| Residential real estate investments offer a history of | | | | A poor management company can quickly cause the |
| proven investor gains. At the same time, the success | | | | drastic loss of occupancy, lead to inflated expenses, |
| path is littered with failed investments and investors. | | | | cause outsized capital costs and without quick actions |
| Assuming you protect yourself adequately from | | | | result in a failed project. The key is regular review and |
| leverage risk, provide adequate operating cash, and | | | | property inspection coupled with proactive |
| have sufficient reserves. These three items in my mind | | | | management company discussions. Additionally, a |
| are foundational. How do you assure your capital will | | | | continual process that checks management |
| be safe and that you will avoid unnecessary risk? | | | | alternatives for cost, efficiency, effectiveness and |
| Three areas deserve focus for this goal: | | | | leading edge systems and skills are important parts of |
| | | | this effort. |
| 1. Location quality, | | | | Asset management is the continual process of |
| 2. Management quality, | | | | reviewing investment needs, improvement plans, |
| 3. Asset management quality | | | | management shifts, and market conditions for sales |
| Looking at location, the key is your pre purchase | | | | and financing to maximize the capital results of the |
| market analysis and your ongoing market studies. | | | | investment. The asset manager is the key operational |
| Choosing a location in a quality neighborhood with | | | | component to the first two issues and his or her skills |
| strong traffic, good sources of employment, and other | | | | following the market, developing strategies, and |
| area amenities a resident will desire puts a project on | | | | implementing plans is the gear that make the other |
| the right footing at the outset of the project. However, | | | | two issues come together. |
| real estate investments are often long term endeavors | | | | While the actual day to day function of these |
| during which time neighborhoods evolve and trends | | | | components may be out of a silent investors hands, |
| change. Recognizing that events are turning against a | | | | attempting to effectively measure the quality of the |
| location and selling early is an important capital risk | | | | investment location, reviewing how the property |
| mitigating step. In some respects, this is perhaps even | | | | management processes will be handled, and testing |
| more important than choosing the right location | | | | the asset management skills are important pre |
| because an owner may attempt to ride out events | | | | investment activities. Further, during the course of the |
| leading to a total loss when the greater finesse of | | | | investment asking the right questions about these |
| following the area market requires more drastic | | | | issues is a good way to help your principals perform |
| actions. | | | | more effectively for you and for themselves. |