate asset managers manage real estate portfolios on behalf of investors. This includes everything from big institutional investors to small family offices and individuals.
Asset management's objective is to generate the best possible return on investment (ROI) for its clients through a mix of active and passive strategies. This may include renovating the property, renting it to tenants, or selling it in due time.
Asset managers are in many cases responsible for financial reporting and performance measurement to demonstrate portfolio performance to clients.
What is property management?
Property managers are in charge of managing the day-to-day operations and maintenance of the property. This includes anything from small residential areas to large commercial areas.
The main objective of the property manager is to ensure that the property is well maintained, runs smoothly and reaches its peak potential. This may include performing repairs, collecting rent, and responding to inquiries from tenants.
Five Key Differences Between Asset Management and Property Management.
Here are the five key differences between Asset Management and Property Management.
1) The Tasks and Responsibilities
Unlike common belief, the responsibilities of each are very different. As stated previously, the main focus of the asset managers is to achieve the highest possible return on investment for their clients. On the other side, a property manager's primary focus is to maintain the property and manage the day-to-day operations.
Asset managers are commonly responsible for financial reporting and performance measurement, the property management duties include tasks such as repairs and rent collection.
2. Their Goals & Budget
An asset manager's primary goal is to manage and increase the property's value with a focus on owner ROI. They determine whether to keep investing in a property or sell it based on the real estate market.
Property management companies, on the other hand, maintain and enhance the value of the managed properties by efficiently maintaining the condition of the properties. Their aim is to help owners, tenants, and landlords find cost-effective solutions for managing their properties.
Property managers make important financial decisions related to property ownership, but property managers are often given a budget or fixed monthly fee to work within.
3. The Professional Industry
It is important to keep in mind that asset management is not limited to real estate investments but applies to all types of assets. As such, a lot of asset managers come from a financial background and are trained in financial analysis, real estate markets and real estate investment management rather than residential property maintenance.
On the contrary, property management is the branch of the real estate industry that specializes in the maintenance, management and operation of residential and commercial properties. Many property managers hold property licenses and are trained in various aspects of property management from marketing, leasing to repairs and maintenance.
4. Who Needs Them?
Asset Managers work directly with property owners and realtors to manage specific property portfolios. They are employed by an individual or company to manage their real estate investment.
So, if you own an investment property or are considering buying an investment property, you may need to hire an asset manager.
On the other hand, property managers usually have direct contact with building residents and owners. Landlords, tenants and vendors will contact them to assist in the day-to-day management of their property.
While some homeowners may choose to manage their own properties, most end up hiring a property manager to handle the time-consuming chores and repairs that come with it.
5. Who Can They Hire?
Property managers often hire construction staff. This may include maintenance staff, front desk staff and various other contractors. In addition, they can hire vendors that provide services such as landscaping, snow removal and trash removal.
On the other hand, asset managers usually hire realtors to help them buy and sell real estate. They might use the services of appraisers, home inspectors and attorneys.
Both Asset Managers and Property Managers must be familiar with the real estate industry, but they focus on different areas and employ different types of professionals to help them in their work.
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