How We Protect Our Investors Through Asset Management

What is Asset Management?

“Overall strategy for each rental property and the entire real estate portfolio, improving asset value by wisely reducing expenses and increasing income, hiring and overseeing the property manager; and preparing, monitoring, and adjusting property financial projections and financing strategies.” -Roofstock

Asset Management is one of the most critical topics rarely talked about in the real estate investments industry. The role of the asset manager is to oversee the property managers. Asset managers are responsible for ensuring the property performs to budget or better. They monitor KPIs (key performance indicators) but also make sure that tenants get the service promised. Further, they ensure that the property is well-maintained and that there are no safety issues.

When we assume the ownership of a new property, we manage CapEx (capital expenditures) projects to ensure we get the most value out of the property. After all, property investment is about making a return. So, when it comes to asset management, your property manager is your most crucial partner. The property manager can make or break a deal. This partnership between the asset manager and the property manager is integral in implementing the business plan and hitting or surpassing goals.

The Role of the Property Manager

Let’s start with the property manager. While the asset manager is important, the property manager is the most important player in asset management. The property managers conduct the day-to-day management of the property. In the larger assets we manage, we have staff on the property to ensure that the property has the appropriate day-to-day oversight.  

Property managers interface with the tenants and the property daily. The manager gets heavily involved even before we close a deal. They input all tenant information into their software. They also do their lease audit to ensure everything matches the rent roll. For example, on the last deal we did, the rent roll showed there were more deposits than what was showing on the lease documentation. Going through the lease documentation helps us ensure that the information we have about tenants is accurate. During this review, we finalize the operating budget, CapEx projects, property manager contracts, etc., and set future expectations for how the property will be managed going forward. 

On an ongoing basis, we work to finalize bids and CapEx items. CapEx funds get assigned to various improvements that will need to be made to the property. We try to finalize those bids right around the time we are closing so that there are fewer surprises down the road. This helps set the stage so that we can start working on projects within the first week after the deal closes. The sooner we get to work, the sooner we can bring in increased revenue. We want as much done as possible before the first day of ownership. Therefore, why we prepare for ownership during the escrow process, before we close and take over the property.

The Onboarding

We like letting our property manager do their thing during the first week of ownership. They need to give notices to tenants that the property ownership is changing, take over the office, and figure the lay of the land. The first week is a whirlwind and we like to give them the space to take control.

After that first week, we will set up a weekly status call. These calls are intended to do a deep dive into the property situation, review financials and tenant concerns, etc. In addition to these standing meetings, we partake in email communications between all necessary parties. Usually, when you first take on the property, the previous owner may have slowed down on work orders. So, your property manager will most likely need to tackle a handful of maintenance-related work orders in the beginning and prioritize how to get all of those work orders addressed.

For example, we recently had a water heater leak to deal with at one of our properties right at take over. The leak made its way to the bottom unit. As you can imagine, it created quite a mess and some damage to the property. However, our property manager handled the situation beautifully. Also, during these initial days and weeks, the tenants reach out to get items addressed that may be unresolved. Our goal is to take care of these items quickly. This helps set a good precedence with tenants and helps to build trust. It’s a fine balance between how much you push and how much you trust your property manager to do the right thing.

Ongoing Asset Management

The initial onboarding period takes about two to three months. After that period comes to an end and we are feeling more confident, those previously mentioned conference calls will become a bit less frequent. Usually, calls will move from once a week to every other week. The frequency of calls will largely depend on the volume of current CapEx projects and how the property/manager is performing.

During the calls, we will review the status of those projects and deep dive into weekly performance reports. We carefully review every line item to ensure we are meeting or exceeding our targets. If we are not performing well on certain line items, we dig into it to understand what can be done better for the next week.

We also seek to keep our property manager accountable. We understand that sometimes there are things that cannot be controlled. For example, weather-related events and “acts of God.”  We ensure that occupancy levels are high and we are hitting new rent targets. Our property manager is incentivized to keep the occupancy high and paying.

Monthly, we compile all reports and compare everything to our budget numbers. We tend to be conservative on numbers, so we always hope to do better.

Wrap-Up

In conclusion, you can see how asset management onboarding is a laborious process.  Once the cadence and systems are in place, it becomes smoother and less time-consuming. Just because we are hitting all our targets doesn’t mean we don’t continue to push or think outside the box on how to improve further.

We don’t allow complacency. There is always something that can be improved. Also, ultimately, we are responsible for our investors’ investment, and we don’t take that lightly. Whichever property manager we use must be open to our requests and work with us for the greater good.  The best property managers consider what is being requested of them and seek to understand where we are coming from. We believe our success with asset management is due to our attention to detail. By providing this attention to detail, we ensure that our assets are successful investments.