Just getting started in real estate investing? It can be pretty overwhelming, huh? One thing that is sure to overwhelm first-time real estate investors is the number of tools paraded in front of them- both free and paid and all promising to help you become a millionaire.
To help you cut through the noise, I can tell you that there is one real estate investment tool that you actually do need- a rental property calculator.
And I’m not talking about those calculators that resemble the simple tool you can pull up on your laptop right now. I’m referring to an advanced, data-driven investment property calculator. This is the kind of tool that real estate investors need and this is the guide you need to read to find out what to look for when buying a rental property calculator.
Buying a Rental Property Calculator: 6 Things to Look For
“How do I know if an investment property is profitable?”
Buying a rental property calculator is sure to help you answer this question if you choose the right one. So what should the “right one” have?
#1. Integration with Tools That Actually Help You Find Investment Properties
There are countless rental property calculators on the market right now. But most of them assume that the real estate investor has already done the legwork and found an income property. These simple tools will ask you to enter in all the information and then automatically calculate the return on investment on a rental property for you. Sound familiar? Essentially, these tools function exactly like Excel rental property analysis spreadsheets with the added benefit that you don’t have to plug in any of the formulas related to buying rental property.
So what happens is that you spend a good amount of time scouring the housing market for real estate deals, networking, maybe working with an agent, only to pull up these simple rental property calculators to find out that it says your investment property for sale is a dud. It won’t make you any money. In fact, you will bleed money every month if you buy that rental property for sale.
And now you’re back at square one in your investment property search.
Rather than letting this happen to you, look for a kind of all-in-one real estate tool. Look for a platform that allows you to conduct an investment property search and investment property analysis (on multiple properties) in one session, without leaving the comfort of your couch. This will ensure you’re getting your money’s worth when buying a rental property calculator.
#2. Rental Income, Cost, and Occupancy Rate Estimates Ready to Go
As I mentioned, a lot of rental property calculators will require that you know how much rental income a certain investment property will produce. They will also expect that a new real estate investor will know all the rental property expenses as well as the occupancy rate.
Now, if you’re buying a rental property from a landlord, then it’s possible they may have handed you all this information. But more often than not, real estate investors are buying properties from homeowners or vacant properties that another investor is flipping. So where do you get this kind of rental property information?
You could spend hours doing real estate market research and neighborhood analysis to find out how much other local landlords with very similar rental properties are charging and spending. And you can try to figure out how often your future rental property will be occupied based on real estate market trends. But again, once you come home and plug all of this information into your rental property calculator, you might find that you’ve wasted a lot of time- the rental property cash flow will be negative.
That’s why it’s crucial that when buying a rental property calculator, you look for one that collects its own real estate big data and analyzes it for you. And if it has the aforementioned integration with investment property search tools, then the calculator will be able to display rental income, occupancy rate, and cost estimates for every listing.
Your calculator should be a rental income calculator, rental property expense calculator, and an occupancy rate calculator all in one.
#3. Interactive Features for Calculating ROI on a Rental Property
Having estimates is great. This kind of functionality means that when you’re buying a rental property calculator, you’ll have a tool in your arsenal that shows you the:
But what about the cash on cash return? Unlike the cap rate, the cash on cash return is a real estate return on investment metric that is unique to each and every investor. It’s based on your personal investment property financing. The CoC return lets you know how much money you’ll be making based on how much cash you actually put into the property upon purchase.
So, when buying a rental property calculator, make sure it comes fully equipped with an interactive mortgage calculator. This calculator should allow you to add your:
- Property Price (as you won’t always pay the listing price)
- Mortgage Type (Fixed-Rate, Adjustable-Rate, Interest-Only)
- Down Payment
- Loan Amount
- Loan Term
- Interest Rate
And every change you make in the mortgage calculator should be reflected in the rental property cash flow and the cash on cash return.
#4. Real Estate Comps (Specific to the Investment Property for Sale)
Another feature that you should look for when buying a rental property calculator is auto-generated real estate comps. Performing comparative market analysis on your own in the initial stages of an investment property search is important. It helps you weed out the overpriced and identify below market value opportunities. So you need a quick way to find real estate comps and a good rental property calculator will be able to help. It should provide unique comparables for every real estate listing that you find.
Related: How to Easily Find Real Estate Comps
#5. The Ability to Forecast ROI on a Rental Property
If you’re buying a rental property and plan on implementing a buy and hold real estate investment strategy, then you want to know how this property will perform years down the line. Will it generate profit or will it lose money based on its current stats?
This is called the investment payback balance and a common mistake among first-time real estate investors is to ignore this aspect. Many focus on how much cash flow the rental property will produce over a year as this is the kind of information that most calculators can offer you. Don’t make this mistake and look for a rental property calculator that can forecast ROI using predictive analytics and show you the investment payback balance.
Related: Investment Payback Calculator: A Tool That Every Investor Needs
#6. Traditional and Airbnb Analytics
Landlords and real estate investors no longer have only one option when it comes to renting out a house. You can either implement a traditional rental strategy or an Airbnb rental strategy. And while you may have a personal preference already, it’s smart to look into both options. After all, if one can make a lot more money for you, then why not explore that route?
Related: Real Estate Investing: Traditional vs Airbnb Investments
When buying a rental property calculator, make sure that it provides both traditional and Airbnb analytics for every listing. It should allow you to quickly and easily compare the return on investment you can achieve from either strategy with each rental property for sale you come across.
Where Can I Buy This Kind of Rental Property Calculator?
If you’re looking for the real estate investment calculator described above, then Mashvisor is what you need. It’s the ultimate calculator for analyzing investment property and it goes beyond just answering the question of how to calculate return on investment property. This tool is a key part of the formula for buying rental property.
Can I afford an investment property calculator? Check out our pricing plans. We have a plan to suit everyone. And you can get started today with a 14-day free trial.