In God We Trust, Everyone Else Please Bring Data

As part of our lives, we, as humans, are constantly trying to predict behaviors in our surroundings. It is a fundamental part of our choice-making. We search for our best estimated guess about multiple issues daily and we usually do it through the identification of patterns. In policy, business and in life, having the best conceivable understanding of what is happening and what are the possibilities surrounding our environments is what assures the best decision-making. Within the last few years, our constant interactions with the internet have created huge amounts of data about our behavior in multiple areas. With the help of technology, we are now able to process all this data and have a better chance at making a more accurate guess about the future and, therefore, choose better.

 Applying data analytics to tenant underwriting and digital tenant experiences results in an opportunity for efficiency at every real estate company. As recovery and reopening gain pace, being able to make more informed choices about tenants and offer digital onboarding experiences bring data analytics to the core of the transaction in rentals.

Data analytics can be broken down into four components: descriptive, diagnostic, predictive and prescriptive analytics. Descriptive analytics gathers information to understand present market concerns, and diagnostic analytics looks to explain why past conducts occurred. In this real estate context, predictive analytics, which estimates future outcomes, presents the biggest opportunity to accelerate rental transactions and create better experiences and higher market liquidity. Nowadays, there are great amounts of data produced through credit use, social media and the internet of things, which allows artificial intelligence to find accurate behavior patterns that were previously unthinkable to process.

Why is predictive analytics a much-needed breakthrough in Mexico’s rental market? It’s simple: a very large and growing part of the population is looking to rent as its only housing alternative and is unable to meet outdated lease requirements. Millennials, the generation born between 1984 and 1999, represent approximately 40 percent of the total Mexican population. They are the country’s largest demographic and productive bonus. Nonetheless, they face very different professional circumstances compared to their parents or grandparents. Most notably, the increase in housing prices that has widely outpaced the increase in average wages for the last couple of decades has made it nearly impossible to save up for a down payment. According to an Apartment List Survey in 2019, 12 percent of millennials plan to “always rent,” up from 10.7 percent in 2018. The increase in the reported preference is also fueled by the desire to maintain a flexible, and sometimes nomadic, lifestyle. 

In Mexico, 16 percent of households rent the place they live in, and in main urban areas, this number rises to 27 percent of households. Renting a property can represent a fundamental part of someone’s livelihood but the transaction in Mexico is characterized by old-school procedures based on distrust and excessive requirements. Most leases require the tenant to present a guarantor with a lien-free property to co-sign the lease and back him or her up in case of default. Additionally, investigations and tenant background checks create friction and pain points within the process. The same playbook for closing a rental transaction has been followed for decades but demographics and lifestyle conditions have changed, and many are left behind in the quest for a decent place to live, as they lack capacity to meet the traditional criteria.

As millennials face more difficult professional stability, renting becomes their only path to an independent adult life without jeopardizing their financial health. However, the leasing process has remained unchanged for decades and requirements such as a guarantor or a property guarantee limit this generation’s ability to rent better properties. On the other hand, millennials are using technology in most of their life aspects and generate a lot of data that allows us to predict payment behavior and residential habits.

Morada Uno is a proptech/fintech company committed to streamlining the leasing process in Mexico. We use technology and data analytics to predict tenant behavior and eliminate the barriers and friction of the traditional transaction. Our predictive analytics allow us to underwrite potential tenants with a holistic approach and evaluate their past and present behavior, similar to a bank’s lending models and procedures.

Our approach balances the interests and benefits of all stakeholders within the leasing transaction. We support tenants by opening more leasing opportunities for them, we provide landlords with the best-in-market protection for their assets and returns, and we enable brokers to close faster, safer deals. At Morada Uno, we believe analytics allows for better tenant selection and we are willing to back him or her up through our rental guarantee. Our mission is to increase market liquidity by using data. 

In practical terms, Morada Uno’s tenant screens and rent guarantees are a great option for the growing number of tenants entering the market and landlords looking for efficiency, safety and flexibility in their rent. We are bringing a new alternative to the market that allows the economically upcoming sector of the population to be included and to access better living conditions. 

American statistician W. Edwards Demming — with his legendary quote, “In God we trust, everyone else please bring data” — defined a new orientation of decision-making, from intuition-based to fact-based. If we are looking to improve confidence in lease transactions, we need to use data more intelligently. Our technological solutions are providing better information for decision-making and, therefore, more trust and agility in rental transactions, all through the power of data analytics. The market is changing and new solutions that ensure efficiency, mobility and overall liquidity are here. It is up to today’s stakeholders to adapt to this new data-based era.