Modeling flood risk impact on real estate portfolios

This paper presents a teaching case designed to engage instructors and students in the study of risk management for real estate portfolios, with a focus on the growing impact of flooding in the United States. The case introduces a flood‐adjusted property valuation (FAPV) model, which uses a probabilistic approach to estimate property values discounted for flood risk in flood‐prone areas. The FAPV model is then applied to calculate the Loan‐to‐Value ratio, followed by a discussion on strategies for mitigating flood risk within the portfolio. The teaching case includes a complete teaching schedule and methodology, requiring only a foundational understanding of probability and basic Excel skills. By working through this case, students gain practical insights into real‐world decision‐making processes in risk management.