Methodology

How the Total Risk/Return Score (TRS) engine works.

1. Normalization Layer

Global real-estate data is heterogeneous — different currencies, tax regimes, and reporting standards. Every raw input (yields, taxes, appreciation, operating costs, climate exposure) is mapped onto a standardized 1–10 Likert scale so markets across borders compare apples-to-apples.

2. The Five Scoring Pillars

Market Stability (Volatility): historical price volatility + transaction liquidity.
Rental Yield & Demand: net operating yield blended with occupancy.
Growth & Appreciation: historical CAGR + forward macro (GDP growth, urbanization).
Legal & Regulatory: property-rights strength + openness to foreign capital.
Environmental & Technical: climate vulnerability and physical risk (inverted).

The composite TRS (0–100) is a weighted average — you control the weights on the Markets page.

3. Net Yield & Global Comparability

Net yield strips vacancy, operating costs and property tax from gross rent:

Net Yield = (Rental Income − Operating Expenses) / Property Value

We then deflate by local inflation and subtract a currency-drag term (inflation differential vs USD, a relative-PPP proxy) to produce a USD-comparable Global Real Yield.

4. Stochastic Optimization (Monte Carlo)

Rather than relying on static averages, each market's return is simulated over thousands of paths. Annual appreciation is drawn from a normal distribution N(mean CAGR, price volatility), compounded with leverage and net rental income, netted against debt service and fx drag. The output distribution yields the expected return, the 5% downside (Value-at-Risk), probability of loss, and a Sharpe ratio.

5. Data Sources

Live: World Bank World Development Indicators (inflation, GDP growth, urbanization) — no key required.
Curated: gross yields (Global Property Guide style), prices (Numbeo style), property-rights (IPRI), climate (ND-GAIN).
Pluggable listings: adapter interface for RentCast/ATTOM (US), PropertyData (UK), Bayut (UAE), Domain (AU) — add an API key to pull real listings.

Methodology adapts a multi-factor allocation model to real estate (Lalum 2026; Petropoulos et al. 2023; Forradellas 2026). Figures shown are illustrative and not investment advice.