Property Management vs. Asset Management in Commercial Real Estate
When it comes to commercial real estate investing, property managers and asset managers may have similar titles, but they have distinctly different roles. A property manager generally focuses on a property’s everyday operations, like maintenance, rent collection, and managing staff. Property managers often work onsite, but not always. In contrast, asset managers are more involved in the financial management of an investment property, including managing tax and legal issues, negotiating with lenders, and managing both the acquisition and disposition of a property in order to maximize long-term profitability.
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- Property Managers Work With Individual Properties, Asset Managers Work With Portfolios
- Are The Roles of Property Manager and Asset Manager Beginning to Blend?
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Property Managers vs. Asset Managers: What’s The Difference?
When it comes to commercial real estate investing, property managers and asset managers may have similar titles, but they have distinctly different roles. A property manager generally focuses on a property’s everyday operations, like maintenance, rent collection, and managing staff. Property managers often work onsite, but not always. In contrast, asset managers are more involved in the financial management of an investment property, including managing tax and legal issues, negotiating with lenders, and managing both the acquisition and disposition of a property in order to maximize long-term profitability.
To break it down, property management often includes duties such as:
Renting and leasing the property
Property risk management
Property and facility maintenance
Addressing and correcting tenant problems
Collecting rent and other charges
Collaborating and managing property contractors and staff
Enforcing property regulations and rules
In contrast, asset management generally involves responsibilities including:
Conducting thorough due diligence during the property acquisition process
Securing commercial financing and negotiating with lenders
Creating and implementing marketing strategies for a property
Working with investors to determine return hurdles and overall investment strategy
Working with appraisers to determine property value
Helping investors determine the ideal holding period to maximize returns
Setting aside funds for replacement reserves/capital improvements
Analyzing a property as one part of an investor’s larger real estate portfolio (and strategizing appropriately)
Making decisions and advising investors regarding the legal and tax implications of property ownerships
In general, business plans for commercial properties are established well before a property is actually acquired, but may be modified during the acquisition process and holding period as new information is learned. Effective asset managers are generally looking for the best ways to advise their clients on how to add the most value during each transaction, however, it is the investors themselves that usually make most of the major decisions.
While it may seem counterintuitive, asset managers often are the most involved in investment planning and analysis when investors buy stabilized properties that they wish to hold onto for the long term. A qualified asset manager will perform many of the functions mentioned above, such as setting marketing strategy to obtain the highest level of commercial rent (while striving to retain full occupancy), determining if rehabilitations/renovations will provide a worthwhile return on investment, and helping an investor decide if a holding period should be shortened or extended to maximize sale price and overall returns.
Property Managers Work With Individual Properties, Asset Managers Work With Portfolios
On a higher level, portfolio managers may manage a large portfolio of real estate assets for an investor, so their decisions may not always reflect what is best for an individual property, but what is best for the portfolio as whole (though this is often the same thing). For instance, if an investor or institution was looking to get a portfolio loan (also referred to as a blanket loan), for several properties, it may make sense to prepay a loan one one of the properties with several years left on its loan term in order to get better terms (i.e. lower interest rates, higher leverage) for the portfolio as a whole. This is generally the kind of higher-level thinking that would not be required or expected of most property managers, even though expectations of that role are rising.
For individual commercial real estate investors, asset managers may also work much like personal financial advisors, helping determine which properties they should buy and sell based on their individual needs. Factors an asset manager may take into account include an investor’s level of desire to be actively involved in the investment process, as well as how their background, family, work life, and financial situation may influence their specific needs as a commercial property investor.
Are The Roles of Property Manager and Asset Manager Beginning to Blend?
In many scenarios, the roles of property manager and asset manager are beginning to blend. In generally, this has occurred in the form of property managers being expected to take on some of the lower-level roles that asset managers did in the past, such as putting more effort into the financial management and marketing of properties, instead of simply dealing with day-to-day issues like maintenance and tenant management. In part, this may be a result of asset managers expecting more from property managers, while it may also be the result of the vast increase in financial tools and software, making it significantly easier for property managers to analyze property financials and make recommendations to asset managers and investors.
Questions? Fill out the form below to speak with a commercial mortgage specialist.
Related Questions
What is the difference between property management and asset management in commercial real estate?
Property Managers vs. Asset Managers: What’s The Difference?
When it comes to commercial real estate investing, property managers and asset managers may have similar titles, but they have distinctly different roles. A property manager generally focuses on a property’s everyday operations, like maintenance, rent collection, and managing staff. Property managers often work onsite, but not always. In contrast, asset managers are more involved in the financial management of an investment property, including managing tax and legal issues, negotiating with lenders, and managing both the acquisition and disposition of a property in order to maximize long-term profitability.
To break it down, property management often includes duties such as:
- Renting and leasing the property
- Property risk management
- Property and facility maintenance
- Addressing and correcting tenant problems
- Collecting rent and other charges
- Collaborating and managing property contractors and staff
- Enforcing property regulations and rules
In contrast, asset management generally involves responsibilities including:
- Conducting thorough due diligence during the property acquisition process
- Securing commercial financing and negotiating with lenders
- Creating and implementing marketing strategies for a property
- Working with investors to determine return hurdles and overall investment strategy
- Working with appraisers to determine property value
- Helping investors determine the ideal holding period to maximize returns
- Setting aside funds for replacement reserves/capital improvements
- Analyzing a property as one part of an investor’s larger real estate portfolio (and strategizing appropriately)
- Making decisions and advising investors regarding the legal and tax implications of property ownerships
On a higher level, portfolio managers may manage a large portfolio of real estate assets for an investor, so their decisions may not always reflect what is best for an individual property, but what is best for the portfolio as whole (though this is often the same thing). For instance, if an investor or institution was looking to get a portfolio loan (also referred to as a blanket loan), for several properties, it may make sense to prepay a loan one one of the properties with several years left on its loan term in order to get better terms (i.e. lower interest rates, higher leverage) for the portfolio as a whole. This is generally the kind of higher-level thinking that would not be required or expected of most property managers, even though expectations of that role are rising.
For individual commercial real estate investors, asset managers may also work much like personal financial advisors, helping determine which properties they should buy and sell based on their individual needs. Factors an asset manager may take into account include an investor’s level of desire to be actively involved in the investment process, as well as how their background, family, work life, and financial situation may influence their specific needs as a commercial property investor.
What are the responsibilities of a property manager in commercial real estate?
A property manager in commercial real estate generally focuses on a property’s everyday operations, like maintenance, rent collection, and managing staff. Property managers often work onsite, but not always. Responsibilities of a property manager include:
- Renting and leasing the property
- Property risk management
- Property and facility maintenance
- Addressing and correcting tenant problems
- Collecting rent and other charges
- Collaborating and managing property contractors and staff
- Enforcing property regulations and rules
What are the responsibilities of an asset manager in commercial real estate?
Asset managers in commercial real estate generally have responsibilities including:
- Conducting thorough due diligence during the property acquisition process
- Securing commercial financing and negotiating with lenders
- Creating and implementing marketing strategies for a property
- Working with investors to determine return hurdles and overall investment strategy
- Working with appraisers to determine property value
- Helping investors determine the ideal holding period to maximize returns
- Setting aside funds for replacement reserves/capital improvements
- Analyzing a property as one part of an investor’s larger real estate portfolio (and strategizing appropriately)
- Making decisions and advising investors regarding the legal and tax implications of property ownerships
On a higher level, portfolio managers may manage a large portfolio of real estate assets for an investor, so their decisions may not always reflect what is best for an individual property, but what is best for the portfolio as whole (though this is often the same thing). For instance, if an investor or institution was looking to get a portfolio loan (also referred to as a blanket loan), for several properties, it may make sense to prepay a loan one one of the properties with several years left on its loan term in order to get better terms (i.e. lower interest rates, higher leverage) for the portfolio as a whole. This is generally the kind of higher-level thinking that would not be required or expected of most property managers, even though expectations of that role are rising.
For individual commercial real estate investors, asset managers may also work much like personal financial advisors, helping determine which properties they should buy and sell based on their individual needs. Factors an asset manager may take into account include an investor’s level of desire to be actively involved in the investment process, as well as how their background, family, work life, and financial situation may influence their specific needs as a commercial property investor.
What are the benefits of having a property manager in commercial real estate?
Having a property manager in commercial real estate can provide many benefits. Property managers can help ensure that the property stays rented, evict non-paying or disruptive tenants, and maintain the property (which may involve hiring external contractors). Property managers can also have an even more active financial role in a property, and be responsible for paying insurance and other fees. Additionally, a great property management company can help maximize your leasing income and ensure that your tenants are happy, which can help prevent tenants from moving out.
What are the benefits of having an asset manager in commercial real estate?
Having an asset manager in commercial real estate can provide a number of benefits. Asset managers can help investors make informed decisions about their investments, such as which properties to buy and sell, and how to maximize returns. They can also help with due diligence during the property acquisition process, securing commercial financing, creating and implementing marketing strategies, and analyzing a property as part of an investor’s larger real estate portfolio. Asset managers can also help investors determine the ideal holding period to maximize returns, set aside funds for replacement reserves/capital improvements, and make decisions and advise investors regarding the legal and tax implications of property ownership.
What qualifications are needed to become a property manager or asset manager in commercial real estate?
To become a property manager or asset manager in commercial real estate, you will need a combination of education, experience, and certifications.
Property managers typically need a bachelor's degree in real estate, business, finance, or a related field. They may also need to be licensed in the state in which they are working. Additionally, property managers may need to have experience in property management, such as working as a leasing agent or assistant property manager.
Asset managers typically need a bachelor's degree in real estate, finance, economics, or a related field. They may also need to be licensed in the state in which they are working. Additionally, asset managers may need to have experience in asset management, such as working as a financial analyst or portfolio manager.
- Property Managers vs. Asset Managers: What’s The Difference?
- Property Managers Work With Individual Properties, Asset Managers Work With Portfolios
- Are The Roles of Property Manager and Asset Manager Beginning to Blend?
- Questions? Fill out the form below to speak with a commercial mortgage specialist.
- Related questions
- Get Financing