Real estate forecasting was traditionally based on intuition and word-of-mouth. In today’s environment, data-backed decisions form the backbone of a company’s financial growth. As there is a lot of data generated every day, you can use technology to leverage your business growth.
PropTech has a variety of software for budgeting and forecasting. Recent software uses data mining and even machine learning to predict house prices.
Through this guide, you can learn how to use PropTech to improve forecasting for your property management company.
Why are budgeting and forecasting important?
The financial health of your company depends on the budgeting and forecasting process. It enables strategic decision-making and revenue growth for your business. Real estate market trends are volatile. If you utilize technology to evaluate your investments, you can:
Update forecasts according to new market trends.
Analyze upcoming changes in the market.
Budget better by predicting cash flows.
Make decisions based on data and not guesswork.
Safeguard your company from potential financial pitfalls.
Improve performance of other departments through proper planning.
Get more investors as you have proof of the financial future of your company.
Why choose automation for real estate budgeting and forecasting?
Many companies rely on spreadsheets for their budgeting needs. With 88% of them containing errors, they are far from accurate. The real estate industry is competitive, and embracing technology can put you ahead in the race.
Using budgeting software also helps you make better business plans. According to Bi-Survey, 53% of businesses reported better planning results after using budgeting software.
Here are the 5 benefits of automating your real estate budgeting and forecasting process.
Enhanced reporting
As a property manager, you would be looking for tailor-made reports unique to your company. Forecasting software does exactly that.
Reports based on generic conditions are usually not adequate. Forecasting software allows you to generate reports against any kind of trend. If you want to run multiple scenarios or analyze different reports, you should switch to forecasting software.
More reliability
A spreadsheet document can go wrong with a single error. Whether it is missed numbers or wrong data, it can cost you important investments. The most important benefit of utilizing software is reliability. As they don’t rely on manual data entry, they increase your budget’s accuracy. Your data can also be utilized by different platforms if your tools are integrated.
It is also more secure than manual data entry. You can rely on cloud storage to keep your data from getting lost.
Increased productivity
Automated budgeting and forecasting are not only more accurate but also faster. Your employees don’t need to spend hours entering data and rechecking it, You can put your team to more productive use.
Since the forecasting is faster, you can get more work done in the same amount of time.
Elimination of guesswork
Traditional real estate forecasting was based on intuition. This may work for smaller companies with a local reach. But, property managers and investors require reliable data-based decisions for their multiple properties. Forecasting software gives insights only after analyzing marketing data and trends. After all, no company wants to leave their key decisions to guesswork.
Improved compliance
There are several real estate laws that keep changing. In the US, you should also be careful about any state-specific laws. Automated forecasting is usually in compliance with the laws. They help you create the necessary reports and also verify them internally.
Different functions you can automate:
Leading companies have automated several important business functions. These work as a unified strategy and may not show results when singled out. Some of the essential functions you can automate are:
Lease forecasting
Lease forecasting improves your budget. Accurate predictions can direct your investments and improve ROI. Your software should forecast precisely and also have an easy-to-use interface.
Multiple variable forecasting
Forecasting takes into account multiple scenarios like tenancy changes, economic factors, and other changes. The right software needs to forecast considering all these aspects. It should also let you generate multiple reports on individual changes.
Corporate expense management
The real estate budget needs to account for corporate expenses such as legal fees, payrolls, and taxes. These can change in different regions or countries. You need to evaluate your budget according to the expenses specified by the local law.
Some software has such inbuilt functions. You can also use add-on tools in software like Yardi and MRI to manage budget and forecasting.
How to choose the right software?
There are many tools designed for real estate budgeting and forecasting. Before choosing one, you need to evaluate the software for some key abilities.
Being Adaptive: It should let you change your forecasting based on new inputs. Ideally, it should generate as many reports as you want.
Speed: It should generate reports within a short span of time. If you have deadlines, you need to consider this quality.
Integration: It should seamlessly integrate with your other tools.
Easy interface: It should be useful for a person who does not have much IT experience. A simple software understandable by a client could go a long way.
Efficiency: It should decrease the workload from your staff. The reports should not need much evaluation from your other employees.
Accurate: Most people shift from traditional methods to software because of the accuracy. Your software should generate reports that are accurate and up-to-date.
What features to look for?
Budgeting
The budget feature lets you collect data from a property level. This data is used to make granular level forecasts. Choose software that lets you predict future costs by analyzing individual data such as rent and vacancies.
Assumption analysis
As a property manager, there are several ‘what if?’ scenarios you need to analyze. Software that generates reports as per your input will allow you to evaluate different market scenarios.
Customizable P&L
Your software should evaluate cash flow based on the components of your chart of accounts. It should also allow a choice between generating reports at an account level or cash level.
Adjustable granularity
Software that has adjustable granularity generates reports at all levels. You can choose to generate an overall report or divide them into segments. You can also choose many reports of individual properties.
Short and long term forecasting
Usually, forecasts are done for 1 year to 5 years. If you require forecasts for varied durations, choose software that is flexible with time. That way, you can input the duration to get an accurate forecast.
Global reporting
If you are thinking about international investment, you should choose software that can deliver global results. You should be able to switch between regions and currencies before making a forecast.
Investment planning
Based on the forecast, the software should plan your ROI on various investments. It should also give you valuable insights on the right areas for investment as well as the upcoming trends.
Integration with other tools
If you use multiple software for other processes, you should focus on the integration of your budgeting and forecasting software. The integration allows your other tools to utilize data from your budgeting software directly. This ensures seamless workflow and increased efficiency.
Dashboard
A dashboard comes in handy if you want to view all your generated reports. It also provides some key insights into your activity. A dashboard helps you manage your budgeting and forecasting data within the app. It also lets you view, forecast, and delete any reports.
Support and troubleshooting
Make sure that a dedicated support team is available for the software you choose. If you ever face problems with the forecasting software, the team should be ready to look after the issue for you. They should also notify and guide you through any new updates.
Cloud-based storage
Cloud storage is popular for a number of reasons. Since budgeting and forecasting uses a lot of data, it is safe to store it on the cloud. That way, it will be more secure and you will always be able to recover data.
Our recommended real estate budgeting and forecasting software
Yardi advanced budgeting and forecasting
This software by Yardi delivers accurate budgets quickly. The features include budgeting, flexible modeling, real-time valuations, and much more. It allows you to reforecast according to your data input.
MRI's budgeting and forecasting software
This software is built to make budgeting more efficient for property managers and investors. Some of the features are centralized budgeting, configurable leasing assumptions, access to data, and a simple user interface.
Get the best out of technology through Assetsoft
Budgeting and Forecasting are the financial backbones of a real estate business. At Assetsoft, we assist you in every step like planning, strategy, and operation. From tech advisory to implementation, we do it all.
Through software like Yardi and MRI, we help you make the best out of technology. We can suggest the right software by understanding your requirements. We can also integrate your tools, check-up existing software and provide training for your staff. For any property management software requirements, reach out to us!
Book a free consultation now!