Asset Management Maturity Model

by | Metrics

real estate asset management maturity

Real Estate Asset Management Maturity: Assessing and Enhancing GP Performance

The Asset Management Maturity Model is a framework for real estate investors to gauge how efficiently the General Partners are running their businesses, and if they are likely to deliver the expected returns on the investments they pitched. There are four levels of maturity in the Asset Management Maturity Model: Unaware, Reactive, Proactive, Optimized.

Why Asset Management Maturity Matters for General Partners

Having worked with well over 100 general partners, owner/operators and third-party property managers, I have seen a wide range of management styles and practices. Some companies are very professionally run, and they use conversations and data to find ways to improve their business processes, train their teams, and execute the business plan. I have also seen companies at the other end of the spectrum, that don’t have targets, don’t regularly review performance, and simply react when there are cash flow problems, employee turnover and resident complaints.

Think of any real estate General Partner that is doing very well. It is highly likely that they have mature asset management processes to drive their business. In this article I will describe the four stages of the Asset Management Maturity Model.

The Four Stages of Asset Management Maturity

The stages framework of the Asset Management Maturity Model gives investors an idea of how their General Partner is performing asset management.

1. Unaware

Companies in the Unaware stage

  • Don’t regularly look at the key numbers such as NOI, occupancy etc.
  • There is little emphasis on planning, budgeting or risk management.
  • As long as there is enough cash in the bank account, they don’t feel the need to regularly look at metrics.

We call this “flying blind”.

 

2. Reactive

Companies in the Reactive stage …

  • Review financial statements at month end.
  • They have budgets for NOI, total income and total expense, and look at budget variances.
  • If budget variances are significant, further analysis is performed.
  • They don’t have the ability analyze data by portfolio, asset type, asset age etc. and rely on standard reports from their accounting and property management systems.
  • There is limited emphasis on processes, training and team culture for driving business outcomes.

However, financial statements are lagging indicators of business performance. So, any corrective action taken is a reaction to events that have already taken place.

 

3. Proactive

Companies in the Proactive stage …

  • Track the leading indicators that predict NOI, cash flow, occupancy etc.
  • For example, the number of leads, applications, lease termination notices etc. are predictors of future occupancy, rental income and NOI.
  • In addition to the budget, these companies also maintain a forecast. Forecasting forces them to anticipate upcoming events and, if possible, proactively try to stay on plan.
  • They also set and track targets for non-financial metrics, such as lead captured, leases signed, unit turn days, work orders closed etc.
  • If key metrics are tracking below target, they are easily able to drill into data such as rent roll, General Ledger or charges and receipts to uncover issues.

Getting to the Proactive stage requires a strong emphasis on SOPs, metrics, training and company culture to product consistent financial results.

 

4. Optimized

Companies in the Optimzed stage …

  • Have figured out key key ratios. that propel their business.
  • For example, they know how many leads can expect from each dollar spent on advertising, know how many leads will convert into showings and leases etc.
  • They constantly track the important leading indicators and receive alerts when a metric is out of range.
  • They have organized their chart of accounts so that they break down their expenses by specific processes and activities.
  • They utilize historic data (e.g. collection rates, unit turn velocity, lead conversion ratios etc.) to predict quarterly performance.

These companies can continue to optimize how well they execute because they are measuring their processes (lead generation, leasing, unit turnover, collection etc.) and how much these processes are costing them.

 

What is RentViewer?

RentViewer is used by asset managers at real estate investment and management companies that use systems such as Yardi, Entrata, Rent Manager and Appfolio. The RentViewer real estate data warehouse simplifies data extraction and management so that asset managers can focus on analyzing and understanding their data and spend less time manually exporting and organizing the data.