How do you do asset management when it comes to your real estate syndication or your real estate investment fund? In this four-part series, we’re going to go through exactly that – the four big steps that you take.
There is some overlap between property management and asset management. But think of it this way: asset management, for the purposes of these videos, is that level above property management. It’s not about banging on toilets, fixing things, and talking to tenants. These are the higher-level decision-making skills that you are going to need in order to run one asset effectively for your investors or multiple assets.
This is part one of four. It’s also a blast from the past – videos that I put together for a high-level coaching program. Many of the participants were high-level real estate executives from REITs who wanted to put together their own syndication or fund, or high-level brokers. So a lot of them had familiarity with property management itself, and we’re talking about the next level up – that level of asset management and how you’d manage those. I know you’re going to find this video helpful.
We’re talking about operations and custody. In this particular video, we are going through property analysis as it relates to that custody. So why are we doing this? Let’s start there.
As we’ll talk about in all of these custody videos, we want to set a baseline in order to measure against it. The purpose of setting that baseline is so we know at one point certain how things were, so that we can see how things have changed. We need to know where we are on the map in order to get to where we want to go and take this property to where we think it belongs.
Under property analysis, there are two different things that we’re really looking at: the physical property and how that property is being managed.
For the physical property, there are things that are very specific to the big picture of the property. These include the dimensions of the property, how it’s constructed (is it tilt-up, all steel, all wood, or framed?), and what it looks like. It’s critically important to add these to the plan because you’re setting a baseline and you want it to be thorough.
You should gather up all plans, as-builts, blueprints, and floor plans. Build a stacking plan to make sure you have it all in one place. Gather up all the surveys, primarily the ALTA surveys done for the property. Understand what the frontages are like, what access, ingress, and egress looks like. Is there parking? Is there a stoplight right at the exit?
Understand your parking situation. Parking is always critical in a commercial building. Know the zoning and what restrictions are put on the property, as they can change over time. Know what sort of easements there are.
Other things that relate to the building are the smaller pictures: what improvements have been made? How are the systems done, like your HVAC and plumbing? When were they last done? How new or old are they? What about the elevators? Do they currently have the right certificate, or do they need to be updated? How about your fire suppression system? Is it up to code?
Where are you at on all of your warranties for these systems? The roof warranty is a perfect example. You need to know where you’re at on your roof warranty because a roof has maybe 20 years of life, so you know what’s coming.
Related to this is management. When something goes wrong, who’s the person that actually knows about these things? Who needs to be contacted? We need to understand the roles of the management, particularly property management. What are the job descriptions? What is the communication plan?
What are the policies and procedures? How do you deal with a slipping fall? How do you deal with a new tenant coming in or giving over vacancy? How do you deal with build-outs or complaints or service requests?
Lastly, because your investor isn’t interested in you making money as the property manager (should you be the property manager), what they’re interested in is the agreement that the entity of the property manager has with the owner of the asset. What fees are getting paid?
This property analysis may not be done by you if you’re not the property manager, but you should expect this is done by your property manager. These are very important things in order to set that baseline so that you can manage it properly or have it managed properly and make smart decisions going forward.
That’s a high-level view of asset management, or the first part of asset management for this series of videos – part one of four talking about the property analysis that needs to take place. We do this to set that benchmark and identify issues. As we’ll see in later videos, we’ll take that same information and move it along so that ultimately you make better decisions when it comes to what I call the custody part of being a syndicator or investment fund manager.
My name is Tilden Moschetti. I am a syndication attorney for the Moschetti Syndication Law Group. If we can help you put together your syndication or investment fund, we’d be happy to talk with you. Not only do we take care of the legal side of things to keep you in compliance with the SEC and state regulators, but we’re also there as experts in how to do syndication investment funds, and we’re happy to help share our expertise and our knowledge to make sure that you are successful.