Asset Management is a form of property management but comes at it slightly differently.
Where property management focuses on the nuts and bolts of effectively running properties day to day, asset management focuses on adding value to real estate as a form of investment.
What is Property Asset Management, and What Does it Mean?
In short, Property Asset Management is defined as the strategy and skill-set to manage real estate property interests to increase investment values and reduce costs long term.
Not that regular property management doesn’t have this end-goal of increased values and reduced costs in mind anyway. Still, asset management goes a step further to make it the absolute goal and thinks more bigger-picture into issues that can extract that extra value within a property interest.
Therefore, this tends to hinge on market values and what the property ownership or tenancy value is, how things can be evolved to increase the value, and how these extra initiatives and plans can unravel to see it increase longer term.
Reducing costs and expenditure is a consequence of this, but not necessarily the main focus. The goal is to unlock the hidden gems of value in the property interest even if there is an increased initial cost for the sake of a greater long-term return.
In terms of the terminology used, you sometimes see this as real estate asset management, property portfolio asset management, and, more generally, investment asset management.
It’s all the same focus, although make sure you’re talking about the property as the ‘asset’ in question as opposed to other forms of non-property assets.
Property asset management tends to focus more on commercial property because of the more significant opportunities and values involved, but certainly still applicable for residential interests, particularly larger multi-let and mixed-use schemes.
In terms of a final, more concise summary of Property Asset Management, it is the process of maximising the value of a property interest through proactive and cost-effective measures.
Asset Management Versus Property Management
Understanding how the usual Property Management and more value-driven Asset Management areas relate to each other is best understood in an example.
Let’s take, say, a row of shops with flats above them, your typical local parade maybe with a newsagent and café or takeaway.
Let’s say you own the freehold of one of these with a convenience store below and two flats above it, with the whole unit let out under one commercial lease to ABC Newsagents for another three years, with rent payable quarterly in advance.
In the property management world, you have the basics to look after – making sure the landlord or tenant is carrying out maintenance and compliance works according to the lease, arranging correct insurance cover and any service charges, and making certain rent is satisfactorily paid up.
You can also start thinking longer-term and looking at, say, early negotiations to renew the lease in the next few years and analyse interim rents, and how the newsagent is correctly using the separate flats upstairs themselves or through authorised sublets.
Asset Management then looks at things longer-term and value-wise, and the price of the freehold interest could be both short and long-term.
So if the current tenant renews their lease in a few years, the property may be worth ‘x’ amount as opposed to ‘y’ amount if they vacated and the landlord was left with re-letting the whole property.
But what would happen if you agreed to new terms now and ‘re-geared’ the current lease for a longer-term, and what are the tenant's priorities?
Maybe they would commit to a longer lease term if the landlord can offer some initial rent-free period to ease current cash flow.
And what would happen if they just took a lease on the ground floor shop and the landlord accepted the flats back to let out or even sell as separate long-lease interests separately?
Other opportunities and angles open up now you’re focusing on the longer-term goal of increased market rates within the parameters of the landlords’ and tenants’ priorities and a little thinking outside the box.
A Property Asset Management Strategy & Plan
Therefore, it’s essential to have a clear strategy over time to accomplish these greater-return goals for the property, not just bumble along.
First, clearly defining that end goal is essential, and whether it needs to be expressed in a more excellent value on paper or increased rental return in the shorter term.
Also, what price is willing to be paid to accomplish this, such as initial expenditure for property changes.
It would help if you had a plan to reach this, including a realistic time frame and how things should occur correctly.
This is where the pure property management expertise can help, something that asset managers often miss in the frenzy of the deal and the figures.
So in the above example, a landlord may want to take the flats back and deal with them separately for a greater return. Still, there can be all kinds of expensive issues to clarify, such as utility supply and splitting, and then separate access and fire compliance, which could quickly turn unprofitable.
Asset Management Companies & Firms
External advice can be a great help at this stage, as they have the expertise in both property and market matters, plus a fresh non-connected perspective on your property to help come up with some real gems and angles.
And for such advice that works, it’s worth paying the price, for as the old saying goes, you tend to get what you pay for (check out the post here on how fees get structured for this advice).
But make sure you receive the right advice, not standard off-the-shelf reporting but expertise applied to your situation and property asset.
Also, make sure it’s with the right advisor, which may be different from your usual property manager even though they may offer bolt-on asset management services.
The Role of Property Asset Managers
Like property managers, you do have Asset Manager jobs where they primarily look at these longer-term angles on properties.
In reality, though they can be the same role or person, ideally, any good Asset Manager should at least be working closely with a Property Manager who understands the nuts and bolts of the property and the people involved to reflect in broader investment advice.
The skill-set for a Property Asset Manager is slightly different, though, so an Asset Manager, in addition to grounded property management expertise, needs to have more agency and professional experience and skill set, and often contacts within the property market.