Three Best Practices for Asset Management Success: NFL to AM
I wanted to share this post to first share a brief story of my path from the NFL to Real Estate Investing & Asset Management and share my view on the Three best practices for Asset Management success. I retired in 2017 from a career ending knee injury with the Tennessee Titans and have always seen myself transitioning and investing in Real Estate. I could remember reading “Rich Dad Poor Dad” in the first offseason after my rookie year (after blowing over $20,000 in expenses in my first month off after our season was over which to this date I have no idea what I spent it on) and said to myself “If I keep going at this rate I am going to become another 73% statistic of athletes going broke after the NFL.” Nonetheless I bought my first property in late 2016 and after my retirement in 2017, I began my commercial real estate career in brokerage specializing in multifamily investment sales and then on to Asset Managing a $50m multidisciplinary real estate portfolio from Multifamily, Office, Retail and Mixed-Use commercial assets for a local developer/mentor of mine in Washington, DC while buying smaller multifamily and rehabs.
From my experience in Asset Managing stabilized, value-add and distressed properties, my hopes are that I can share and add value to those that are new to this space and actively pursuing multifamily and other assets. Here are my three best practices for Asset Management (none in particular rank but they are all very important).
Property management – If you are not new to this space you have probably already heard that property management is the most important piece to your team on managing and operating an asset. They are an extension of YOU and are the first point of contact for your customers (tenants). As a wise man once said “you can never make a new first impression.” You need to be very slow when hiring property management companies as they will be very energetic to obtain your business but some tend to lose energy after they have secured the management agreement. Like any teammate, you should hold them accountable and don’t be afraid fire fast. Always have the expectations set up-front and IN WRITING before you sign the agreement so that there is no confusion at closing.
Systems and Processes – Complexity kills execution. In our playbook we use to have an acronym on the first page that said K.I.S.S (Keep It Simple Stupid). Whether you are new or experienced you should begin or have documented systems and processes (standard operating procedures) on how you plan to manage any asset fundamentally with an understanding that there is a layer on top with a special plan for that particular asset that may be a stable or value-add play. Invest in systems like AppFolio, Rent Manager, Buildium, etc. Create a process for handling open AR’s and AP’s (receivables & payables), reports, evictions, filling vacancies and weekly/monthly cadence with your PM. Have your accounts ready before acquisition. I recommend having separate accounts for operations, capex, security deposits, escrows and owner distributions (From syndication for passive investors) .
Lead With Revenue – In asset management, every property should have a clear business plan to maximize income and lower expenses. You should be going into every property understanding the budgets for each expense line item with conservative revenue projections as a good PM in a particular market would be able to assist you with. Your main goal is to execute the business plan, drive performance and drive profitability of the asset while understanding the strength of the market, which at times can require you to be savvy and think outside of the box. For example: understanding when and when not to be aggressive on rents with respect to the pulse of the market. Analyze deeply any operational inefficiencies, your tenant profile and your business plan to effectively create a playbook to maximize revenue.
I hope this piece has created some value and gave some insight on what I believe are three important best practices to Asset Management at a high level. As the saying goes “the jockey is more important than the horse!”