- Worst case: if rents go down or don’t change at all
- Most likely case: the most realistic income that can be obtained
- At its best: rentals beyond our wildest dreams
How Scenario Analysis Helps Measure Risk When Investing in Real Estate
Website design By BotEap.comScenario analysis is used by real estate investors and investment property specialists because it provides a good way to measure risk when evaluating real estate investments.
Website design By BotEap.comWhat is scenario analysis? It involves estimating a series of variables that will have the greatest impact on the probability that an investment will be made in accordance with the minimum expectations of an investor. Rental income, for example, is subjected to scenario analysis when the analyst wants to measure the performance of investment properties based on various rental scenarios. In other words, how well does the property perform in the event that rents go down or up?
Website design By BotEap.comScenario analysis generally considers three scenarios. In this case, we will assume that our scenario analysis aims to explore what influence changes in rents would have on property performance.