Most people who get into real estate do so for the potential returns the investment will generate. It’s a highly strategic process, and in theory, the better the property, the greater the earning potential it will have.

With each property, investors must weigh the risks and opportunities it presents. Often, they turn to professionals for guidance on decisions like these but sometimes there can be misunderstandings about the type of services they will be getting when reaching out for help.

For example, it’s not unusual for investors to hire a property management company with the mistaken assumption that the property manager will also provide a certain amount of asset management functions. These two services are very different, but often they can get blurred together.

Property Management 101

In general, property management companies are responsible for all things having to do with individual units at a property and taking care of the tenants who live there.

This includes things like collecting rent, taking care of maintenance issues, and advertising and leasing the unit. Property managers are tactical and handle the ongoing management of a given rental property.

Asset Management 101

Asset management is a strategic function. These companies help investors with forecasting, positioning, and branding a property rather than with managing the day-to-day operations of a given rental unit.

For example, asset management companies will offer guidance on how a property should be positioned in the marketplace – will it be high-end, low-end, or in the middle? Based on the positioning, they can assess how money should be allocated to the investment for things like capital improvements.

In conclusion, while a property manager should have a strong understanding of the local market, offering strategic input into a property’s positioning is simply not part of their job description, nor are they charging for those services.

As you evaluate the help and guidance you need for your real estate investments, be sure to have these conversations up front with the both property managers and asset managers so you can clear up any potential confusion about their scope of services.

To hear more from us as we discuss the differences between asset management and property management, listen to episode 8 of our podcast Owner Occupied.