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The Most Important Asset Management Tools Property Managers Need

Even when property management goes right, asset management can still go wrong. Watch our new video for solutions for your business!

Asset management is related to ownership activities and what owners are looking for in property operations

Property managers tend to be very focused on the day-to-day. That includes leasing, marketing, occupancy, and related concerns. Asset managers and asset management tools, however, tend to focus on financial performance and metrics like leasing trends, NOI, and expense ratios.

What Are Asset Management Tools For?

Many asset management tools can get really involved with parsing financial data. Those provide asset managers with insights into the health of a property. You might have a great NOI, for example, but your capital expenses might be too high and your cash flow is too low. Or you might have great occupancy, but your economic occupancy is low because concessions are being offered.

Asset managers and owners want insight into that kind of information, but that’s not always on the property managers’ radar. So the kinds of tools that you see are business intelligence (BI) platforms that take data from a typical accounting platform and repurpose it to provide the metrics that asset managers want for their business decisions.

Further, asset managers want to understand, at a glance if possible, whether or not the property managers on site are on top of everything that is happening at the property. Yes, the financials are important. And yes, leasing trends, occupancy, and rental rates are important too. But are you looking at competitive markets, performing market surveys, and presenting the property in comparison to comparable properties in the market?

Owners also take an interest in resident demographics. Where are the residents that are moving into the property coming from? Are we drawing from a specific geographic area? Are we getting residents that all work in a similar area that we can then target through marketing? As a property manager, you want to be able to demonstrate to the owners and asset managers that you understand the demographic you’re appealing to.

Revenue Management Software

Revenue management software is another tool that is helping with the asset management/property management relationship.

At this point, revenue management ought to be table stakes for any institutional class operator. If you’re an owner with a property that has 100 units or more, you absolutely should be using revenue management.

And the great thing about revenue management is it allows the property managers and the owners to have a dialogue about revenue targets. The revenue manager helps to achieve those targets and, even if you miss, collect objective data. That data helps with decisions about changing rental targets and that sort of thing if you didn’t achieve the occupancies you wanted to.

If you have revenue management in place you can also use it to diffuse tension between owners and the operators.

If, for example, a property isn’t leasing enough or hitting certain rent premiums, revenue management is a really important tool. A lot of the marketing tools for screening and posting available units have grown and offer a lot of transparency.

Owners, asset managers, and operators can have real-time discussions about screening standards, for example, or setting limits on credit. If those changes don’t produce the results that you’re looking for, you still have an agreed-upon benchmark that you can revisit.

Seeing ads and tracking their results in real-time is also important for marketing. The owners and the operators can have a discussion about what’s working and what isn’t. These changes have improved the relationship and the transparency between owners and asset managers over the years.

Asset Management Failures

It’s very possible for property management to go right and asset management to go wrong. And that can happen when, for example, you’re hitting leasing and occupancy targets, the property looks good, and residents are happy. That’s a successful property management engagement, but it doesn’t mean that you don’t have issues on the asset management side.

The asset management side starts by looking at the NOI budget. Maybe you’re 98% occupied, for example, but you’re not hitting rent targets. Or you’re hitting rent targets, but you’re not fully occupied or you’re not at the levels that you want.

Asset management also goes wrong when things that don’t necessarily affect property managers start to happen. Things that affect the owner’s bottom line but not the property managers’ performance can be asset management failures. Say, for example, that you have a trip-and-fall incident and you get sued. That’s a failure of asset management because it affects the owner, it’s their issue to deal with. Property managers are typically indemnified against lawsuits, so they get kicked over to the owner or the asset manager side of the house.

A lack of transparency into daily maintenance and upkeep is another asset management failure. If everything looks fine on the surface but preventative maintenance isn’t happening down below, you’re at greater risk of equipment loss due to catastrophic failure.

Not doing maintenance to maximize your equipment’s useful life cycle is another failure at the asset management level. Asset managers will care more about escalating insurance rates because you’ve had incidents. Too many claims affect the asset managers and the owners, though not the property managers as much.

Effective Asset Management

Effective asset management helps you meet a property’s financial benchmarks and preserve the asset itself by running the facility properly and maintaining the equipment properly.

The property’s operating risk is also being managed so that you don’t have lawsuits or claims, and your incident reports are low. You’re also staying in compliance with local codes so you’re not getting fined. That’s where quality asset management shows its true colors.

If property managers are going to manage assets more effectively, there are a few things that you need to have in place.

Number one, you need more than just an accounting platform in place. That’s basically table stakes. Everyone needs to have a robust accounting platform. But you need to go beyond the income statement, cash flow statement, and balance sheet when you’re producing reports for your owners or your asset manager. You have to be able to provide insights into the financial metrics of the assets.

If you want to provide great asset management, you need to understand what the NOI goals are. You need to know what your economic occupancy goals are. And you need to be able to look into the future and project your lease percentage based on current trends.

You also need to provide assurances that you are maximizing rent. That is possible with a revenue management system or through extensive market surveys to compare yourself against comparable properties.

Proactive & Scheduled Preventative Maintenance

There are a number of key financial benchmarks to be aware of beyond leasing and expense budgets. That’s the financial side, but there is also an asset operation and asset life cycle side.

You need a system in place that makes sure preventative maintenance happens. You cannot rely on the local knowledge of your maintenance supervisor. And you can’t rely on a manual that outlines your best practices for maintenance. You can’t rely on a manual to convey the frequency and the procedures that the main staff needs to follow. None of that stuff gets any attention paid to it.

You need a system that automatically presents the preventative maintenance program to the right person at the right time. Something like Leonardo247, where those schedules are generated automatically based on a property’s unique amenity and equipment profile, is becoming a must-have for institutional owners.

Risk Mitigation Procedures

You need to make sure that the risk mitigation procedures and the operating promises that you made to the owners and asset managers are being fulfilled.

There’s a lot of work that property managers need to do on a daily, weekly, and monthly basis. Those things aren’t reflected in the financials but they’re important. Those tasks include:

  • Walking the property and looking for trip hazards
  • Making sure that the model unit is pristine on a daily basis
  • Checking to make sure that the website has the latest photos and the correct phone number
  • Marketing available units in a timely fashion
  • Sending your collections reports and making sure that those are being followed up on

There are a whole host of things beyond what affects the top line that you need to be doing to be a good steward of that asset. And it’s very difficult to demonstrate those things to owners if you don’t have a system or a tool that captures those things and reports them to an owner or an asset manager.

Very few systems do that effectively. That’s one of the reasons that we created Leonardo247. It assists in that process.

Further, when you do that, you’ll create so much more trust between your company and the property owner. For the first time, they’ll have real confidence that the asset is being cared for properly. That’s good for everybody.

Code Compliance

The other thing that comes along with proper asset management is code compliance. You need to be aware of what the municipal codes are. You need to be aware of basic risk mitigation practices. That includes mitigating trip hazards or keeping branches trimmed away from the roofs as wintertime approaches so you don’t have snow loads. Also, you’re inspecting and maintaining your balconies on a regular basis.

There’s a whole host of risk mitigation tasks that, in theory, you could ignore forever and be fine. But the one time that something happens, if you haven’t kept up with your risk mitigation, really bad things can happen.

Insurance policies can get canceled because you’ve been negligent in upholding the local codes or best practices with respect to maintenance. That can be a silent killer for your assets.

One client came to us after they had a fire at a property. They hadn’t done a basic annual fire inspection, and when the underwriters found that out, they denied the claim. The underwriters said that the client hadn’t upheld their responsibilities. That company went into bankruptcy because the millions of dollars in losses and claims from the residents all hit the owner. The property management company was off the hook because management companies are typically indemnified in those kinds of scenarios.

In short, proper risk management is a significant piece of asset management but it’s too often overlooked.

Want to learn more about the right asset management tools for property managers? Click here to contact us and request a demo.

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