One of the biggest mistakes I see apartment and commercial real estate investors make is leaving their investment property in complete control of their property manager. Even the best property management companies will not look at things like the owner.
I have seen this literally cost investors thousands of dollars in lost cash flow and property value, so it is definitely a mistake you want to avoid.
In this article I want to discuss the importance of being an Asset Manager, rather than a Property Manager. First, let's define these two terms:
Focus is on maximizing return and property value for the investor(s).
Focus is on day-to-day management activities for a property.
"Think Like a CEO..."
If you want to maximize your returns as an investor, you must think like a CEO, and not a property manager. Your focus should be continually on how to maximize the return from a property and increase value.
I see a lot of investors that lose track of this, and leave things up to their property manager, thinking that is their job. It is not.
Here are the things you should be focused on as an Asset Manager:
1) Increasing Income
2) Reducing Expenses
3) Improving Property Value
4) In short, maximizing returns and property value.
Continually ask yourself questions, such as:
- How can we increase rents? Are all of our rents at market levels? Can we charge higher rent for preferred units, such as near a pool?
- Can we reduce our property taxes by protesting the assessed value? Can we reduce our insurance expense by changing companies? How can we reduce every single line item expense - even by a small percentage?
- How can we increase the value of the property? What improvements would maximize value?
None of these activities should be done at the cost of deferring maintenance or reducing the property value over time. As the CEO of your investment you need to see the big picture - whether it is a duplex or several hundred units.
Your property manager, on the other hand should focus on the day-to-day property operations to keep things running smoothly, such as:
1) Property Maintenance
2) Marketing and Rental of Units
3) Collecting Rents and Paying Bills
4) Enforcing Property Rules and Procedures
Good property managers will also perform activities that could be considered asset management, such as performing regular checks to verify market rents are maximized, testing marketing results, and finding ways to reduce expenses.
However, I would caution against leaving everything up to your property manager, because ultimately, it is your responsibility to increase your returns and property value.
By the way, if you liked this article, you will probably like my new report and video series, "The 7 Biggest Mistakes Investors Make When Buying Income Property."