Real estate forecasting software: 5 ways to boost profitability

The real estate industry can be lucrative, so it's no wonder that many investors and companies are trying to up their finance game and become more profitable. To do this effectively, many businesses use real estate forecasting software to streamline processes, improve collaboration, and better anticipate change.

Biggest challenges facing the real estate industry today  

A global survey of over 700 finance leaders, including real estate finance leaders, revealed that the top five external pressures facing them today include inflation, rising energy prices, fears of recession, talent issues, and rising interest rates. 25% of surveyed finance leaders also said that preparing and bracing for challenging times ahead remain a key focus.  

These external pressures are highly relevant to the real estate industry as they can greatly impact profitability. One critical way in which you can address these pressures and set your organization up for success is by improving your forecasts with real estate forecasting software. To do this, you need a combination of careful planning, reliable data, and technology that streamlines manual processes.  

5 ways to boost profitability with real estate forecasting software

1. Scenario Planning

Scenario planning is a strategic planning model that helps you forecast different outcomes and trends. By looking at different scenarios, you can avoid under- and over-predictions of costs associated with development projects and in-service properties. Look at situations like:

• Interest rates and inflation that raise the cost of debt and materials
• Overtime costs associated with developers that self-perform work
• Uncertainty that may be associated with unpredictable events

Looking at possible scenarios can help you understand the potential challenges, warning signs, and even opportunities, such as potential acquisitions. You can easily pivot from one outcome to another with scenario planning and “what-if” analysis, allowing you to identify the most profitable opportunities.

With real estate forecasting software, you can enhance your scenario plans with accurate and data-driven projections. By using historical data and market trends (e.g., fluctuating interest rates), you can predict a range of possible future scenarios and determine their impact on your real estate investments.

2. Collaboration

Working together across properties and communities can help organizations centralize data and enable analysis, giving you a reliable way to share information, improve insights, and reduce confusion.

Effective collaboration ensures that the properties that make up your community have a single source of the truth in terms of workflows, data entry, and forecasting. For your business to be profitable, every property manager needs to be working with a single version of a report, so there is no confusion about which data is most recent. Real estate forecasting software has the power to centralize all your data into one place, so everyone in your organization can collaborate on the same forecasts, reports, and plans.

Collaboration among communities also builds trust, encourages group problem solving, and helps multiple locations become more efficient, thereby increasing productivity and profitability.

3. Market leasing assumptions

The third way to boost your profitability is analyzing market leasing assumptions to better predict whether clients will renew their leases.

• Increasing the accuracy and frequency of rent planning allows you to adjust your leasing assumptions as market and regulatory conditions change – such as rent increases, demand for commercial real estate, and economic cycles.
• When it comes to commercial lease planning, you must also consider the tenant – the type of lease they currently hold, the probability they renew, the type of industry they operate in, and the relationship you’ve had with them since they first signed their lease.
• Analyzing your data from multiple angles will help you pinpoint trends that may improve your ability to predict whether a tenant is more likely to renew.

The goal is to have a set of assumptions that are reliable and robust if changes need to occur.

Real estate forecasting software plays a crucial role in supporting market leasing assumptions.

Using artificial intelligence, you can analyze historical data, current trends, and market conditions to make precise predictions about lease renewals, allowing you to adjust your leasing assumptions dynamically as conditions change.

4. Cash flow planning

In the face of inflation and higher interest rates, businesses need effective cash flow management standards to collect cash quickly and deploy it on the most value-adding investments. That’s why monitoring cash inflows and outflows and setting benchmarks is the fourth way to improve your profitability.

Real estate forecasting software can aid in cash flow planning by forecasting rental income, operating expenses, and other variables, so you can strategically allocate cash towards value-add investments, thereby improving your profitability.

5. Implementing finance technology

Implementing finance technology to streamline processes is the last way to improve your forecasting abilities. This is where real estate forecasting software can help – also sometimes referred to as FP&A software, Financial Performance Management (FPM) software, or Corporate Performance Management (CPM) software – especially if your organization is still on spreadsheets.

Real estate forecasting software can help property managers, developers, and asset managers to track performance, manage operating costs and budgets, scope project costs, and better forecast cash flow.

The result? Reduced costs and increased ROI.

How you can become more agile, profitable, and competitive with real estate forecasting software

Improving forecasting abilities is critical to the success of real estate businesses. Organizations should follow the five best practices: scenario planning, collaboration, market leasing assumptions, cash flow planning, and the implementation of real estate forecasting software to become more agile, profitable, and competitive.

The increased usage of real estate forecasting software is making things easier by providing innovative solutions, which are modernizing the industry and ensuring better results, with the ability to adapt to changing market conditions.

Check out this short demo to see how Prophix can take your real estate business to new heights.

An example of how to automate and optimize forecasting processes

Read on to learn more about 5 best practices you can implement today with real estate forecasting software to maximize your profits.

What is real estate forecasting software?

Real estate forecasting software is a specialized solution designed to help finance leaders in the real estate industry predict future trends. By centralizing and streamlining processes, you can project potential changes in property values, rental rates, and market demand, so you can make informed, strategic decisions about your properties.