Real Estate Investment Analysis - ROI Calculation

 

Notes:

• What problem does it solve?
  This code calculates the return on investment (ROI) for a real estate property considering all acquisition costs, financing costs, and rental income.

• How can businesses or users benefit from customizing the code?
  This can be used to assess the viability of an investment property. Users can customize it to evaluate different types of financing (loan vs. full payment).

• How can businesses or users adopt the solution further, if needed?
  This can be integrated into a broader property evaluation system for investors to assess multiple properties simultaneously.

Actual Python Code:

class RealEstateROI:

    def __init__(self, purchase_price, loan_amount, annual_rent_income, annual_expenses, property_value_increase_rate):

        self.purchase_price = purchase_price

        self.loan_amount = loan_amount

        self.annual_rent_income = annual_rent_income

        self.annual_expenses = annual_expenses

        self.property_value_increase_rate = property_value_increase_rate

    

    def cash_on_cash_roi(self):

        # Cash invested is purchase price minus loan

        cash_invested = self.purchase_price - self.loan_amount

        # Cash flow (income minus expenses)

        cash_flow = self.annual_rent_income - self.annual_expenses

        return (cash_flow / cash_invested) * 100

    

    def total_roi(self):

        # Include appreciation in value (property value increase)

        annual_property_appreciation = self.purchase_price * self.property_value_increase_rate

        total_return = (self.annual_rent_income + annual_property_appreciation - self.annual_expenses) / self.purchase_price

        return total_return * 100

# Example usage

roi_analysis = RealEstateROI(purchase_price=500000, loan_amount=300000, annual_rent_income=36000, 

                             annual_expenses=8000, property_value_increase_rate=0.03)

print(f"Cash on Cash ROI: {roi_analysis.cash_on_cash_roi():.2f}%")

print(f"Total ROI: {roi_analysis.total_roi():.2f}%")