Real estate asset management often refers to the ability to provide investors with commercial real estate within their investment portfolios.
These commercial real estate properties are seen as lower risk methods for making money in the long term. Investors are provided with info to help maximize the value of their holdings, other investment opportunities, and the risks associated with new or existing properties.
A real estate asset manager is tasked with the responsibility of overseeing the financial state of these real estate holdings. The job involves finding the right balance between taking risks to earn profits and ensuring that no significant losses are undertaken. With strategies such as effective leasing, capital reinvestment, balance sheet management, and developmental potential, asset managers squeeze the maximum out of commercial real estate for their clients.
The portion of real estate holdings in an overall portfolio is often determined by the client. The investment company will offer advice, including its view of current financial and real estate markets, but the client determines what percentage of his money goes into these properties.
After the client makes his or her wishes clear, the real estate asset manager takes over. Their job is to ensure all variables in a client's portfolio are considered. By taking into account the scale of the investment operation, amount of funds allocated to real estate, business goals, and the state of the economy, they will make real time decisions about buying and selling stakes in commercial properties.
Advantages of Real Estate Asset Management:
- Real estate properties are often secured by leases, which ensure a regular stream of dividends for the investor. These returns are typically a lot higher than stock yields.
- Unlike home real estate markets that can go up and down, commercial real estate generally has an upward trajectory. Projects that are well planned will be successful, ensuring long term profits.
- Investing in commercial real estate can be thought of as a hedge against inflation rates. When compared to stocks, 10-year treasuries and bonds, real estate investments have a high correlation to inflation.
- There is value in property and structures. For example, investing in a building of law offices is a double investment in the property and those offices. If something happens to the companies working there, money can still be made through the property.
Disadvantages of Real Estate Asset Management:
- If you want to properly invest in real estate properties to make solid profits, a high initial investment is required.
- There is always the risk of a lawsuit pertaining to an accident or incident on a real estate property will bring its value down. Commercial properties result in a large stream of daily visitors, increasing the potential risk of these lawsuits.
