Before jumping on an investment opportunity, you need the best real estate calculator to know if the property will be profitable or not.
If you know what you’re doing, buying an investment property can be a lucrative venture with long term financial rewards. However, not all investment properties will generate good returns. Therefore, every real estate investor must know how to evaluate deals.
Table of Contents
- What Is a Real Estate Calculator?
- What’s the Best Real Estate Calculator?
- How to Use Mashvisor’s Real Estate Calculator
- Property Metrics Provided by Mashvisor’s Real Estate Calculator
- What Are the Special Features of Mashvisor’s Calculator?
Luckily, you don’t need to use spreadsheets to find the best investment property. With the right investment property calculator, you can do your investment property analysis easily and more accurately.
But again, not all real estate calculators are made the same. If you want an investment property with an excellent rate of return, you need to use the best real estate calculator. You might be surprised how much you can gain from using a capable real estate investment calculator.
So, what is the best calculator for real estate? In this article, you will discover the best real estate calculator for investors and how to use it to analyze your next real estate deal.
You will also learn about the role Mashvisor plays in ensuring that any real estate deal you get involved in rewards you with a nice profit.
What Is a Real Estate Calculator?
A real estate calculator is a tool that helps you figure out the financial aspects of real estate transactions. It includes how much your mortgage payments will be or how much rent you can charge.
You can use the calculator when buying or selling a property, checking if you can afford a property, or planning for rental properties. You can find some online versions for free or as part of software or apps you can purchase.
Many different types of real estate calculators will make investing in a bad property almost impossible.
Here are some of the different types of real estate calculators and their purpose:
Mortgage Payment Calculator
A mortgage payment calculator is a tool that helps you calculate how much your monthly mortgage payments will be.
It takes into account the price of the property, the interest rate of the loan, and the duration of the loan (in years) and uses the said information to calculate your monthly mortgage payment.
The purpose of a mortgage payment calculator is to give you an idea of what your monthly payments will be. With the mortgage calculator, you can budget accordingly and make informed decisions about how much home you can afford.
Assuming the property you want to buy costs $300,000. You plan to take out a 30-year fixed-rate mortgage with an interest rate of 3.5%.
- Using the mortgage payment calculator, you enter the home price ($300,000), the loan term (30 years), and the interest rate (3.5%).
- The calculator then uses the provided information to calculate your monthly mortgage payment, which, in this case, would be approximately $1,347.
Capitalization Rate (Cap Rate) Calculator
A capitalization rate calculator is a tool that helps you calculate the rate of return on an investment property. It takes into account the income the property generates, such as rent, and compares it to the price of the property.
The purpose of a capitalization rate calculator is to help you determine the profitability of an investment property. It also allows you to compare the returns on different properties to make informed investment decisions.
For example, if you own a rental property that generates $1,000 per month, and the property is worth $100,000, you would divide $1,000 by $100,000 to get a capitalization rate of 1%. It would be considered a low return on investment, and you might want to consider other options.
Cash Flow Calculator
A cash flow calculator is a tool that helps you calculate the amount of cash that you’ll have coming in and going out over a certain period. It takes into account all of your income and expenses, including other items like salary, rent, bills, and investments.
Its purpose is to help you manage your money more effectively by giving you a clear picture of your current financial situation and helping you make plans for the future.
For example, you can use the cash flow calculator to track your income and expenses over a month and see if you are spending more than you are earning. If so, you can use the information to find ways to reduce your expenses and increase your income to improve your cash flow.
Investment Property Calculator
An investment property calculator is a tool that helps you calculate the potential return on investment (ROI) for a rental property. It takes into account the income the property generates and compares it to the cost of owning and maintaining the property.
The purpose of an investment property calculator is to help you determine the profitability of an investment property and to compare the returns on different properties.
Let’s say you’re considering buying a rental property that costs $200,000, generates $1,500 in rental income per month, and incurs $300 in monthly expenses. You can use an investment property calculator to see the potential ROI.
It would give you an estimate of the cash flow, the net income, and the return on investment in percentage. It would help you evaluate whether the investment is worth pursuing.
Related: Return on Investment and Risk in Real Estate
Net Operating Income Calculator
A net operating income (NOI) calculator is a tool that helps you calculate the amount of money a property generates after deducting the operating expenses. It takes into account the property’s income, such as rent, and subtracts the cost of owning and maintaining the property.
Let’s assume you’re considering buying a rental property that generates $1,500 in rental income per month and comes with $300 in monthly expenses. You can use an NOI calculator to calculate the NOI, which is the income left after subtracting all the operating expenses.
In this case, the NOI would be $1,200. The figure is important because it gives you an idea of how much money the property is generating after all the operating expenses are paid. It can also be used to compare the profitability of different properties.
What’s the Best Real Estate Calculator?
Generally, an investment property calculator should help you analyze potential real estate deals or assess existing rental properties. There are many calculators out there that can be used for analyzing investment property. However, some calculators can offer so much more than that. You can significantly increase your chances of success if you pick the right one.
In light of how much you can get from using an investment property calculator, Mashvisor’s calculator is by far the best. Yes, this is a bold statement, but after reading this blog, you will understand why. The fact is that not all rental properties for sale will be good for you.
However, the special features of Mashvisor’s real estate calculator can help you to decide whether to buy a particular property accurately and avoid making costly mistakes.
Risks of Investing in Real Estate
Just like any other investment, there are some risks associated with real estate investing. Below are some risks of investing in real estate.
Real estate values can fluctuate greatly depending on the state of the economy, interest rates, and other factors. It can make it difficult to predict the value of a property and can lead to losses if the property is sold during a downturn in the market.
Rental properties may be vacant for a while, which can lead to a loss of income and difficulty finding tenants.
Owning a property comes with the responsibility of maintaining it, which can be costly. Repairs, upgrades, and unexpected expenses can eat into your profits.
Real estate investment often involves borrowing money to purchase the property, which can amplify potential losses.
Legal and Regulatory Risks
Laws and regulations related to property ownership and rental properties can change, and non-compliance can lead to fines or legal action.
Tax and Insurance Risks
Real estate investment can come with complicated tax implications, and not being aware of the tax laws and regulations can lead to penalties and fines. Insurance also plays a significant role in protecting your investment, and inadequate coverage can lead to financial losses.
Such risks can make investing in real estate a hassle. But don’t worry. If you use a good real estate calculator like Mashvisor’s, you can easily avoid the said risks.
Start your 7-day free trial now with Mashvisor’s real estate calculator.
How to Use Mashvisor’s Real Estate Calculator
Mashvisor’s real estate calculator is easy to use. Plus, anyone can use it to estimate the potential returns of a rental property regardless of their experience. All you need to do is enter a few details about the investment property you intend to buy. The calculator will then work out the rest for you. The data you enter will involve the following:
1. Comparable Rental Income
The first step you should take is to enter the comparable rental income of the property you intend to buy. It means you do not know how much the property will bring for you, but you enter the rental income that other similar properties generate.
The good news is that Mashvisor’s artificial intelligence (AI) already fills up this part of the calculator based on its own comps analysis. It means you do not have to. But if you want to, you can edit this field and input your number.
Why Is It Important to Know How Much to Charge for Rent Before Investing?
Knowing how much to charge for rent before investing in real estate is important because it helps determine the potential return on investment. Setting the rent at the right level can help ensure that the property generates enough income to cover expenses and produce a profit.
Furthermore, it can help attract and retain tenants. If the rent is too high, it may be difficult to find tenants. On the other hand, if it is too low, the property may not generate enough income to cover expenses and make a profit.
Knowing the rental market and comparable rental prices in the area can help real estate investors make informed decisions about how much to charge for rent.
Related: 40 Best Cities for Airbnb Rental Income in 2023
The second step is to select your financing method, which can be either cash or a mortgage loan. Then, you need to enter the purchase price of the property.
Mashvisor’s real estate mortgage calculator makes this process easier for you by providing readily available property data for the listing price and property value. You can choose the price you are willing to offer or key in a custom price.
If you picked the mortgage option, you would be required to specify the loan amount, loan type, the amount of down payment, and the mortgage interest. All the said data are important because they will impact your return on investment (ROI). Therefore, you can play around with the numbers to see what would give you the best ROI.
Which Is Better: Paying In Cash or With Mortgage?
There are two ways to finance the purchase of a property: with cash or with a mortgage.
Pros of Buying a Property in Cash
One advantage of paying in cash is that you won’t have to make monthly mortgage payments. Also, the closing process can be faster and more streamlined. Finally, you can negotiate a lower price with the seller since there is no need for financing.
Cons of Buying a Property in Cash
One of the biggest cons of buying a property in cash is that it ties up a large amount of cash that can be used for other investments. Also, you may likely overpay for the property, which can limit your potential return on investment. Finally, you don’t get the same tax benefits as you would if you financed the purchase with a mortgage.
Pros of Buying a Property With a Mortgage
A major pro of buying with a mortgage is that you can deduct the interest paid on the mortgage from your taxable income. This way, you will save a lot of money on your taxes. You can also buy a more expensive property that you might not be able to afford with cash. Finally, you can purchase a property with a smaller down payment.
Cons of Buying a Property With a Mortgage
One major con is that you’ll have to make a monthly mortgage payment, which can be a significant expense and may limit your financial flexibility. Also, you may be subject to a prepayment penalty if you decide to pay off the mortgage early. Lastly, if your credit score is low, you may not qualify for a mortgage or end up paying a higher interest rate.
3. Property Expenses
In this section, you can fill in both one-time and ongoing costs related to the investment property. With the best real estate calculator for investors, you will automatically get most of the rental property expense estimates based on the property’s location.
However, you can do your market research and adjust the rental property expenses provided and add your unique expenses.
What Are the Costs Involved in Rental Property Investment?
When investing in a rental property, there are certain expenses that you will incur. They occur under one-time start-up costs and recurring costs.
One-Time Start-Up Costs
Below is a list of the one-time start-up costs of investing in a rental property:
- Inspections: An inspection cost is a fee paid to a professional inspector to evaluate and assess the condition of a property.
- Total repair costs: Total repair cost is the total amount of money required to fix any issues or defects in a property. They include the necessary repairs, renovations, and maintenance to make the property habitable and safe.
- Furniture and appliances: Furniture and appliances costs are the costs of furnishing and buying appliances to equip the property for tenants.
- Closing costs: Closing costs refer to the expenses and fees associated with buying or selling a property typically paid at the time of closing the transaction.
Below is a list of the recurring costs of investing in a rental property:
- Insurance: You’ll need insurance to protect the property from damage or loss, as well as liability insurance to protect yourself from lawsuits.
- Utilities: Utility cost refers to the expenses of providing and maintaining the necessary services to run a property, such as electricity, water, gas, internet, and telephone services.
- Property management: If you choose to hire a property management company, you must pay a percentage of the rental income for their services.
- Property maintenance: As a landlord, you are responsible for maintaining the property and fixing any issues that may arise. They can include regular maintenance, such as lawn care, pest control, and repairs caused by normal wear and tear, as well as unexpected repairs.
- Property tax: Property tax is the annual taxes imposed by the government on real estate property, typically based on the property’s value or assessed value.
- HOA dues: HOA dues are fees paid by homeowners to a homeowners association (HOA). The fees cover common area maintenance, amenity upkeep, and other shared expenses for properties within a community.
- Rental income taxes: Rental income taxes are the taxes imposed by the government on the income earned from renting out a property.
4. Occupancy Rate
Occupancy rate is a measure of how much of a property’s total available units are being occupied by tenants. It is calculated by dividing the number of occupied units by the total number of units available for occupancy.
High occupancy rates can mean a strong demand for rental properties, while low occupancy rates may indicate an oversupply or lack of demand.
Now, the field will already be filled out by Mashvisor’s calculator using its own AI comps analysis. But if you wish, you can edit this field.
Also, note that whatever number you input in the occupancy rate will affect your 10-year investment payback balance.
Property Metrics Provided by Mashvisor’s Real Estate Calculator
After entering the required details, the calculator will find estimates of many real estate metrics. You will see the results immediately on the screen whenever you change any variable in the calculator. The metrics will determine whether the investment property for sale is worth buying or not. They include:
1. Cash Flow
Cash flow is the difference between monthly rental income and monthly rental expenses. Every investment property should be treated as a business that can either make a profit or incur a loss.
If the rental property expenses are more than your rental income, the investment property generates a negative cash flow. Therefore, you will need to put in some of your own money each month to cover the deficit.
If your investment property provides a positive cash flow from the time it was purchased, it means you will enjoy a surplus each month. It makes investing in cash flow properties more desirable to investors. With Mashvisor’s calculator, you can easily know whether an investment property provides good cash flow or not.
What Is Considered a Good Cash Flow?
A good cash flow in real estate investing is typically considered a positive monthly cash flow after all expenses. The expenses include mortgage payments, property management fees, and maintenance costs that are deducted from the rental income.
A general rule of thumb is to aim for a cash flow of at least $100 to $200 per rental unit per month. However, the specific amount can vary based on the local real estate market and property expenses.
2. Cash on Cash Return
When looking for the best real estate calculator, cash on cash return is one of the important return on investment metrics it should be able to calculate.
Cash on cash return (CoC return) is usually used for analyzing investment property financed with a mortgage loan. The CoC return metric shows investors their possible returns based on the total amount of cash invested.
What Is Considered a Good Cash on Cash Return?
A good cash on cash return is considered to be 8% to 10%. However, the specific target return can vary based on personal goals, local market conditions, and the type of property. High-performing markets and properties may generate higher CoC returns, while lower-performing markets may provide lower returns.
3. Capitalization Rate
Capitalization rate (cap rate) is used to analyze the returns of an investment property without considering the method of financing. It is the ratio of net operating income (NOI) to the current market value of an investment property. Since the financing method is not taken into account, the cap rate is ideal for comparing multiple rental properties.
Sample Computation of Capitalization Rate
Here’s an example of how to calculate cap rate:
1. Determine the Net Operating Income (NOI):
Rent revenue: $24,000 per year
Expenses: $8,000 per year (Property taxes, insurance, maintenance, etc.)
NOI: $24,000 – $8,000 = $16,000 per year
2. Determine the market value:
Assume the market value of the property is $200,000
3. Calculate the cap rate:
Cap rate = NOI / Market Value
Cap rate = $16,000 / $200,000 = 0.08 or 8%
It means that the property is expected to generate an 8% return on the initial investment if the property continues to produce the same NOI. A higher cap rate generally indicates a higher expected return and vice versa.
What Are the Special Features of Mashvisor’s Calculator?
The best real estate calculator should offer more than what other basic calculators do. That’s precisely what Mashvisor’s calculator does. Apart from the important real estate metrics, Mashvisor’s rental property calculator comes with the following unique features:
1. Optimal Rental Strategy
If you’re looking for the best real estate calculator app, you should consider Mashvisor’s real estate calculator. The calculator can effectively help you to examine the potential return of a rental property for both rental strategies (short term rental and long term rental).
Mashvisor’s real estate calculator shows the above real estate metrics for both strategies, as well as the short term rental occupancy rate. Therefore, you can compare the two strategies and accurately determine the optimal rental strategy for a particular investment property.
If you’re looking to invest in short term rentals, Mashvisor’s short term rental income calculator is the best to use.
2. Rental Comps
To accurately analyze investment property, you’ll need to look at other comparable properties in the market. Mashvisor’s real estate calculator provides rental comps for all rental properties for sale on the platform. It allows you to compare investment properties that meet your criteria based on a particular metric.
3. Neighborhood Analysis
Another unique feature that makes Mashvisor’s calculator the best real estate calculator for investors is the insights from historical and predictive analytics. Based on the said insights, you can know the performance of the market where an investment property is located.
This way, you will be able to invest in only the best locations. As you know, location exerts a significant impact on the performance of an investment property.
4. Investment Payback Balance
Based on the current stats, the calculator can show you the amount of profit expected from a rental property for up to ten years. It can be seen in the Investment Payback Balance section of the tool.
5. Contact the Listing Agent
If you’ve analyzed an investment property for sale and are satisfied with the numbers, the calculator allows you to contact the listing agent and proceed with the deal easily.
Related: Should Investors Work With Real Estate Agents Near Me?
The Bottom Line
For you to properly assess the profitability of a real estate deal, you need to use the best real estate calculator you can get. Forget the guesswork and use Mashvisor’s real estate investment calculator to analyze investment properties accurately in a matter of minutes.
Mashvisor’s real estate calculator is a valuable tool for any real estate investor looking for profitable investment opportunities. It provides a wealth of data and insights on various aspects of real estate investing, such as rental income, cap rate, and cash on cash return.
The said information can help investors make more informed decisions about which properties to invest in and how to optimize their returns. Furthermore, Mashvisor’s real estate calculator allows investors to compare different properties and neighborhoods. The tool makes it easy to find the best investment opportunities.
Overall, Mashvisor’s real estate calculator is an essential tool for any real estate investor looking to maximize their returns and minimize their risks.
Schedule a demo today of Mashvisor’s real estate calculator with one of our product specialists.