Finding great real estate deals is one thing. Knowing how to manage them is another. To become a successful GP or fund manager, you need acquisition and management skills. That’s when you start to see real returns and can start scaling your portfolio.
However, best practices for managing real estate are constantly evolving. If you’re still tracking returns with spreadsheets or sending manual emails to investors, there are better ways. With dedicated real estate investment management software, you can automate routine tasks to free up more time for high-level business decisions and relationship building.
What is real estate investment management?
Real estate investment management is the practice of overseeing real estate assets or funds to maximize their financial returns and value. It involves property acquisition, fundraising, leasing, maintenance, operations, distributions, and strategic long-term planning.
Real estate investment management vs. private equity management
Here are the differences between real estate investment management and the similar but different practice of private equity management:
| Real estate investment management | Private equity management | |
| Asset type | Physical real estate (residential, commercial, industrial) | Companies or business equity (private companies, startups, leveraged buyouts) |
| Management focus | Property operations, leasing, maintenance, tenant relations | Business operations, strategy, financial restructuring |
| Relevant regulations | Real estate laws, zoning, property taxes | Securities regulations, corporate law, shareholder agreements |
| Typical investors | REITs, institutional investors, high-net-worth individuals | Institutional investors, pension funds, high-net-worth individuals |
Asset management vs. property management
Another important distinction to know is the one between asset management and property management. Here are the key differences:
| Asset management | Property management | |
| Primary focus | Maximizing the overall financial performance and value of a real estate portfolio | Day-to-day operations and maintenance of individual properties |
| Stakeholders | Sponsors and investors | Tenants, vendors, sponsors, investors |
| Key metrics | IRR, equity multiple, cash-on-cash return | Occupancy rate, rent collection, maintenance response times |
| Skills required | Financial analysis, market knowledge | Operational management, customer service, property maintenance |
Real estate investment management lifecycle
The first step to managing real estate is understanding the investment management lifecycle:
1. Capital raising and investor onboarding
Before you can pursue a real estate deal, you must raise the necessary capital to fund it. This involves everything from building investor pitch decks to designing subscription workflows. With Agora, this is easy. The platform lets you easily track fundraising progress, boost conversions, and ensure a smooth onboarding process.
2. Acquisition and due diligence
After securing funding, you must carefully review potential property acquisitions. Your due diligence should span the financial, operational, legal, and environmental aspects of the deal. To avoid making a costly mistake, work with real estate lawyers, analysts, and other professionals.
3. Operational oversight and cash flow optimization
Once you own the property, it’s time to optimize operations to maximize cash flow. This could mean implementing value-add improvements, cutting unnecessary costs, negotiating better vendor contracts, or raising rent to market rates. The key is to carefully monitor income and expenses so you can identify areas for improvement.
4. Investor reporting and distributions
As the asset generates returns, you must report on its performance to investors and distribute their profit shares. Agora includes an investor portal where you can keep LPs updated with real-time investment dashboards and reports.
5. Exit planning and asset disposition
Finally, every real estate investment must have an exit plan, whether that’s selling or refinancing the property after a certain period. As the exit date nears, prepare the property, find a reliable broker or lender, and arrange final investor distributions and return reports.
Key metrics in real estate investment management
To maintain a profitable real estate investment, you must monitor (and optimize) these metrics:
| Net operating income (NOI) | Net operating income (NOI) is a property’s annual income after deducting operating expenses. It measures an investment’s profitability at the property level. Here’s how to calculate it:
NOI = Gross operating income – Operating Expenses |
| Internal rate of return (IRR) | Internal rate of return (IRR) is the discount rate at which the net present value of all future cash flows from a real estate deal is zero. It measures annualized return while accounting for the time value of money. IRR is typically solved using Excel’s =IRR() function or other financial calculators, since it usually can’t be solved algebraically. |
| Equity multiple | Equity multiple (EMx) is the ratio of total cash distributions to total equity invested. It shows how many times the investors’ original equity is returned over the life of the investment. Here’s the formula:
Equity multiple = Total cash distributions / Total equity invested |
| Occupancy and rent collection | Occupancy and rent collection help you understand how your property is performing compared to its potential. Occupancy refers to how many units are filled by tenants, while rent collection refers to how much of the rent owed is actually collected. |
| CapEx vs. OpEx tracking | Capital expenditures (CapEx) are the cost of major improvements or unexpected repairs that extend a property’s useful life or increase its value. Meanwhile, operating expenses (OpEx) are the recurring costs necessary to keep the property running (maintenance, utilities, management, etc.). Track both to keep your costs in check. |
Tools and technology for modern real estate investment management
To stay ahead of the competition and keep investors happy, you must leverage the latest real estate management tech. Here are some examples:
Centralized dashboards for real-time data
Instead of updating investors with annual or quarterly reports only, you can give them real-time insights into their investment performance with centralized dashboards. These track key performance metrics (KPIs) like IRR and cash flow for stakeholders to review at any time.
Automated distribution and waterfall calculations
Distribution and waterfall calculations can be complex. To avoid human and/or spreadsheet errors, invest in software that automates these calculations. For example, Agora has automated waterfall calculations built into its platform, ensuring faster and more accurate payouts.
Investor portals and self-service reporting
Providing on-demand access to investment documents like K-1s is a great way to promote transparency and cultivate trust. Investors like to be in the know, and a dedicated investor portal with self-service reporting functions is a simple way to keep them updated.
Integration with CRM, accounting, and fund admin platforms
When you have a well-integrated tech stack, everything runs more smoothly. For example, by connecting your investment management platform with CRM tools, accounting software, and fund admin systems, you can reduce repetitive data entry and keep data more organized.
Key strategies in real estate investment management
When managing commercial real estate assets, you have many strategies to choose from:
Portfolio diversification
Minimize risk by diversifying your portfolio across property types, geographic markets, and investment strategies. That way, you don’t keep all your eggs in one basket. If one sector performs poorly, it won’t devastate the entire portfolio or fund.
Active vs. passive management
As a GP, your real estate management can take on varying levels of involvement. For example, you could focus on stable, cash-flowing assets with long-term tenants that require minimal work, or you could tackle more hands-on investments like major construction or renovation projects.
Value-add and opportunistic strategies
Value-add and opportunistic strategies refer to investments that carry higher risk but also higher potential reward. Think ground-up developments and lease-up strategies where more could go wrong, but where the potential upside is high.
Compliance, audits, and reporting obligations in real estate investment management
Real estate investment management requires legal compliance across:
- SEC filing and financial statement requirements. These include timely filing and accurate financial disclosures to ensure transparency and protect investors.
- eSignature and digital compliance workflows. These help streamline contract execution while maintaining legal validity and adherence to real estate regulations.
- Document retention and audit trails. Detailed recordkeeping helps create audit trails required for regulatory reviews and protects you against disputes.
Emerging trends in real estate investment and asset management
Now that you’re familiar with real estate asset management, here are some emerging trends in the field:
Use of AI and predictive analytics
With the power of predictive analytics, you can forecast rent growth, tenant turnover, maintenance needs, and more. As a result, more GPs are relying on AI tools to identify acquisition opportunities and manage assets more efficiently.
Increased LP demand for transparency
More than ever, limited partners expect visibility into fund performance, fee structures, and risk exposure. To satisfy this demand, you must adopt transparent reporting practices.
ESG metrics and sustainability reporting
Environmental, social, and governance (ESG) considerations are becoming increasingly important to commercial real estate investors. Managers who implement green building standards, carbon reduction strategies, and transparent reporting have a competitive edge.
Tokenization and fractional ownership models
Blockchain technology can create tokenized real estate assets, lowering the barriers to entry for real estate investing. As this technology continues to develop, the industry could see a traditionally illiquid asset become more liquid, opening the doors to new types of investors.
Common challenges in real estate investment management
Here are some common pitfalls to avoid in real estate investment management:
| Disparate systems and manual workflows | Relying on disconnected tools and manual processes can create inefficiencies, errors, and compliance risks. |
| Scaling communication with a growing LP base | As the number of LPs increases, maintaining consistent, transparent, and timely communication can be challenging. But with a dedicated CRM, this becomes easier. |
| Managing multiple assets and entities efficiently | Coordinating financials, reporting, and operations across multiple properties requires streamlined workflows that avoid bottlenecks. |
| Adapting to changing market conditions | Real estate investment managers must stay agile to respond to economic shifts, capital markets, and regulatory updates. |
Best practices for scaling real estate investment management operations
Here are some best practices for scaling your real estate investment management operations:
- Establish repeatable processes for reporting and communication. Standardized workflows for investor updates help ensure consistency and accuracy as your business grows.
- Automate distributions and performance metrics. Automation can minimize errors and provide LPs with faster, more reliable access to investment performance data.
- Build resilient tech stacks. Investing in integrated tech platforms can help you streamline operations and quickly adapt to new regulatory or market demands.
- Reduce admin overhead for leaner teams. Leaner teams let you operate more efficiently by focusing on high-value strategic activities over repetitive tasks.
How to choose the right real estate investment management platform
When choosing a commercial real estate investment management platform, look for a balance between ease of use and powerful features. The right tool should offer automated reporting, distributions, and compliance, while also integrating seamlessly with your existing tech stack.
In addition, look for a scalable product that can grow with your portfolio, so you don’t have to migrate to a new system later.
Finally, ensure the platform is intuitive for LP investors. It should have an investor portal that’s easy to navigate and includes all the self-service reports and KPI dashboards your LPs expect.
Conclusion
Ultimately, the best commercial real estate investment managers establish repeatable workflows, leverage technology, and stay ahead of emerging trends. That’s how you maximize returns while providing investors with transparent reporting.
Whether you’re just starting to manage assets or scaling an established fund, Agora’s real estate investment management solutions can give you a competitive edge in today’s market.
