Like any financial decision, an investment in real estate has to be strategic. You need to understand its potential as a revenue stream and what opportunities it offers for growth in a given market. With each strategic investment, your real estate portfolio will grow, and at a certain juncture, so too will the services you need to invest in order to help you manage your growing pool of rental properties.

At this point, most real estate investors turn to a property management company for help, but oftentimes there can be frustration and confusion when investors conflate the scope of services a property manager provides with that of what asset managers do.

Understanding the Difference Between Asset Management and Property Management

Each property management company is going to have its own slight variation on the services it provides, but in general, property managers are responsible for all things having to do with individual units at a property and taking care of the tenants who live there. Property managers are tactical.

This includes things like collecting rent, taking care of maintenance issues, and advertising and leasing the unit. For more about what services a property management company provides, read this post.

Asset management, on the other hand, is a strategic function. It also involves developing the financing strategy of a real estate investment and branding the given property.

For example, how will the property be positioned in the marketplace – will it be high-end, low-end, or in the middle? And what does that positioning mean for how money should be allocated to the investment for things like capital improvements?

In short, asset management has much more to do with the strategic forecasting, positioning, and branding of the property rather than with the day-to-day operations of the given rental unit.

Why It’s Important to Understand the Difference When Hiring a Property Management Company

When investors hire a property management company, they sometimes do so with the mistaken understanding that the property manager will also provide a certain amount of asset management functions.

The reality, however, is that most property managers are not really set up to do that. Moreover, they are not charging for those services.

So, while a property manager should have a strong understanding of the local market and could be in a position to offer some insight, it’s simply not part of their job description.

When hiring a property management company, it’s important to have these conversations up front with them 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.