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Real Estate Management

July 13, 2021

Real Estate Management vs Property Management

Property management and real estate management might be seen as the very same business to most people.

Industry people would say there’s a big difference, yet tenants, suppliers, contractors and the general public wouldn’t have the foggiest idea. Landlords would struggle to define it. Experts might say it’s all academic anyway.

And each business can and will do more of  the work the other typically does.  Should they be kept separate?  Will industry regulators be able to keep each separate and will training schools alter their curriculums?  Enter powerful property management software platforms and the overlap can be a real head scratcher.

Enjoy this discussion and the resources below for landlords, contractors, and property managers.

Opportunities and Challenges Ahead?

Industry people might know the difference academically, yet not really understand the meaning in a way that helps them perform better in their businesses. It’s wise to know how they differ, what the difference means, and how recent tech trends will provide greater management powers for property managers.

Would a landlord/property owner know if they need an asset manager or a property management company?  Likely not. And which would be the right choice? Consider that property managers perform accounting, cash flow analysis, marketing and more traditional real estate management tasks for owner/landlords.

And modern property management software keeps integrating modules that give landlords and property managers real estate manager like powers.

And real estate asset managers can perform duties typical of property managers.  Asset managers typically charge higher rates than property managers and they would contract out for property management.  This makes the difference meaningful for landlords who need management services.

Hot Real Estate Sector

Investors continue to pour money into the US, Canadian, UK, German, and Australian real estate markets in 2021. Not surprising given that real estate investment is where most of the world’s wealthy made their fortunes. It’s a winner for sure.

And when an industry is hot and growing, there will be a sizable demand for professional management of residential and mixed use properties.

The real estate management market is estimated at $15 Billion for 2021, and will grow 9.3% per year to $28 billion by 2028 (according to fortunebusinessinsights).

Since housing supply constraints are forcing rent prices higher, there will be more investment in the years ahead. The success of the built for rent sector as an example shows the industry innovates to generate much needed solutions and create new jobs.

It’s Investment Wisdom then Management Systems for Optimal Results

If you’re a small business landlord, you might get better results by thinking like a real estate investor. An investor mindset would lead to the use of powerful digital management tools to find great properties, optimize profits, and manage them well. An investor is attuned to property potential and able to let go of properties with a cloudy future (emotional attachment).

Landlords need to start thinking and managing like a real estate investors because the pandemic showed you well, that taxes, revenue, and tenant relations aren’t certain and your investment is never secure. Losing it all is possible as some landlords have found out.

How do Wrong Choices Play Out?

And then there’s mistakes.  That’s where landlords learn their painful lessons which you frequently hear about on forums and Facebook groups. They may look at it as “problem tenants” which can be an issue, but was it really because they bought a property they can’t manage well and which attracts those tenants?

The real estate market is complex and many investors really don’t know what’s happening under the surface economically, politically, or with renter demand. Even real estate investment managers sweat it out. Forecasting is difficult for the experts.

Pros who use modern management tools learn faster and become masters in real estate management (using real estate management software).

Real Estate Management vs Property Management

The terms real estate management and property management are used interchangeably today. Small to mid-sized landlords might want to consider how each is actually unique before hiring.

One definition is that real estate management leans more to the business of investing or asset buying and selling (asset manager). It may refer to things other than rental management tasks such as asset appreciation as well as profit on assets.

Although the boundaries are becoming more blurred, we might say that real estate management has a more macro overview on major investment goals and strategies along with wealth protection.

Here’s a real estate asset management firm in New York. Their website tells you quickly what their value proposition is and their core services. And in New Jersey this firm manages residential properties and contracts out services need.

An asset manager can manage residential rental properties, commercial property, mortgage loans, real estate stocks, real estate investment trusts (REITs), crowdfunding investments, and beyond — quote from Liz Brummer of Motley Fool.

Asset managers typically work in the private or institutional marketspace among private equity firms, hedge funds, or REITs on larger rental property portfolios. They may offer specialized broker and financial services, and at scale.

Property management on the other hand refers to the active management of rental units and tenants. It gets confusing when asset and revenue manager’s duties overlap with property management.

The point for landlords, is what is the the goal and how do we get there?

Real estate asset management refers to the process of maximizing the value and return on investment of a property. This includes finding the highest and most consistent sources of revenue, reducing expenditures whenever possible and risk management, among other things — from article on Mashvisor.com

Small landlords should understand the distinction. Right now, you’re doing both.

Property Management Software Takes on More Responsibility

Property management supports your real estate management goals of choosing the best properties, setting the right rent prices, monitoring performance, managing cash flow and the revenue source (tenants)reducing taxes, marketing your rentals, maximizing profit, and streamlining the process of building your wealth.

So just as there are differences, (and perhaps differences between property management software and real estate management software), the two do like they will converge.  Will the growing power and capabilities of the software platforms accelerate a fusion? It’s already happened with some companies.

Some property management service firms and software products have improved profit as their purpose. In fact, property management software is becoming central to all real estate management tasks. It’s very valuable considering the low software subscription costs and striving to become a complete real estate management solution.

While small portfolio landlords don’t talk about their own properties as investment vehicles, they really should upgrade their vocabulary and goals. You are real estate entrepreneurs.

It’s impossible to talk about commercial, office, or residential real estate without mentioning property management’s activities. If a property management software solution can help you grow yields, avoid bad properties, identify which to sell, and aid in tax management, cash flow, keep tenants happy and keep the building ship shape, well, then it is central to your real estate investment strategy.

What are Top Real Estate Management Challenges in 2021?

The challenges major property managers face in managing are not dissimilar to those property owners do. Yields, profitability, cash flow, expense management and tax management are key. Some owners must also manage tenants directly. Here’s the top ones you might be facing:

  1. understanding real estate law and regulation changes
  2. what is the best asset manager/property management company mix?
  3. at what size of property portfolio do you hire a property manager or asset manager?
  4. which properties to buy?
  5. who will advise and buy the new properties?
  6. which properties to sell?
  7. how to set the right rent price?
  8. which property management software to choose?
  9. whether to do it yourself or hire a property management company
  10. how to improve rent revenues and minimize taxes with advanced tax management?
  11. what to pay property managers?

After making smart, reasoned decisions about buying residential, office, retail or commercial properties, the business focus moves to organizing them to maximize revenue and minimize costs. And that is where property management software arrives to help make the venture a profitable one. You should view the software as a platform for business.

Whether you’re managing, evaluating, and growing your real estate asset values, or optimizing rental income, you’ll want a software solution that offers excellent financial, tax, tenant, maintenance and overall reporting tools. This keeps investors fully informed about how their properties are performing.

What are Real Estate Investors (Including small business landlords) Doing Now?

Keeping up to the market today is a challenge, whether it’s technology, demand, laws, or competition.

And the trends are are always in response to the top property management challenges. These are the critical areas of business where profit is eroded and risk is high. Please do read up on the top property management challenges.
Now is a good time to reflect on your top priorities and goals:

  • researching properties more carefully and examining long term value
  • assessing the end of a boom and perhaps a downturn in the markets
  • finding available quality rental properties
  • researching and choosing the right property management company
  • using powerful analytics tools to identify opportunities for rental income growth
  • using powerful analytics tools to identify activities and assets that are underperforming
  • using powerful analytics tools to identify great tenants and money losing tenants
  • upgrading digital marketing strategy to grow demand from high quality tenants and promote your assets
  • using Proptech tools and apps to optimize aspects of your business that are lagging
  • investigating short term rental income properties
  • preparing for potential economic downturn with recession-resistant properties/tenants
  • preparing for inflation and rising interest rates in the years ahead
  • diversifying your property portfolio to protect your wealth
  • choosing a Realtor with good knowledge/systems for property management
  • managing legal liabilities in your state and city
  • how to adjust your portfolio when a downturn begins
  • how to manage taxation well
  • how to manage tenants in arrears and handle tenant evictions legally and effectively
  • whether to adopt green infrastructure and other amenity costs
  • determining best improvements to make in your units or buildings

The final note on any real estate management plan is about which properties to buy. The next downturn will tell you more clearly how well you chose.

Build a powerful business model and take action with a great property management software platform is the best decision. The best tools with the best insight will help you choose properties better going forward. Put your bad choices behind you and manage like a pro with a great software platform.

Visit the ManageCasa property management blog for more ideas and tips on protecting and optimization of real estate management.

Here are some additional real estate management resources to help you excel in 2021 and beyond:

  • Tips for Buying Rentals Properties: moneyunder30.com/formula-buying-rental-properties
  • About Asset management: https://realestate.vt.edu/content/dam/realestate_vt_edu/industry/AssetManagement_Final_2017.pdf
  • How to protect your real estate assets: andersonadvisors.com/real-estate-asset-management-how-to-protect-your-rental-property-income/
  • About Rent Controls: https://managecasa.com/articles/rent-controls/
  • Important property management documents: https://managecasa.com/articles/profit-and-loss/
  • Leasing Optimization: https://managecasa.com/tenants-and-leasing/
  • Choosing a Property Management Company: https://managecasa.com/articles/property-management-companies/
  • Property Management Fees: https://managecasa.com/articles/property-management-fees-explained/
  • Best Cities to Buy Rental Properties: https://managecasa.com/articles/best-cities-to-buy-property/
  • How to Grow Rent Yields: https://managecasa.com/articles/grow-your-rental-yields/
  • Definition of real estate management: millionacres.com/real-estate-investing/rental-properties/real-estate-asset-management-vs-property-management-whats-difference/
  • Definition of asset management: fortunebuilders.com/real-estate-asset-management/

 

More insight and strategy from the ManageCasa Blog: Property Management Software for Small Business | Real Estate Management Systems | Real Estate Investing | Built to Rent | Switch Property Management Software | Simple Property Management Software | Hausverwaltung Software Germany | Berlin Germany Property Management

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