If you’re like me and are inclined to draw a parallel between a Real Estate Portfolio Manager (REPM) and a Financial Portfolio Manager then, firstly let me thank you for your company, and secondly let me tell you that we’re both, unfortunately, wrong.
Many investor clients are drawn to the investment side of the real estate industry, but they don’t want the challenges of the daily operations of owning individual properties.
To invest in properties without the brain drain, an individual can invest in a portfolio of properties with a professional management company. Real estate Portfolio Managers oversee a portfolio of properties to provide a successful return on investment for their clients.
A Real Estate Portfolio Manager offers invaluable services to those clients (a) by ensuring the best and highest use of an investor’s capital and (b) with transparent reporting on performance. A Real Estate Portfolio Manager is similar to a Financial Portfolio Manager in that both use forecasting and modelling to provide good counsel to their clients.
An investor’s motivation can vary greatly when getting into the market or when expanding beyond their existing portfolio. Some individuals get involved in real estate for the income potential from rentals or repairs and renovations causing the property to appreciate (colloquially known as a fix-and-flip). Others may use their investments as a method to hedge inflation. It’s also common practice to leverage property for purchasing other assets of greater value, essentially to scale up their portfolio. Many investors are drawn to the thrill of the hunt, looking for the next big thing; they value being ahead of market trends.
Canadian Real Estate Wealth Magazine turned to the very talented leader of the Jesse Davies team, Mr. Davies himself, for insight into the benefits of having a Real Estate Portfolio Manager to manage a portfolio of multiple investment properties. Jesse is the owner of Casa Property Management and brings a wealth of knowledge in various property types found all over Calgary to the table. “We treat each and every rental property like it is our own. Most of our owners live out of province or overseas or just don’t have the time to handle showings, qualifying of candidates, signing of leases, rent collection, repair requests and all the other tasks management of a property entails.”, noted Jesse.
A common methodology of a Real Estate Portfolio Manager is to put together a ‘bundle of properties’ for an individual or group of investors to consider. This is often referred to as a Real Estate Fund or Investment Fund.
(i) Allows for diversification of the portfolio. An investor’s funds are spread across various properties, thereby minimizing the risk of investment silos and increasing the likelihood of generating consistent cash flow, which is the name of the game for investors.
(ii) Encourages property-type and geographic variety. In presenting this option, a Real Estate Portfolio Manager can minimize the impact of negative factors, like a zoning variance being declined or a piece of land being discovered to be a brownfield, impacting an investment.
(iii) Less big swings. A small investor owning individual rental units can feel the pinch when tenants vacate or when a unit remains unoccupied due to its need for repairs or upgrades. Investment funds avoid these dramatic pendulum swings.
(iv) Minimizing personal liability. A real estate investment fund doesn’t require a client to personally guarantee a loan or use their credit to qualify to buy a property. From a legal perspective, those working with a real estate fund have limited liability if someone sues them. In a worst-case scenario, the most these clients can lose is what they’ve invested.
When asked what separates the wheat from the chaff or the exceptional from the great REPM organization, Mr. Davies shared the following, “We have a team of highly motivated administrators & leasing agents at the Jesse Davies Team who understand the market and are very detailed-orientated. We structure our compensation for our staff based on performance. Their commissions are paid only when we rent the unit out and the higher price we obtain the higher their commission so everyone is working for the same motivation and outcome.”
Although Canadian writer Robin Sharma was not describing the dedication of REPMs when he noted, “Greatness comes by doing a few small and smart things each and every day. [It] Comes from taking little steps, consistently. [It] Comes from a making a few small chips against everything …that is ordinary so that a day eventually arrives when all that's left is extraordinary”, he may as well have been! It is for this extraordinary reason that so many investors are finding Real Estate Portfolio Managers to be indispensable in getting them extraordinary results with more ease and a heck of a lot faster than going it alone.
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