Mindful Capital Group is your real estate asset management firm of choice. But before you decide to use Mindful Capital Group, ask yourself what exactly is real estate asset management?
Real estate asset management is essential to successful real estate investing. Most real estate investors do at least a minimal amount of asset management themselves. Larger entities and experienced investors may enlist an asset manager to handle their investment portfolios. Essentially, real estate asset management is both a skillset and a career.
So what exactly is real estate asset management? Here’s a comprehensive explanation.
What is Real Estate Asset Management?
Real estate asset management is the process of maximizing a property’s value and return on investment.
Generally, there are four areas of focus in real estate asset management:
- Reducing Expenditures: Property can cost a lot of money to maintain when you consider operational costs, maintenance, closing costs, and taxes. Luckily, there are a variety of ways to reduce the cost of investment properties.
- Risk Management: There’s an element of risk in all types of investing. But there are some investment properties that are riskier than others. Mitigating risk or preparing contingencies in case an investment fails are critical components of real estate asset management.
- Finding the Highest or Most Consistent Revenue Sources: It’s always nice to find a property that’s likely to increase significantly in value. But consistent profit is just as important. In some cases more important than a large lump sum profit. Good real estate investors seek out properties that provide the highest possible stream of revenue. One way to do this effectively is by investing in rental properties.
- Portfolio Building: Ideally, the more you invest, the more you’ll profit. Real estate asset management is all about strategically expanding and diversifying your real estate investment portfolio.
Using Real Estate as an Investment Asset
There are several different types of investment properties, including:
- Residential
- Commercial
- Mixed-use
- Vacation rental
An investment property is really not so different than a stock or bond. You buy at a certain price with the expectation that you can sell for a higher price in the future.
However, real estate is a more complicated type of investment than your standard security. Real estate typically requires more time, effort, and patience.
When you buy a stock, there’s little work you have to do after the initial purchase. You might watch the stock market and decide when it’s time to buy or sell, or maybe you’ll even participate in shareholder voting. But your stock’s value won’t be affected by lousy tenants, vacancies, or poor market growth. The real estate market has a ton of nuances that, if improperly managed, can detract from the investor’s profits or even cause a loss of profit.
Investors who buy stocks or bonds seek either short-term profits through dividends or penny stocking or long-term profits through appreciation and sale. There’s a similar dynamic in real estate investing.
Real estate investors seeking short-term profits might look for opportunities to buy rental properties or fix-and-flips. In this instance, real estate asset management would focus more heavily on reducing operational costs and increasing rental profits. Keep in mind that “short-term” is always relative when it comes to real estate.
Real estate investors who are seeking long-term profits might look for opportunities to buy properties that will significantly appreciate in value after a few or more years. In this instance, real estate management would place special emphasis on making upgrades to improve the property value.
Both investment strategies require skills in market research and risk management.
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