Cash flow properties are the key to generating a profit in real estate investing. Like everything in real estate, calculating cash flow accurately requires the proper tools. If we were to rewind a few decades ago, we’d have to use Excel spreadsheets to manually calculate and analyze cash flow. These spreadsheets got the job done, but they were very time-consuming and prone to error. Luckily, spreadsheets are no longer needed in 2020. With the cash flow analyzer, real estate investors can conduct a cash flow analysis of multiple investment properties for sale in minutes as opposed to months. But what exactly is a cash flow analyzer? In today’s blog post, we’ll discuss what cash flow is, why a cash flow analyzer is important, and where you can find the best cash flow analyzer in 2020.
What Is Cash Flow?
First, let’s explain what cash flow actually is. Real estate cash flow is the difference between rental income and rental property expenses. In other words, cash flow is a measure of the net amount of profit a rental property is making. Positive cash flow represents a net positive. This happens when rental income outweighs rental property expenses. The opposite is negative cash flow, or when rental expenses surpass rental income, leading to a net loss. As you can obviously tell, a positive rental property cash flow is the goal. Negative cash flow, however, should be avoided.
The cash flow formula is pretty straightforward:
Cash Flow = Total Rental Income – Total Rental Property Expenses
The total rental income of a property is self-explanatory. Total property expenses, however, are not. Rental property expenses are all costs and fees associated with running a rental property. The most common examples include:
- Rental income tax
- Property tax
- Management costs
- Property insurance
- HOA dues (for condo investments)
- Cleaning fees (for Airbnb rentals)
- Utility costs
What Is a Cash Flow Analyzer?
As you can see, calculating cash flow depends on many factors. If just one variable is incorrect, the entire calculation can become inaccurate. If, for instance, you underestimate a property’s management costs, the estimated rental property cash flow will be off. The potential for mistakes when calculating cash flow is increased when using Excel spreadsheets. Since the inputs in these spreadsheets are manual, and there are many variables to consider when analyzing multiple properties, you can end up with inaccurate results.
So, what is the solution? The answer is a cash flow analyzer! Also known as a cash flow calculator, the cash flow analyzer estimates and breaks down rental property cash flow accurately, effectively, and quickly. The analyzer considers a property’s location and features during an analysis. As a result, investors are provided with a complete understanding of cash flow properties. Then, they will be able to buy a rental property that is sure to earn a large profit.
What Is the Best Cash Flow Analyzer in 2020?
With all the cash flow calculators out there, where can you find the best one for residential real estate? Luckily for you, our dear reader, you don’t have to look very far! With Mashvisor, you have access to the best cash flow analyzer software out there. Mashvisor’s cash flow calculator utilizes predictive analytics, state-of-the-art algorithms, and big data to conduct a cash flow analysis. In addition, the analyzer provides interactive capabilities, allowing users to personalize and specify their analysis. Also, Mashvisor computes data for both traditional and Airbnb cash flow properties.
Here are the four main functions of Mashvisor’s cash flow analyzer software.
1. Estimates Monthly Rental Costs
As seen earlier, the majority of the variables needed to calculate cash flow come from rental property expenses. Therefore, Mashvisor’s first step for a cash flow analysis is to estimate all the expenses of a traditional or Airbnb property. The cash flow analyzer places expenses into two categories. The first is recurring expenses, which include maintenance costs, repairs, and taxes. The second is one-time start-up expenses, such as closing costs and appraisal fees. Mashvisor’s analyzer uses the most up-to-date data from nearby and similar real estate comps. In addition, the analyzer is interactive. It will allow users to adjust and add costs based on their investment goals and research.
2. Projects Monthly Rental Income
The second function of the analyzer is to estimate income. Unlike rental property expenses, rental income is not a sum of many other factors. Nonetheless, it must be accurately estimated in a rental property analysis for cash flow. Similar to expenses, Mashvisor’s analyzer uses property data from rental comps and predictive analytics to estimate income for properties. And as mentioned previously, Mashvisor projects the traditional and Airbnb rental income for all property listings.
3. Calculates Cash Flow
After compiling estimates for rental income and rental expenses, Mashvisor’s analyzer will calculate rental property cash flow. Of course, both traditional and Airbnb cash flow will be computed for the property. The analyzer also allows real estate investors to adjust different costs and observe the effect on cash flow. As such, you will be able to understand how to maximize the positive cash flow of your selected investment property.
4. Computes ROI and Determines Optimal Rental Strategy
After computing cash flow, Mashvisor will calculate the return on investment (ROI) of the rental property. This includes the cap rate and cash on cash return for both traditional and Airbnb rental strategies. In addition, Mashvisor’s analyzer will tell investors which strategy is optimal for their property. The analysis includes a detailed comparison of cash flow, ROI, and other variables to help you decide which route is best.
All in all, the cash flow analyzer is a must-have tool for real estate investing. It allows investors to determine the profitability of investment properties for sale in a short amount of time. Of all the cash flow analyzers out there, Mashvisor’s is the best of the best. It provides the most recent data, interactive capabilities, and analysis for Airbnb for sale. To start your 7-day FREE trial with Mashvisor’s cash flow analyzer and other vital real estate investment tools, CLICK HERE!