Advanced Property Management, Part IV: Property vs. Asset Management
“Hey, RRP. We just purchased a property out of foreclosure, and we know nothing about it.”
There’s few times more hectic in a property manager’s life than the moment that a client calls you with those words. You know, right away, that you’re going to be a busy manager for the next few days at best, because the list of tasks that need to be completed efficiently in order to fill in that missing knowledge is big, hairy, and has more than a few teeth. At the minimum, you’re going to have to:
- Research the title of the property and ensure that it is actually currently in the legal ownership of the client (it’s rare, but investors are occasionally sold fictitious zombie titles by unscrupulous criminals or improper titles by banks who illegally foreclosed before they actually had title to the home!),
- Uncover any liens currently on the property and how much the client will have to pay to clear them (often, there are several, especially if the home is in an HOA or other form of managed subdivision),
- Discover the state of any leases and associated tenants currently in the property,
- Investigate the status of the property’s utility and other basic bills, as well as the status of the property in the eyes of the State, the municipality, and any relevant community organizations/HOAs,
- Explore the quality of the neighborhood (if you’re not already familiar), including accessibility to major roadways, groceries, and other amenities; crime rates and types; local rent costs; and other issues,
- Assess the physical condition of the property and arrange for the proper cleanup of the grounds and structure and rehabilitation of the structure, and
- Re-key all of the locks, including any security systems, garage keypads, etc.
Eight years ago, the definition of “property management” would have included those last three points and no more. But today, a PM must be more than just a property manager if they want to thrive — they have to be an asset manager as well, and asset management is an entirely different ball game.
What’s the Difference?
Quite simply, a property manager’s focus is on the day-to-day business of keeping the rent coming in. That means they handle everything related to the rent, from finding the right tenants to keeping them around, from maintaining the property to keeping it safe, and from collecting the rent to evicting the non-payers. An asset manager’s focus is on the long-term goals of a client’s asset portfolio, and on what can (and needs to) be done in order to improve the performance of that portfolio over time.
Before the Great Recession, a property manager might offer their best advice to a client in terms of how a particular property can be addressed — but they would rarely if ever offer any form of service related to the overall investment quality of a client. Today, however, it’s becoming normal for a client to turn over responsibility for basically every aspect of that property’s existence to the PM the moment the ink is dry on the purchase papers.
It’s far beyond the scope of this post to teach a property manager asset management, even on the most basic level — but it’s important for every property manager who wants to stretch for the top of their field to know what that looks like. For today’s already-busy PMs, it means adding an entire new discipline to your toolbelt, and focusing on more than just this month’s rent.