September 2016 - Ram Real Estate

Many of us are familiar with real estate property management i.e. the management of the daily activities of a property’s operation. But, when the conversation turns to real estate asset management, things can get a little murky.

Although there are many facets to this industry, to put it simply – the goal of real estate asset management is to maximize property value so that it can be sold, rented, and/or leased for a profit. Interested in learning more about the ins and outs of this complex, but intriguing, industry? Keep reading for a concise, but comprehensive, breakdown:

Investing in Real Estate

Corporations, private companies, individuals, and even governments buy real estate for investment purposes, usually for one of two reasons:

To renovate and resell
To renovate and lease or rent

Sounds fairly simple right? But, this is where things become a little more complex. You see, there are challenges in this industry that aren’t in the capital markets. For instance, unlike most other commodities, property deteriorates over time, and the buying and selling process of the damaged property can get quite involved.

In order to circumvent these issues, the asset management of investment properties promotes improvements that will increase the property’s value and minimize risks. But, that’s not all – real estate asset management also concerns itself with effectively navigating the sometimes hard to understand tax and legal rules that govern the investment property industry in the US – thus effectively helping real estate investors avoid many of the potential pitfalls that can befall them.

Real Estate Asset Management Goals and Objectives

Just like other types of investments, diversification is key when it comes to building a strong real estate investment portfolio. To this end, a large portion of an asset manager’s responsibilities tends to revolve around three main things:

Revenue forecasting
Data analysis
Market research

Furthermore, they help their clients create well-structured and attractive rental agreements and leases that will:

Limit liability exposure
Minimize vacancy rates
Provide their tenants with much of the flexibility they desire

This responsibility may seem strange when considering the other aspects of this industry, but you must remember that resources have to be strategically apportioned and managed. The failure to do so will impact the portfolio’s value negatively..

The Bottom Line

In short, the goal of real estate asset management is to help clients increase property value and, as a consequence, their returns. Good managers, like the ones at RAM Real Estate Management in Southern Nevada know how to reduce expenditures whenever possible. In this way, we are able to help our clients find the highest and most consistent revenue sources while simultaneously mitigating risk, liability, and other factors.

When you become a rental property owner, one of the first things you have to decide is whether you want to take on the responsibilities of a landlord or hire a property management firm to do the hard work for you.

To gain a better understanding of these two choices, our comprehensive guide details the pros and cons of each:

Landlord

A landlord is essentially a property’s gatekeeper, with responsibilities to both the rental business and the tenants. Some of them include:

Finding new tenants
Marketing/Advertising
Collecting rent
Setting rental rates
Repair and maintenance

Although, the aforementioned tasks can be challenging, being a landlord has its advantages:

Income: You get a monthly check to pay the property’s mortgage and – dependent on current rental rates – make a sizable profit as well.
Tax deductions: You can deduct the costs of replacing water pipes, replacing damaged furniture, professional services, and more.

Cons include:

Vacancies: If your property is vacant, it can’t generate an income, making it essentially worthless. It’s up to you to create and implement advertising and marketing campaigns to attract applicants, screen them, and much, much more.
Legal issues: You must remain current on the Nevada’s land and property legislations and laws to know where you stand when it comes to evictions and other legal issues.

Property Management Firm

Every savvy entrepreneur knows that it’s better to work smarter, not harder. And sometimes it’s just good business to have a professional do something that you don’t want to do. For instance, some of the responsibilities that you can expect your property management company to take over include:

Finding new tenants
Advertising/marketing
Delegating repair and maintenance duties
Collecting rent
Setting rental rates

Some of the benefits that come with going this route include:

Higher-quality tenants: They use rigorous screening processes to cull the reliable tenants from the bad.
Shorter vacancy cycle: Experienced companies, like RAM Real Estate Asset Management, have effective strategies to attract new tenants as well as a time test tenant retention policy to keep existing ones happy.
Fewer legal issues: The property managers at RAM are always up-to-date on the latest laws in the real estate industry. This knowledge ensures that your property – and how it’s ran – is legally compliant, shielding you from frivolous lawsuits.
Less responsibility: You won’t have to handle as many tasks as before, giving you more time and freedom to invest in other things.

There aren’t many disadvantages to hiring a property management company, but one of the biggest is cost – you will either be charged a flat annual fee or anywhere from 8 to 10% of the monthly rent.

At the end of the day, the decision to become a landlord or hire a property management company is up to you. No matter what you decide, you must take the necessary steps and adopt effective strategies that bring about your long term success.

Ins and Outs of Real Estate Asset Management | Key Insights

Landlord vs Property Management Company: Which Will You Decide?