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Investment_Companies_Offer_Investors_an_Effective_Alternative_to_Third-Party_Management

An investor who joins forces with an investment management company receives all the benefits that affiliation offers—property management that’s not only of the highest quality, but that also works hand-in-hand with asset and portfolio management.

 

Investment Companies Offer Investors an Effective Alternative to Third-Party Management

Mar 29, 2018

An apartment community requires a lot of attention to function properly. Some operations tasks are relatively simple, such as ground maintenance; others, much less so, such as dealing with rent arrears. The financial performance of a multifamily investment property must be managed, as well. An investor can undertake these managerial tasks personally, hire a third-party management company, or work with an investment management company that can offer unique advantages.

Options for Third-Party Management of a Multifamily Property

Multifamily property owners may choose to manage their properties themselves because they take pleasure in it or have a desire for full control over the day-to-day operations. Unfortunately, enjoyment is often the only benefit self-management offers, and it is not easily attainted. Outside management has proven repeatedly to be more reliable and to consistently outperform investor-owner management.

A professional management company is faster to respond to emergency repairs, more efficient at budgeting, and more adept at screening new residents than investor-owners. A management company has numerous resources and an entire organization dedicated to the many tasks of property management. This gives it the advantage of division of labor, with specialists trained in the fine points of apartment community management— everything from regulatory compliance and vendor contracts to plumbing and grounds maintenance.

Working with a management company may not be an unalloyed blessing for property investors that want to customize management, however. Consider that one of America’s leading property management companies services not only multifamily housing nationwide, but also senior housing, military housing, Section 8 housing, retail spaces, and offices. With such widespread product diversification, such large companies would likely be unable to offer investors any meaningful degree of personalization.

Real Estate Investment Management Firms an Alternative

There are undoubtedly some very good third-party real estate management companies, but even those that offer the best service have limitations. For example, bear in mind that third-party management companies are exactly what they claim to be—outside companies that operate for a profit. The profit incentive that motivates them may not always serve the bests interests of a property owner. Some companies might be tempted to relax resident standards in order to maintain a high level of occupancy or economize on maintenance expenses to the extent of negligence, for example.

Most property management companies employ excellent specialists and do what they claim to do. Even in those cases though, they do not offer the broad perspective that is crucial to an investor’s success. For example, asset management, which looks at a property from the point of view of financial performance, considers the effectiveness of property management as it reviews lease terms and legal liability. At an even higher level, portfolio management looks at an investment property in the context of the investor’s total investments. Depreciation, business strategy, and market trends are among the concerns of the portfolio manager, but things a property manager cannot be expected to tackle.

As an alternative, a real estate investment management company offers the integrated approach to property management that investors need, and that helps them thrive. An investor who joins forces with an investment management company receives all the benefits that affiliation offers. The investor can expect property management that’s not only of the highest quality, but that also works hand-in-hand with asset and portfolio management.

Investors can also gain access to greater opportunities when they choose an investment management firm over a third-party management company. By participating in the investment offerings of an investment company, an individual investor can buy equity interests in entities that own high-quality properties that would be inaccessible to them otherwise. For example, an investor might own an interest in a partnership that owns a luxury residential tower that would be impossible for him to invest in on his own.

At CWS Capital Partners, we are a fully integrated multifamily real estate investment management firm that offers everything from due diligence and risk management to transaction support and property management. We specialize in assisting our clients with 1031 exchanges, acquisitionsrepositioning, and development. We also own and manage luxury multifamily investment communities in major markets around the country and employ a team of experts who can help you hone your investment strategy.

For more articles like this one, check out our investment strategy blog posts.

Contact us today to get started with your next investment.

 

The information provided here is for your general informational purposes only. It should not be considered a recommendation or personalized advisory advice. CWS has made this third party information available from authors it believes are knowledgeable and reliable resources. However, its accuracy or completeness cannot be guaranteed and sentiment may change due to legal or economic conditions.

All investments involve risk including the possible loss of principal. You should familiarize yourself with all risks associated with any investment product before investing.

Advisory services are provided by CWS Capital Partners LLC, a registered investment advisor.

Securities offered by CWS Capital Partners LLC are through an affiliated entity, CWS Investments. CWS Investments is a registered Broker Dealer, member FINRA, SIPC.


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