Many investors considering entering the real estate market are unsure how to proceed. Some take a do-it-yourself approach and invest in a property on their own, but others find the process intimidating and instead choose to partner with a real estate investment management firm that offers significant advantages over working solo.
A real estate investment management firm can provide investors access to markets they would have difficulty finding or entering on their own, deliver high-quality management and advice, and offer joint investment products. To make it easy for new investors to understand exactly what experienced firms do, here’s a compact breakdown of what every top firm should offer:
Deep knowledge of the real estate market and finance
In broad terms, real estate investment management firms buy or develop properties, which they then sell whole or in part to their clients and manage for a fee. These activities require specific skills and resources that not every potential investor can master. Experienced firms have a deep understanding of the market, extensive knowledge of finance to evaluate a proposal and make sound real estate investments, and keen negotiating skills to finalize a deal.
The ability to meet specific needs and desires
Real estate investment management firms can differ greatly in their activities. They may specialize in a specific type of property, such as multifamily housing or shopping centers, as well as in a specific class of property, such as luxury or distressed. Some firms offer debt financing for properties as well. These differences are reflected in the rate of return, holding period, level of risk, and other considerations. With a broad range of options to choose from, investors can find a firm that focuses exactly on what works best for their goals.
Property, asset, and portfolio management
Real estate investment management is demanding on several levels. It is complex enough that it is generally divided into three specialties—property management, asset management, and portfolio management—each handled by a different team.
Property management—the day-to-day operation of a property—is time-consuming and labor-intensive, and is something many investors do not have the time or desire to oversee. Management on this level includes interviewing prospective tenants, handling leases, dealing with evictions, and attending to maintenance and repairs. No matter the size or type of property, good property management skills are crucial for success.
Asset management addresses a property’s financial performance and deals with issues such as lease language and legal liability. This team within a firm has an optimizing effect on property management by identifying improvements in management routines. It can also provide portfolio managers with information on individual properties that can guide their decisions.
Portfolio management analyzes all of an investor’s (or firm’s) real estate assets at the same time in light of holding periods, market trends, and other more global considerations. At this level of management, investment strategies and business plans are formulated.
Pooled financial and management resources
A real estate investment firm may offer investors the opportunity to join in pooled financial resources. Choosing to participate in a firm’s joint funds can give investors access to investments that would be beyond their means individually. An investor might obtain fractional ownership in a luxury apartment tower, for instance. An investment firm might also offer its clients tax optimization opportunities, such as accommodating 1031 exchanges, that would be hard to match if working alone.
Even without participating in a joint fund, an investor might become the co-owner of a property or of a number of units within a property, yet still benefit from the management provided by the firm. Often investors benefit from shared liabilities too, with individual holdings included in a joint fund to guarantee income in the event of vacancies, and umbrella insurance coverage provided by the firm.
Specialists and support services
By partnering with a real estate investment management firm, investors can benefit from a wealth of specialty resources, including professionals in fields such as capital projects, risk and safety. The firm might also have training, IT, human resources and accounting services that make an important, if indirect, contribution to the firm’s financial performance.
Choosing the Real Estate Investment Firm That Is Right for You
Investment management firms have been compared to mutual funds in that both offer the benefits of ownership without full management responsibilities. A firm’s track record should be taken into consideration when choosing a firm to invest with. As mentioned, real estate investment requires a number of highly developed and disparate skills, and not every firm has them in equal measure.
Real estate investments differ by intangible elements as well. Office properties, which often boast top-quality construction and premium locations, are considered prestigious. Multifamily housing is considered the most stable—regardless of what happens in the economy, people need homes and hold onto them longer than anything else.
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, acquisitions, repositioning, 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.
Please contact us to learn more about investing with CWS Capital Partners, or view our current offerings by completing our self-certification form for accredited or qualified investors.
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.