3 Data-Driven Risk Mitigation Propositions For Real Estate Investors

3 Data-Driven Risk Mitigation Propositions For Real Estate Investors

Real estate investors can leverage data-driven insights to counter the impact of risks involved in real estate investments.

FREMONT, CA:  While investors eye real estate as a means of revenue generation, much has changed in terms of the way real estate businesses are conducted. Technology is gradually transforming the real estate industry. Technologies such as artificial intelligence (AI) are enabling the realtors to make informed decisions. Despite the innovations and promising returns, real estate is not immune to risks. For instance, ground-up construction projects can be extremely profitable, but the investors have to endure years of zero returns to get there. The key is to maximize the chance for a positive return by identifying the underlying risks. Data and algorithms are the two primary tools that can enable investors to identify risks and make informed decisions. Below are the primary data-driven risk mitigation techniques that can cradle the interests of investors in real estate.

 Market Risk Prediction  There is a wide range of factors, such as inflation, unemployment, and interest rates that can impact the performance of commercial real estate. Thus, investors must leverage predictive data models to determine how the existing and future macroeconomic trends will impact the market. Such informed decisions will significantly lower investment risks. 

 Algorithmic Asset Risk Mitigation  Macroeconomic factors do not necessarily impact all asset classes. So it’s essential to understand the individual dependency of an asset on a macro or a micro trend. For instance, the increased interest rate might disproportionately impact the housing sector as homeowners are more dependent on loans. The impacts can be countered with the aid of data-driven decisions and algorithmic solutions to understand the connection between the market happenings and their impacts on assets.

 Insights into Liquidity Risk  Real estate investments aren’t as liquid as securities due to the amount of money involved. However, investors can address this challenge by researching the locality and the ease of selling a property before making an investment. Once again, data and algorithm-based insights can aid the real estate investors.

Awareness against the above risks can empower the investors to make informed business decisions, thereby lowering the overall impact of risks involved in the deal.

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