Asset Management vs. Property Management: Why You Need Both to Succeed
By Gary Lipsky, author of Best In Class: How to Manage Your Multifamily Asset, Avoid Mistakes, and Build Wealth through Real Estate
People talk about buying apartments, but very few talk about asset management – what you do after you buy. Do not mistake asset management with property management which is handling the day-to-day.
Asset managing includes managing your property manager (if you have one), making sure the business plan is getting executed, and managing the finances from a 10,000-foot view. Asset managing is running a business and if you’re the asset manager, you are the CEO.
To be a good asset manager, you need a MAP. Just like if you were traveling to a place, you need to know how to get there. I assume the place you want to get to is X NOI with a valuation of Y right? I used X and Y as placeholders, but you can use whatever dollar amounts you want to achieve. You can’t just see how it goes and figure out the business plan along the way. Failure to plan is a plan to fail.
MAP stands for measure, accountability and plan. You have to measure everything to see where the bottlenecks are. You need accountability so that things are done in a timely fashion and you need a business plan.
Measure. What gets measured, gets managed. I bet you measure occupancy, delinquency, NOI and probably a lot more. I would suggest you break things down further to see where bottlenecks or opportunities lie. Don’t look at occupancy as a whole, look at each unit type to see if there’s one unit type you need to lower rents and others you need to raise. Look at each phase of a renovation to see if you can reduce the time it takes to get a new renter in a unit vs. waste valuable time waiting on parts or labor.
Accountability. A lot of people shy away from accountability both from holding someone to it and taking ownership themselves. However, to be successful, you need to be accountable and hold others accountable.
What we like to do is create a Google sheet and every week when we have a property call (yes, we have a property call every week), we check our tasks list to make sure everything that was due was completed. The whole team has access to it. The Google sheet shows who’s responsible to get the task done and when it was due. This helps get things done instead of forgetting about it.
Plan. Before you buy a property, you come up with a business plan or at least, I hope so. If it’s a stabilized property, maybe you just maintain operations and use the property for great cash flow. I’m of the opinion that things can always be improved, even for a stabilized property, but I focus on value-add opportunities. Maybe it’s a new name, signage, paint, landscape, interior renovations, amenities, or cutting expenses. I’m being general here but I look at each item individually to come up with a budget and timeline.
We spend a lot of hours coming up with our business plan and we work together with our 3rd party property management team to make sure we are on the same page regarding budget, timeline and results we expect. If you’re not on the same page, then it’s hard to hold the property management company accountable and it’s hard to achieve your goals. It’s okay to pivot but you need to start somewhere.
Good asset management can make an underperforming property perform and a good performing property great. Just because you buy a property, doesn’t mean you can pay attention once something goes bad, or only when you have the time. You need to be consistent, proactive and have a plan if you want to maximize the value.
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