WHENEVER people buy real estate, whether for personal use or for investment, they do so in the hope that the property they are acquiring will increase in value through the years.
After all, there is the popular notion that real property often appreciates in value over time and, as such, it has always been a safe investment area. And, generally, it really is.
In this regard, property location is what buyers traditionally consider when buying a building or condominium, and with good reason. The fact is that the value of a building is always attached to the value of the land. Other aesthetic factors also come into play, like building design and the level and quality of amenities offered out of the box, but these often come secondary to the property’s location.
However, what is largely overlooked is the fact that so much of a real property’s value hinges on how effective it is managed over the long term. As such, property management has become an important area of concern for property developers.
Asset preservation and value enhancement
“Property management is often viewed as the supervision of the operation and maintenance of a property or portfolio of properties,” said Michael Mabutol, president of Pinnacle Real Estate Consulting Services, a property-management company.
According to him, there are two major components of property management work. The first major component is the property care that addresses the issue of wear and tear in the most cost-effective way. The second major component is value enhancement and, in some quarters, value extraction without adversely diminishing the useful life of the property.
“One can summarize the role of a property or portfolio manager into two broad concepts: asset preservation and value enhancement during the normal, day-to-day operations of the property,” Mabutol added. Jeffrey R. Sosa, president and CEO of Sosa JB Property Management Corp. echoes this thought. “Property management initiatives are most effective when factors like asset preservation and value enhancement are considered for the maintenance and upkeep of the physical aspects of the property.”
Signs of an exceptionally managed property
Although property management may be a largely abstract concept, its effectiveness is actually physically observable. There are actual signs that property buyers should look for to know that they are buying into an exceptionally managed property.
“Aesthetic is the easiest sign to look for to know that a development you are buying into is exceptionally managed,” Sosa noted. “Interior and exterior paint should be clean; ideally repainted every three to five years. The level of cleanliness must be topnotch, landscaped areas must be well-maintained, and architectural features must be without damage.”
For Henry Torremonia, head of Property Management of Jones Lang Lasalle, the following are the determinants of a well-managed property: well-maintained common areas; 100-percent availability of facilities like elevators; no signs of neglect like broken taps and busted lights; high level of security; and a neat, efficient, professional and customer-focused staff.
“A representative from the property management should always be available to answer queries,” Torremonia added.
Track record and competence are keys
Nowadays, property owners outsource the professional management of their property primarily to preserve their investment throughout its lifecycle—a move that focuses more on long-term goals rather than the short-term, day-to-day operations.
As such, Torremonia himself stressed that it is important for buyers to look more at the overall picture and consider the track record of the developer, owner, board of directors and the property manager of the project itself. Dean Y. Cid, COO of Paramount Hotels and Facilities Management, echoes this sentiment and believes that the track record and attitude of those doing the property management work are crucial. “The people behind any company spell the difference. Having competent people with the right experience and attitude are essential,” he emphasized.
Location and management
According to Claro Cordero, research head of Jones Lang Lasalle, “In valuation, the buildings in a prime location will always have that advantage over those in an inferior location because the majority of these buildings in prime spots were built with higher and better specifications.”
In cases where a building is in a superior location but has inferior specs, the value of the building is normally pulled upward by what we call the “principle of progression,” a real-estate valuation theory, which states that a property of lesser value is enhanced through proximity with higher-value properties. However, according to Sosa, property management is an equally important indicator of property value, particularly future property value. “When a property is well-managed, the value of the investment will surely increase even when in a location that is not first-rate,” Sosa asserted.
The truth is that, nowadays, buyers or investors are becoming more meticulous and informed on the after-sales services they want to get from the real property they purchase. Buyers now not only consider the peso value of the property at the time of purchase, but also want the value to appreciate in time.
Moreover, developers, themselves, have started looking more at their properties, not just for the current benefits in terms of rental income, but more in terms of capital value appreciation. Considering all these, the work of property management firms becomes even more crucial.