What are the goals of our cities?
Conserve and replenish natural environments
Inclusivity and support for social interaction
Attract private investments
Our cities result from geometric urban design in collision with the economics of real estate development. Shaping a city is not trivial. Architects and urban planners mostly do this work; neither of these academic backgrounds includes real estate finance. Moreover, most city planning and zoning departments don’t have financial analysts on staff.
Why is real estate finance crucial to city planning?
If city planning departments don’t consider the financial consequences of zoning decisions, how can we expect optimization towards attracting investments? And how can we negotiate for such investments to ensure social productivity or environment conservation?
Accounting for every property’s potential return can help us better and more realistically plan for population growth, housing incentives, and allocation of resources.
How to calculate return on investment?
A simple return on investment calculation is the ‘back of the envelope.’ Here is the basic formula:
Gross potential income minus vacancies equals effective income.
Effective income minus operating expenses equals net operating income.
Net operating income divided by total project cost equals a return on investment.
This calculation includes many data layers because it encompasses an entire project. Cities have access to this data, and the math is relatively straightforward. It is a matter of bringing it all together, streamlining the calculations, and scaling it across every property.
Deepblocks has built this functionality in 100 US cities. Although real estate developers mainly use it, we imagine a future in which zoning and planning departments use it as well.
More will be revealed,
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Olivia Ramos is the CEO of Deepblocks, an AI-powered software that automates the process of site selection for developers and investors.
See how quickly you can find your next development site here (our record is 3 minutes).