You may already be familiar with the concept of apartment syndication. Investing in these multi-family assets has so many moving parts. As a passive investor, it is good to know about these moving parts and the hard work your syndicator or sponsor is doing to both protect and grow your investment dollars. One of the big pieces of the operational puzzle is asset management.
What is Asset Management?
When due diligence and negotiations are complete, funds are raised, loan is secured and property is closed, what happens next? Operation and execution of the business plan. The new property management team comes in and establishes order as quickly as possible on the property. Well before that there should be alignment with regards to what is the plan for the property. This includes any renovations and capital expenditures, operational improvements such as reduction in vacancy and improvement to rent collections, etc.
With the plan in place, the Property Management team must make it happen. All of this coordination does not happen in a vacuum. This effort is managed by the syndicator to ensure that the property management team is working in accordance with the plan and to ensure the intended results are realized. The whole effort is called asset management.
Manage the Property Manager
Regardless of whether the syndication has its own in-house property management team to manage or outsources, asset management is a key function of the syndicator. In fact, it may be the most important. The whole investment is based on the performance of the property. The overall goal is to increase equity and valuation of the property through forced appreciation. That happens through any combination of increasing income and reducing expenses. If that does not happen, the property is not improved, and subsequently more valuable, for the next owner.
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