Explore how a leading Europe-based real estate portfolio management company, harnessed innovative data analytics and machine learning to redefine tenant risk assessment in the aftermath of Covid-19.
INTRO AND CLIENT BACKGROUND
Our client, A Europe based real estate portfolio management company.
As the real estate landscape grappled with uncertainties brought by Covid-19, Our client needed a more accurate risk assessment tool for financial behaviour analysis and tenant allotment.
BUSINESS GOALS & CHALLENGES
The onset of the Covid-19 pandemic disrupted established constructs for proxying financial behavior, necessitating a paradigm shift in risk assessment. The primary goals included:
Accurate Risk Assessment: Business was looking for a tool with predictive analytics of tenant risk score, potential defaults and fraud detections on the tenant’s financial transactional data.
Adaptability Post-Covid: Traditional credit scores no longer reflects true financial behavior post Covid-19, requiring a solution that adapts to the new normal, distinguishing between genuine defaults, economic challenges, job losses, and unforeseen shifts in financial behavior.
Primary and Secondary Account Differentiation: Develop the ability to differentiate between primary and secondary accounts, ensuring a more nuanced understanding of financial patterns.
OUR SOLUTIONS: WHAT DID WE DO?
To address challenges in real estate tenant risk, we implemented a multifaceted approach leveraging cutting-edge technologies:
1. Data Analytics
We employed advanced analytics incorporating tenant demographics and historical financial behaviors to gain deeper insights into individual financial profiles.
2. Machine Learning Integration
Integrated machine learning models to accurately predict tenant risk scores, enabling a more nuanced and forward-looking risk assessment.
3. Business KPIs Tracker
Tracked key performance indicators (KPIs) such as Rent-to-Income Ratio (RTI), Persistence (Stability of Tenants' Financial Behavior), and Gradient Metrics to analyze trends and changes in financial health.
VALUE DELIVERED: WHAT WAS THE OUTCOME?
The innovative solutions implemented led to tangible benefits across various stakeholders:
Landlords: Experienced a reduced risk of defaults and enhanced property value through a more accurate risk assessment tool.
Tenants: Enjoyed fair and transparent assessments, leading to better leasing opportunities for those deserving.
Portfolio Management: Our client witnessed improved risk mitigation and decision-making capabilities, ensuring a more resilient and adaptive approach to post-Covid challenges.
CONCLUSION
By combining data analytics, machine learning, and strategic KPI tracking, they have not only mitigated risks for landlords but also ensured fair opportunities for tenants.
This success story highlights the transformative power of technology in adapting to new norms and fostering a more resilient real estate ecosystem.
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