It is easy to get confused by the terms Asset Management and Property Management as these two roles are both important in running multifamily businesses. Below you will learn the difference so that when you are looking at investing, you have a clear picture of what each role entails.
While I think finding the deal and underwriting the deal are major roles in multifamily, asset management can make or break the deal. Asset managers focus on maximizing the potential in the property by ensuring the business plan is implemented and achieved. It is a multi-role job that requires the Asset Manager have a strong background in financial analysis, overseeing operations, and strong people skills. Even though asset managers operate the property after acquisition, their skillset is needed from the beginning to the end of the business plan.
The areas of focus for asset managers:
Asset managers must be able to interpret data from operating the property to find opportunities and identify problems. They must be able to communicate the findings to the management team for decision making. Asset managers must be able to analyze P and L Statements and to pivot the business plan as needed.
Being an asset manager requires a strong skillset of people and project management. They also need to juggle many balls in the air at one time to be able to monitor all goings on in a large property. Since MF is a team sport, the asset manager must be able to work with and motivate the onsite property management team. It is imperative that they also can manage direction from the other partners and consider the needs of the investors.
In short, The asset manager oversees the PM company to make sure the business plan is successfully reached.
A property management company is hired by the owners as a 3rd party entity. Every Property Management company has an onsite manager, leasing agent and maintenance staff. PM companies oversee the day-to-day operations of the property. The onsite staff is responsible for collecting the rents, finding new tenants, addressing work orders, and keeping an eye on the apartment community.
In the large multifamily deals that I invest in, property management companies also provide accounting, payroll, and human resources. The asset manager, who we will discuss below, oversees the PM company to make sure the business plan is successfully reached.
When we are looking to acquire a large MF property, we meet with Property Management Companies to see if they can achieve the business plan we provide. We choose the PM companies based on track record and knowledge of the asset class we are buying.
In closing, when I look at deals to invest in or partners to choose for a syndication, my number one priority is a strong asset management team with a proven track record managing B or C class MF.