Updated: Jul 23, 2019
Real estate investing is attractive because it has been deemed one of the most consistent and tax-advantaged sources of "passive income". However, it is not long before we learn that direct investment in real estate comes with much more responsibility than the word "passive" might suggest. New owners of investment property quickly discover that there are a ton of responsibilities beyond daily operations that are not handled by the traditional property management business model. In order to achieve the expected returns many owners have underwritten, they are finding themselves deeply involved with issues concerning capital improvements, vendor negotiations, tenant issues, record management, compliance management, insurance claims, and risk mitigation.
What does an Asset Manager do?
Asset management services close the gap of responsibilities between the investor and property manager, allowing you to maintain a general partner status in your real estate investments while working as hard as a limited partner would on the investment. Use this freedom to focus on further acquisitions or to simply relax and enjoy your returns! A good Asset Manager ensures the value of your property is being enhanced while increasing your cash returns.
Tactically they will perform functions such as:
- Develop a business plan and strategy
- Financial forecasting
- Cashflow planning
- Tax planning
- Legal compliance
- Mitigate liability and risk
- Manage corporate and property records
- Compile shareholder statements and annual reports
- Plan and negotiate capital improvements
- Insurance claims
- Interface with and drive performance from property manager to:
- Reduce expenditures
- Maximize rates and revenue sources
Third-party Asset Management consultants can be hired or some larger property management companies may provide the service in-house. In many larger syndicated acquisitions, the General Partner will provide the service for 1% to 2% of gross collected rents. A paltry sum for the peace of mind you gain by knowing someone is working to execute the business plan in order to meet your projections.