Real Estate Concepts – July 30, 2024
Category: Real Estate Concepts
In this article:
- Real Estate Asset Management Definition
- The Evolution of Passive Real Estate Investing
- Real Estate Asset Manager Responsibilities
- Real Estate Asset Management vs. Property Management
- Commercial Real Estate Asset Management
- What is a Real Estate Asset Manager?
- Important KPIs for Real Estate Asset Managers
- The Bottom Line
- FAQs — Real Estate Asset Management
Real Estate Asset Management Definition
Real estate asset management involves analyzing real estate investment assets to develop economic strategies that mitigate risk and maximize returns. This process includes monitoring performance and making forward-looking decisions (such as value-add improvements, buy, sell, hold, refinance, etc.) on behalf of investors to increase property values and pursue the best risk-adjusted returns.
Asset management is a critical step after an investment decision. In passive real estate investing, the quality of asset management can significantly impact returns.
The Evolution of Passive Real Estate Investing
Passive real estate investing has evolved significantly over the past decade, offering more opportunities for individual investors. Advances in technology and the rise of “wealthtech” platforms have democratized access to commercial real estate (CRE), allowing self-directed accredited investors to participate in lucrative deals without the burdens of direct management.
Platforms like EquityMultiple offer diversified, structured options for passive investing, including:
- Short-term notes based on real estate
- Real estate private credit (debt investments)
- Preferred equity real estate investments
- Private funds, including REIT-structured funds
Each platform may have its unique operating model and investor protections, so conducting due diligence is essential.
Real Estate Asset Manager Responsibilities
Real estate asset managers develop and execute economic strategies on behalf of investors, managing portfolios and making adjustments based on market conditions. Their responsibilities typically include:
- Sourcing lucrative real estate investments
- Reducing operational, maintenance, and closing costs
- Forecasting and mitigating associated risks
- Constructing a sound financial plan for each asset
Real estate asset managers ensure that the properties within a portfolio are well-managed and continue to generate significant returns over time.
Phases of Real Estate Asset Management
- Acquisition Phase: Crafting an economic strategy aimed at maximizing returns.
- Holding Phase: Monitoring the health of the investor’s asset and navigating through legal requirements.
- Disposition Phase: Determining the best course of action when or if the asset is sold, and facilitating cash flow into a new asset.
Real Estate Asset Management vs. Property Management
| Real Estate Asset Management | Property Management |
| Create and apply financial strategies to assets | Screen potential tenants and manage occupancy |
| Generate cash flow reports based on market trends | Collect rent and manage lease agreements |
| Communicate consistently with sponsors | Work with contractors to maintain property conditions |
Asset managers handle the economic strategies and financial health of assets, while property managers focus on day-to-day operations and tenant management.
Commercial Real Estate Asset Management
For sponsors managing large commercial properties like multifamily apartment complexes, asset managers are crucial in updating investors on asset performance and overseeing KPIs to maximize returns. They analyze rent rolls, lease-up strategies, and other elements of the business plan to ensure everything is on schedule and as planned.
What is a Real Estate Asset Manager?
A real estate asset manager performs tasks such as:
- Analyzing market data and trends
- Developing detailed business plans
- Maximizing portfolio returns
- Monitoring and reporting financial performance
- Managing on-site property management teams
- Evaluating and executing value-add opportunities
At EquityMultiple, asset managers work closely with sponsors throughout the investment lifecycle to protect investor interests and pursue the best outcomes.
Important KPIs for Real Estate Asset Managers
Real estate asset managers track several KPIs to measure performance and guide decision-making:
- Net Operating Income (NOI): Total income minus operating expenses.
- Occupancy and Vacancy Rates: Assesses property performance against market averages.
- Tenant Turnover: Includes lease renewal rate, turnover time, and acquisition cost.
- Certificate of Insurance (COI) Compliance: Ensures compliance and mitigates risk.
- Work Order Efficiency: Measures completion time, submission methods, tenant satisfaction, and productivity.
The Bottom Line
Real estate asset managers play a vital role in helping investors maximize returns and mitigate risks. Their expertise and strategic management are essential for the success of real estate investments.
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FAQs — Real Estate Asset Management
Q: What type of asset management does EquityMultiple do on behalf of investors?
A: EquityMultiple employs an in-house asset management team that works closely with sponsors to maximize investor returns and mitigate risks. Asset managers monitor the financial health of each investment, provide regular updates, and intervene when necessary to protect investor interests.
Q: How are asset management fees typically structured at EquityMultiple?
A: EquityMultiple generally charges low fees of 1% or less to investors, with some offerings being fee-free. Specific fee details are provided in each investment product’s associated documents.
Q: What type of asset management do real estate crowdfunding platforms provide?
A: Real estate crowdfunding platforms offer varying degrees of asset management. Some have dedicated teams, while others provide minimal oversight. It is crucial to understand the level of asset management offered by each platform before investing.
For more information, visit EquityMultiple.com or contact our Investor Relations Team.
About the Author
Timothy Shaw
Timothy Shaw is a Founding Partner at The Stream Group. Leveraging his broad experience in real estate, he provides strategic guidance and advisory support. His background includes multifamily syndications, distressed asset acquisition, and serving as a licensed real estate salesperson in Ohio. At The Stream Group, Tim focuses on ownership and investment strategies, ensuring the firm’s long-term growth and vision.
Before his real estate career, Tim served as a lieutenant in the fire department. His career in public safety allowed him the opportunity to serve in many roles, including firefighter, flight paramedic, hazardous materials technician, and certified fire safety inspector. This background instilled a deep commitment to service and integrity, values he brings to his work with investors, tenants, and team members.
A graduate of the University of Cincinnati with a degree in Fire Science Engineering, Tim is dedicated to creating an environment where systems and data drive success. He admires Warren Buffett’s investment philosophy: “When others are greedy be scared, when others are scared be greedy.”
Tim is married with two children and enjoys traveling with his wife. They spend their free time at their second home on Amelia Island.