Buying, selling and owning real estate may sound easier than it really is, especially if you try to do it professionally. Just because you have obtained a property you have always wanted does not mean that your work is done. There are a number of hidden aspects of property management that laypeople do not have to know – nor are they supposed to. But, if you want to become successful in property asset management, or at least get a hold of it, there are a couple of things you need to keep in mind. Here are some pointers that might make this job easier.
The Basics: What, How, Why?
How is property asset management different from “regular” property management? Are there any differences at all? Well, yes and no: property asset management is property management, but with a greater focus to a broader context of the said property.
Putting it into a new perspective and viewing it as a part of a larger environment, as well as introducing a business aspect into the picture – that is what this kind of property management is all about. So, instead of simply having a property and managing, renting or using it, you adapt it to a new role – office, warehouse or manufacturing space, among others.
Maintenance and Hidden Costs
By seeing properties as individual objects and separate enterprises, property asset management really makes the most of it and drives you towards earning more money. But, in order for that to happen, your real estate must be deemed valuable, which is why it must be in good condition. There are several costly items people generally do not pay attention to –conveyancing, mortgage fees, costs of additional building, etc. – but your property must be in perfect shape if you want to utilize it to the maximum and make a substantial profit.
Beware: What to Pay Attention to?
When you think of property cost, rarely do you consider the fact that there are different kinds of costs that fall into various categories. The four major categories of cost are:
- real estate taxes,
- maintenance and
All of these are equally important and a good property asset management expert should know how to handle all of them at the same time. That is why knowing a bit about each is crucial.
Even though it is not the largest cost in property management, vacancy still takes about 9-18% of the gross income. Depending on a tenant and what kind of property management you have in mind, vacancy is important and is connected to a whole new group of smaller costs – from redecorating and various improvement to leasing and legal costs. That is why this is something you should not be doing alone – this part of property management needs experience, so you might want to consider the services of a professional asset advisory.
Now this is the thing to look for – real estate taxes generally take from 15 to 20% of your property’s entire income. But, since this number is not fixed and varies from country to country, you can never predict it precisely. Moreover, it cannot be avoided nor easily reduced, so be sure to keep it in mind when making financial projections.
This is another expense that cannot be considered fixed – it does take about 10% of all income, but is subjected to change. Since it depends on the landlords, the tenants and their mutual relationship, as well as the state of the property, maintenance can either be ignored or prove to be extremely important. But, when it comes to property asset management, maintenance is vital. If you do not take care of them on time, issues on your property will multiply and grow, so the cost will rise as well. What you need to do is find the middle ground – repair and replace what needs to be repaired and replaced, but do not spend too much money on unnecessary things.
Paying utilities is something you have to do every month and there is no use in trying to avoid it. Yes, it is not the same for everyone and, depending on your tenants, the utilities you yourself pay can be higher or lower. For example, big offices, residential buildings and other huge spaces will cost a lot as they require a ton of electricity, heat, water and air conditioning. However, you can think ahead and create a renewable building – just imagine a shopping mall powered by solar energy!
As you can see, property asset management is not just about obtaining a property and doing whatever you want with it. If you wish to make a profit quickly or, on the other hand, own a property that will be lucrative in years and decades to come, you must take all of the things mentioned above into consideration. Finally, think about the rent as well – lowering it a few dollars every month will not mean a lot to you, but it might mean the world to your tenants and keep them in your property longer.