Real Estate Acquisition vs. Asset Management

Acquiring a real estate asset can be a complicated ordeal. When shopping for properties to invest in, your top priority needs to be risk management making sure a property can accrue more value than it costs to maintain. After the purchase, however, the main focus turns to managing the property. 

In this blog, we’ll talk about the differences between real estate acquisition vs. asset management. The contrast between the two can be stark, but there are a few similarities that may surprise you. 

What is the difference between asset management and acquisition?

Here’s a quick overview: Buying property is asset acquisition. Taking care of property after a purchase is asset management. Both take planning and execution, but one focuses on the period leading up to ownership while the other is ongoing.

The process of acquisition can be a long and arduous one, involving:

• Property inspections: Engineers and building inspectors walk the property to check for problems and irregularities. They write a report that gives investors a clear understanding of how well everything works on the property, as well as what it will cost to take care of any problem areas and get them in working order. A proper inspection can take months to finish. 
• Comparative market analysis: Using market and sales data, investors make estimates about the potential profitability of a property given the comparable rental rates (“comps”) of similar properties nearby. Collecting and analyzing the data takes time, even with the help of AI data aggregator tools. 
• Planning for ongoing property management: Purchasing a property is just the first step. From day one, property owners will need pieces in place for upkeep if they are to attract renters or sell the property for more than its initial purchase price.

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Acquiring a property takes a lot of number crunching and thought to accurately assess risk. And while high risk potential is the source of high rewards in real estate investment, failing to properly assess risk could have you begging other investors to take property off your hands. 

Asset management is different from property acquisition. Rather than offering data about whether or not to purchase a building, it takes place after the sale is complete.

Asset management generally involves:

• Establishing investment goals for the property: Asset management strategy is intimately tied to what investors want to achieve with their investment. For example, a property flipper is less interested in expensive repairs than in cosmetic ones that attract impulsive buyers. Asset managers can recommend the right places to spend investment capital to achieve that goal.
• Regular maintenance and upkeep: Depending on the property, you may need a facilities team to perform routine maintenance and alert you to systems in need of repair. Asset managers know who to call to do the job right.
• Finding and accommodating renters: Most investment properties depend on having renters, but finding them isn’t always easy. Asset managers hire teams who work to keep the property occupied, helping to protect its value and ongoing revenue. 
• Exploring uses for building capital: An asset manager can coordinate with property owners to use the property’s equity for covering the costs of improving the premises. This prevents investors from having to front their own cash to keep the property in working order.  

Basically, an asset manager is kind of a private realty strategist for a given investment portfolio. The property is their project, and they monitor it closely to find opportunities to add value. 

What is the difference between property management and asset management?

While asset managers manage property portfolios, their main priority is maximizing financial returns, not managing the properties themselves. That job is left to a property manager. 

Property managers are usually hired by an asset manager to take care of the more day-to-day responsibilities as far as a property’s actual uses. They tend to know more about how to find renters, as well as how to leverage the nuances of landlord-tenant law when dealing with any renter issues.

Asset managers hire property managers to:

• Keep units occupied by advertising and showing them to potential renters
• Find good, reliable tenants who consistently pay rent
• Manage communications with tenants to keep them satisfied and happy
• Ensure the property stays in good condition by scheduling regular cleanings and basic maintenance
• Keep asset managers and investors informed of the property’s performance
• Provide periodic reports as needed 

A good property manager can be vital to asset management. They are plugged into local communities, acting as the finger on the pulse of the property’s profitability. If there’s a problem looming, a property manager should be the first to let you know. 

Is asset purchase the same as acquisition?

Another investment category similar to acquisition is asset purchasing. The two sound similar, but they have different legal frameworks. 

Acquisition is a complete change of ownership once a property is acquired, everything associated with it becomes assumed into a single entity. 

With asset purchase, some past ownership may remain. For example, when you purchase an office building, some of the existing businesses may remain independent from the new owner. Previous lease agreements can still be valid. 

If that same building is acquired, there’s a possibility for new lease agreements and tenant relationships. 

Asset purchase can be compared to buying a car, whereas an acquisition is more like buying a car company. The new owner controls 100% of the asset.

How to know when to acquire a property

There are lots of properties out there for sale. Knowing whether they meet the goals of your portfolio takes research and due diligence. Plus, it can be expensive, which is why many property investors are turning to AI-driven investment tools. 

AI real estate tools have already had a huge impact on the industry, thanks to the troves of information they scrape from different real estate databases. Rather than waiting for a real estate agent to get back to you with answers to your investment questions, AI real estate tools report on exactly what you need to know, right when you need to know it. 

Tools like Leni provide investors with impactful insights that make purchase decisions clearer and easier. 

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