Successful real estate investors are always on the lookout for new tools to use when buying rental properties. Whether you are new to property investing or an expert, you should be using the various real estate investing tools made available to you to obtain a higher return on investment. Real estate investing tools, moreover, match rental properties to your goals using accurate data.
This might leave you wondering what investment tools you should be considering when buying rental properties. Some of the great tools out there include the heatmap analysis tool, rental property finder, and rental property calculator. We will introduce and explain in details the aforementioned tools and how they could benefit you.
#1: Heatmap Analysis Tool
The location of an investment property is crucial in achieving a high return on investment. That’s why the heatmap analysis tool is one of the best tools for real estate investors buying rental properties. A heatmap is a visual summary of information where individual values are represented in colors. Real estate investors use the heatmap analysis tool to aggregate information about neighborhoods and color coordinate metrics. With Mashvisor’s heatmap tool, in particular, investors are able to identify prime locations for traditional and Airbnb real estate properties based on 4 key metrics: listing price, cash on cash return, rental income, and Airbnb occupancy rate.
Let’s say you want to find investment properties within a certain city and you want to assess which neighborhoods will bring the highest rental income and CoC return. Using the heatmap analysis tool, you can set the appropriate filters and get a visual description of neighborhoods with available properties based on these metrics. The tool provides an efficient way to quickly run a neighborhood analysis.
#2: Rental Property Finder
When buying rental properties, the next thing that you should be wary of is finding the right property now that you’ve found the right neighborhood. You should pick a rental property with good cash on cash return and capitalization rate. Of course, the rental strategy plays an important role in choosing the property. If you aim to buy a vacation home rental, for example, you want to find a property that will have a high Airbnb rental income. You will also have to pay attention to the Airbnb occupancy rate and how it affects the ROI. Taking into account all of these factors and how they affect the ROI can be difficult when buying rental properties without the proper tools.
How to find rental property with a good ROI using this tool:
Mashvisor’s rental property finder will help you find the most profitable traditional and Airbnb properties. The tool gathers and utilizes a wide range of real estate comps, analytics, and metrics to provide savvy real estate investors with lists of properties with the highest potential for returns in up to 5 cities. Based on your preferences and search criteria, the tool will greatly assist you when buying rental properties.
What financial metrics will be used? The tool will calculate and recommend the best properties based on cap rate and cash on cash return. It also allows you to select your preferences in order to provide you with a list of investment properties that are most suitable for your goals. The main filters for this tool are:
- Type of Property
- Rental Strategy
- Number of Bedrooms
- Number of Bathrooms
You can try this tool for free right now!
#3: Rental Property Calculator
The rental property calculator or investment property calculator is an online real estate investing tool that investors use to assess the performance of a rental property. Real estate investors input data pertaining to their financing method and cash investment. The tool then provides them with a list of calculations necessary to study before actually buying rental properties.
Rental property calculators have grown more popular with more real estate investors using them to calculate and derive property data in minutes, that before they spent considerable time to collect. With Mashvisor’s rental property calculator, in particular, you will be able to learn of the expected rental income, expenses, and profits made from the investment property in no time. The cool thing about this particular tool is that it also works as an Airbnb profit calculator!
What will Mashvisor’s rental property calculator calculate exactly?
Cash Flow: the difference between the monthly rental income and the monthly expenses incurred from the investment property. To earn a return and have a positive cash flow, you would want your rental income to exceed your expenses. Often times, real estate investors neglect some of the expenses leaving them with negative cash flow. Assess your expenses accurately using this tool so as to avoid unexpected costs that could harm your cash flow.
Cash on Cash (CoC) Return: the Net Operating Income (NOI) divided by the total cash investment. This return determines the expected profit that a real estate investor would make from a rental property whether they pay all in cash or with a mortgage loan.
Capitalization Rate (Cap Rate): the ratio of the NOI to the property’s current market value.
What cap rate and CoC return should you consider when selecting an investment property? Well, that depends on the location, the investor’s target return, and the real estate investment strategy. However, real estate experts claim that, as far as cap rate, anything above 10% is considered profitable. As for CoC return, some recommend a good COC rate to be between 8 and 12%. Keep this in mind when buying rental properties using this tool.
Buying rental properties requires that you conduct a diligent real estate market analysis followed by a thorough investment property analysis. Complementing your research with the aforementioned tools will most importantly grant you accuracy in the results obtained. Mashvisor’s tools use traditional and predictive analytics and comparative and historical data to provide you with the most accurate results. When you use these tools, you will eliminate the risk of making a decision based on wrong calculations.