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Real estate asset management, despite being one type of asset management, can be quite a challenge considering that properties are not your traditional financial securities. In the US, it is still considered a fast-growing industry, with the real estate sector constantly hitting new heights even in the unexpected attacks of Covid-19.
Real estate asset management refers to the practice of optimizing the value and return on investment of a property. This involves identifying the revenue’s sources, cutting expenses and managing risks. Real estate asset managers can either manage the properties on the clients’ behalf or work in different types of AM (PE, MFs, PFs, etc) whose aims are investing in properties.
Real estate asset managers, like any types of asset managers, work towards a common goal of enhancing market value and raising profits. Those who desire to be a real estate asset manager can apply to buy-side asset management firms or to independent real estate institutions that focus on contending to individual clients’ needs.
Asset management firms like hedge funds, private equity, venture capital, mutual funds, and ETFs invest in a variety of assets (stocks, bonds, derivatives) in order to maximize return while minimizing long-term risk. However, funds that focus on real estate investments do not divert their money to other financial securities.
A real estate investment is similar to a stock or bond in many ways; however, it definitely takes more time, effort, and patience than traditional securities. For example, market conditions, types of tenants, and number of vacancies are just some of the factors that can damage the value of your investment property. The real estate market is filled with intricacies that, if handled incorrectly, can reduce or even eliminate an investor’s gains. Nevertheless, a great plus point when it comes to the real estate industry is that it is highly lucrative and real estate almost always increases in price and value.
1.2. Different types of real estate investments
Different types of real estate investments can be categorized into:
- Commercial properties: hotels, malls, office buildings
- Residential properties: homes, condos, duplexes
- Mixed-use properties that serve both commercial and residential purposes
- Lodging rental properties that are only meant for temporary and seasonal stays
Real estate investors looking for long-term gains may consider purchasing properties that will increase in value over the course of a couple of years or more. In this case, real estate management might prioritize renovations in order to increase the value of the premises.
Short-term investors may search for chances to buy rental homes or quick fix-and-flips. For this type of investment, asset managers place a greater emphasis on lowering operating expenses and increasing revenue.
1.3. Who hires real estate asset managers?
Besides asset management organizations, other entities also look for real estate asset managers. The full list of firms employing real estate asset management include:
- Asset management firms (hedge fund, private equity, venture capital, mutual fund and ETF
- Investment banks (real estate asset managers can handle some aspects of the real estate investment banking division and asset management division)
- Real estate companies
- Property management companies
- Real estate development companies
- Commercial banks
- Corporations
- Government agencies
- Insurance companies
- Mortgage brokers
- Religious & charitable organizations
The primary role of a real estate asset manager is to identify properties available for investment, review and manage current real estate investments, mitigate risks and make sure that costs are optimized and returns are maximized. Compared to a property manager, real estate asset managers fix their attention on the profitability aspect of the premises.
Based on the nature of the job, a basic requirement of a real estate asset manager is to have extensive understanding of the real estate sector. Therefore, it is definitely an ideal exit path for those who have a track record in real estate investment banking or in the real estate industry in general.
A bachelor’s degree in business, finance, or real estate is the first and simplest thing demanded from a candidate in real estate asset management. Other essential requirements to be qualified for a real estate asset manager will be further discussed in the following parts.
The career ladder in real estate asset management can either be hierarchical or flat. In a hierarchical structure, an employee starts off as an research associate before being promoted to the analyst level. Analysts are more focused on investment research and modeling. Working for a few more years, you will advance to the senior analyst and portfolio manager level.
On the other hand, the flat structure allows the analyst to work directly with the portfolio manager.
Another thing to point out that real estate asset managers can be split up into product groups, for example:
- Condominium managers
- Apartment managers
- Land managers
- Retail property managers
The annual income of real REAM research associates ranges from $70K – 150K. Analysts can earn double that amount, making up to $300K per year. The pay of a senior analyst or sector analyst can reach up to $700K while that of a portfolio manager, who is the head of the firm, falls somewhere between $500K and $1M.
While the information regarding real estate asset management salary is quite hard to retrieve, it is quite close to what asset managers earn. We provide a table illustrating the pay of different roles in real estate asset management for your reference:
| Roles | Promotion Timeline | Salary (US$) |
|---|---|---|
| Research Associate | 1 – 2 years | 70K – 150K |
| Analyst | 2 – 3 years | 150K – 300K |
| Senior Analyst/Sector Analyst | 5 – 8 years | 300K – 700K |
| Portfolio Manager | 500K – 1M |
The pay expected may greatly depend on the asset management fee charged by firms. In real estate, fees for asset management typically vary from 0.5 to 3 percent of overall income from the investment or the value of the property.
It can be inferred that real estate asset management is a well-paid job, despite it being noticeably lower than the numbers recorded in investment banking, hedge fund, or private equity. This is due to the fact that real estate is a slow-moving industry, and you don’t have to be on the lookout all the time like when working in the stock or financial securities market. Therefore, the working hours are much more relaxed.
But, if you would like to look into how much investment banks, hedge funds, or private equity firms pay, check out our other articles discussing these topics thoroughly:
| Rank | Firm | Total Real Estate AUM (EU€M) |
|---|---|---|
| 1 | Brookfield Asset Management | 231,772 |
| 2 | Blackstone | 148,214 |
| 3 | Hines | 148,214 |
| 4 | PGIM Real Estate | 127,615 |
| 5 | MetLife Investment Management | 118,679 |
| 6 | Nuveen | 113,141 |
| 7 | AXA IM – Real Assets | 93,498 |
| 8 | UBS Asset Management | 91,347 |
| 9 | CBRE Global Investors | 90,400 |
| 10 | CapitaLand | 87,121 |
(Source: IPE Real Assets, 2020)
The biggest and most important difference that sets real estate asset management and property management apart is that asset managers look at real estate from a financial standpoint. They focus on seeking for potential investment properties, mitigating risks, and cutting costs to deliver the most profitable results while property managers handle day-to-day operational tasks like rent collection or maintenance.
A standard property manager will usually be in charge of things like:
- Finding and keeping renters
- Enforcing terms and conditions in the lease contract
- Rent collection
- Dealing with lousy tenants
- Working with contractors to solve maintenance issues
- Assuring that the property is kept in excellent order and is functioning well
Basically, property managers are responsible for the routine tasks, keeping things operating smoothly and helping to maintain the property’s value and reputation. An asset manager is primarily concerned with profitability, concentrating on the big picture and strategic decisions.
It’s possible that some tasks will overlap. Nevertheless, investors might find it mandatory to recruit both a real estate manager and a property manager in some situations, particularly if the firm has a heavy investment portfolio.
7. How to Get Into Real Estate Asset Management?
By 2022, in the US alone, there will be 322,300 job vacancies for real estate asset managers, as the demand for them will increase by 8% between 2018 and 2028, as indicated by data from the US Bureau of Labor Statistics. Nonetheless, this doesn’t mean that it will be no challenge entering real estate asset management.
7.1. What do you need to become a real estate asset manager
To have a chance in the real estate asset management industry, we recommend you to prepare:
- A bachelor degree in business, finance, real estate or other related field of study (a master’s degree will for sure be preferred).
- A Real Estate Administrator’s certificate administered by the International Institute of Management and Owners of Buildings (or some kind of license for the job your state might require)
- An outstanding resume stating your previous experience with the industry or the role. If you don’t have much working experience, consider adding points like: ‘participated in school’s real estate club’, ‘financial coursework’, etc.
7.2. Real estate asset management interview
Common questions during real estate asset management interviews are:
- Why asset management? Why real estate? Why our firm?
- Walk me through your experience with real estate asset management
- What are some recent trends in the real estate market?
- What are some of our latest or most successful projects?
- Why should we hire you?
- What is your management style?
Some tips to hit it out of the park:
- Do a lot of background research on the industry and the asset management firm
- Practice questions that you believe it would appear in the interview
- Though you are trying to showcase your best self, don’t be afraid to be honest and humble about your answers
- Ask follow-up questions at the end of the interview to show the interviewers that you’ve done some homework and you don’t come to play
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