This is the third part of a 4 part series. Stay tuned for links to the additional parts.
Asset Management
This is the management of the property on a high level. It is not property management – dealing with tenants and toilets. Asset management deals with the strategic plan. It starts right after closing and goes up to the eventual sale.
Start With the End in Mind
What is your long-term plan? Do you intend to hold it for 5 years, add value, then sell for a profit? Do you want to hold it until you retire, selling it to recoup all the equity after the mortgage is paid off? Do you want to never sell, and leave it to your children? Consider this even before buying the property. You don’t have to religiously stick to it, but you should come close. Only a big mindset change should cause you to change your plans.
In your diligence phase, you should have decided what type of features you would like to add to increase the value of the property. These might be a new roof or new parking lot, for instance. These are high-ticket items which you might not want to do right away. You should have a timeline worked out of when you will do these things.
Asset management is also about how you think the rents will change. Hopefully they will go up, but how frequently? What is your strategy for keeping great tenants in place and removing the bad ones? All of these are asset management things. The tactical side is for the property manager to deal with.
In the meantime, you’ll need to be paying the property tax and insurance bills, and keeping everything up to date. All of these things are asset management. Remember to keep it high level and not get into the weeds with property management. Even if you are self-managing, keep these things separate and don’t neglect them. The worst thing you can do is find out you need to sell without a plan. Managing your asset throughout the ownership will prevent this. Next time we will finish up with the exit strategy.
