As a real estate professional, I feel the need to talk about a sometimes-neglected topic, real estate asset management. The goal of asset management is to maximize your property’s value by optimizing long term cash flows. It is a specialized discipline that involves looking at the asset through a holistic lens, creating a long-term strategy and overseeing the execution of the plan.
To begin this process, the asset manager will review the subject property which involves the following:
- Income statement review
- Are rents below market?
- Is there an opportunity to add a revenue stream?
- Could some operating expenses be decreased?
- Understanding the debt structure- Is there an opportunity to refinance at more advantageous borrowing terms?
- Review the relationships with leasing brokers and property managers to make sure a collaborative team with effective execution is in place It is paramount to make sure the leasing team has a strong program, aligning with the asset manager’s short and long term objectives.
- Understand the capital needs of the property and justify the expenses to either achieve greater rents or to keep up with the marketplace. For example, could the updating of the kitchen and bathroom earn a good cash-on-cash return due to increased rents?
- Prepare a cash flow pro-forma to forecast the future operations of the property along with new borrowing and capital spend.
- Provide a hold-sell analysis to show the landlord if the proposed strategy is capital well spent.
After the initial review, a discussion of findings will be presented to the landlord along with a strategy for execution. From there the landlord could decide to implement on their own or have the asset management team oversee the game plan. It all depends on their landlord’s interest and available time.
Are you ready to achieve greater returns and maximize value? The team at Leading Edge Realty Advisors is available for a free consultation to learn more about your property.