Real estate is an investment asset—one that most owners and investors hope to cultivate positive returns on. If you’re like many multifamily owners, you likely rely on third-party property managers to manage your portfolio of assets.

But that doesn’t mean your work is done. In order to maximize your properties’ value, it’s important that you take an active role in asset management.

Active Asset Management vs. Traditional Asset Management

Traditional asset management is a more hands-off approach, where an asset manager likely looks at monthly financials and variances in budget but leaves day-to-day operations to property managers.

On the other hand, active asset management is defined by investors who utilize third-party management companies, but are strategically involved in the operations of their portfolio. While external property managers continue to handle the day-to-day details of leasing, resident management, and property maintenance, active asset managers step in to help property managers better leverage resources to maximize portfolio returns.

Unique Challenges Faced by Multifamily Real Estate Investors

The multifamily housing industry has enjoyed a steady upward trajectory over the past few years, with a very high number of new units constructed, a high demand for apartment rentals, and rising rent costs.  

But investing in multifamily real estate presents challenges that do not exist in capital markets. The property faces the risk of damage, tends to deteriorate over time, and often takes a decidedly more complex process to buy and sell.

With minimal collaboration with their property management companies, how do investors know if property managers are truly maximizing the value of an asset? How do asset managers ensure that their partners are leveraging best practices at the properties they manage? Without an active asset management approach, it’s all too easy for a property to be mismanaged or undermanaged. This can lead to below-market rents, neglected properties, and higher rates of delinquency.

By properly mitigating risks and promoting valuable improvements, multifamily real estate asset managers can help ensure that they maximize portfolio returns.

Making the Switch to Active Asset Management

The following steps will get you on the way to adopting an active asset management approach for your multifamily real estate portfolio:

KPI & Metric Alignment

What KPIs and metrics matter when it comes to maximizing your property’s value? And more importantly, are these KPIs and metrics aligned from both the owner and operator side?

By understanding how specific metrics impact portfolio strategy and ultimately, success, both asset managers and property managers are able to be proactive in their approach.

Ensuring You Have Access to the Data

Once you’ve determined and aligned your KPIs and key metrics, it’s important  to leverage a business intelligence platform that makes this data accessible, accurate, and as real time as possible.

When you have access to accurate and real-time data, you’ll be able to make proactive asset and property management decisions. The result? Better portfolio outcomes.

Property Management & Asset Management Goal Alignment

A property’s success lies in the relationship between the operator and asset manager. That’s why it’s vital that asset managers and operators understand how their respective performance impacts the other’s goals.

For asset managers, this means understanding how, for example, minor decreases in delinquent balance impact factors like NOI. For operators, this means understanding how solving property-level issues such as decreasing make-ready time can impact overall portfolio performance and the bottom line.

To give an example, imagine if an operator and asset manager develop a strategy to successfully decrease their average days vacant by one day, for a property with 100 units.  Even that small tweak applied across 100 units, can have a significant impact on NOI.

To give another example, every tenant that renews a lease with an increase in rent contributes to NOI growth. The cost of a single move out including rent loss generally starts in the range of $1,000 and can easily grow to a range of $2,500 to $5,000 depending on the capital replacements. Operators can play an active role in improving tenant retention by making minor capital improvements such as upgrading appliances and lighting, adding amenities such as free wi-fi, and working to address any unexpected resident concerns, swiftly.

Identify Troubled Properties

In traditional asset management, property management companies generally provide monthly reports, after a month has already ended. Without access to real-time data, it’s easy to see how the asset managers miss out on identifying troubled properties in a timely manner.

Fortunately, new multifamily technology makes it easier than ever for owners to recognize which properties are troubled and invest more energy into identifying why.

Leveraging Face Time When Possible

Data is great, but not a complete substitute for face time. For example, in the event of a disaster such as a fire, it’s important for an asset manager to get on-site and understand what the property manager is dealing with.

When face time isn’t possible, asset managers and property managers need a reliable platform with real-time access to data. This will help not only the relationship between the asset manager and property manager flourish, but also the property itself.

Incentivizing Property Managers

With better technologies that offer real-time access to property performance data, you can use new strategies to incentivize your property managers by rewarding the top performers and creating a friendly competition.

Getting Started with Active Asset Management

Without access to accurate, up-to-date data down to the unit level, it’s impossible to practice active asset management. Thankfully, as multifamily technology improves, there are now better options that deliver the portfolio insights needed for active asset management.

Rentlytics empowers you to beat your budgets, uncover new revenue opportunities, and set a new bar for portfolio performance. As you begin to consider how a technology can help you make the shift from traditional asset management to active asset management, check out our recent webinar, “Looking Beyond the Dotted Line: 8 Essentials for an Effective Multifamily Technology Purchase” for further insights.