GENERAL NEWS
Property management vs asset management
By Turnie Morolong
Both property management and asset management form aspects of real estate management.
There is however a difference between property management and asset management. The
term “property management” refers to the “day to day” operations of a property with a view to
achieving the objectives of the owner of the property. The property may have a value to the owner
because of functional reasons (eg own occupation), economic reasons (as a financial investment)
or subjective reasons (status) or a combination of any or all of these reasons. The basic objective
of property management is to maintain these values.
Functionally property management can be divided into the following areas:
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Leasing dwellings, sites, rooms, etc
Tenant administration (collecting rent and other charges)
Risk management
Maintenance of the property and facilities
Management of expenses and income
Budgeting, record keeping and reporting
Marketing
Working with staff and contractors
Enforcing rules, regulations, covenants and guidelines
Property asset management, on the other hand, is centred on financial
matters; maximising the return on investment and value of the property. Asset
managers look at property as an investment. Asset management focuses on
the strategic issues of optimising returns on investments. The decisions are
of a tactical nature and often have a risk minimisation angle; streamlining
operations and repositioning a property to reduce costs and increase income.
Asset management includes tasks such as:
• Providing advice on continuing the present use of the property (eg on
rehabilitation, modernisation or conversion).
• Providing advice on restructuring the financing of the property or the
composition of the property portfolio.
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• The development, implementation and monitoring of a business plan
for each property in the portfolio.
• Finding and working with lenders.
• Monitoring the performance of the property manager against
benchmarks.
• The supervision of regular valuations by qualified and appropriately
experienced professionals.
• The management of the sales and acquisition process which includes
broker liaison, the preparation of feasibilities, negotiations, the actual
transfer of the property and proper handover of all documentation.
• Knowing and continually researching the general economic
environment and in particular the micro and macro property cycles.
• The management of the accounting and secretarial function.
• The development and implementation of a policy to fund long-term
preventative and capital replacement expenditure.
In conclusion, owners must know the difference between property
management and asset management before hiring someone in which
to entrust their investment because there is a difference. Property
management is concerned more with the process of overseeing the
operation and maintenance of properties to achieve the objectives of
the property owner. Asset management, on the other hand, unlocks the
fullest potential of the value of the properties. Property asset management
is therefore strategic in intent while property management is more
operational in intent.
ISSUE 39 - SEPTEMBER 2019