Many commercial real estate investors are not full time practitioners. Many have active careers, family obligations, or other interests that can take up a majority of their time. Yet commercial real estate is open 24/7 and the markets and trends dictating value never take a vacation. Therefore, if you’re looking to increase your returns on investment in commercial real estate while not taking on another full-time job, private asset management is a great option. Here are five ways that private asset management can help you achieve you increase your returns in the coming year:
1. Increased focus on returns and risk mitigation. Asset management means actively managing properties in a manner that increases returns and attempts to recognize and reduce overall risks. A deep understanding of the market and the trends occurring means pushing rents and increasing value on a consistent basis. Reducing risk can come in a variety of factors such as noticing a downturn and quickly pivoting rents, being proactive in acquiring or rolling over debt, and making timely capital improvements to capture market share.
2. Proper oversight and management of your investments. This item boils down to active management that takes into account analytics, market data, and the financial performance of the asset(s). There is no such thing as passive investing if you want to drive growth within a portfolio. Noticing and interpreting trends in market data means being able to be strategic in how funds are allocated, tenants acquired and decisions made to reduce vacancy. You cannot passively invest and expect to maximize your return on investment.
3. More efficient operations. Asset management should be working collaboratively with property management to establish a working budget and then notice variances in the budget on a quarterly, semi-annual, and annual basis. Understanding the property’s expenses, capital improvements and overall management are vitally important to driving value and growth within the portfolio and needs constant supervision. Streamlining expenses and operations helps drive NOI growth and therefore increase the value of the asset and portfolio.
4. Expertise and Due Diligence. Acquiring or disposing of properties means you need to have an in-depth understanding of the market factors affecting transactions and position in the market cycle. Property due diligence and underwriting means questioning assumptions and comparing them to the market data. A comprehensive strategic analysis means looking at the financials, market data, political risks, and the overall site itself to determine if the property meets the overall portfolio goals. Establishing these criteria will help you drive growth within your portfolio and take advantage of opportunities.
5. Tailored reporting and transparency. Too many investors don’t take the time to properly look at their discounted cashflows or operating budgets. It’s similar to not going to the doctor and getting a regular checkup. Often the problem rears its head after it’s too late. Tailored reporting and an unbiased eye on the data can give you an edge on the competition by comparing the heartbeat of your property with others in the market. Analysis is a key component to comprehensive asset management and is one of the primary ways to maximize returns.
Each of these advantages can help you achieve better results with less risk – so if you’re looking to get ahead in the world of commercial real estate investing, private asset management may be right for you. Contact us for a no risk consultation.