Finding the best real estate investments is always a challenge, even for experienced real estate investors with broad knowledge and experience. Investors need to study the market and also perform a proper assessment with analytics. With the current technology in real estate, most property investors rely on various real estate investment tools to help them search for the best investment properties. Heatmap analysis is one of such real estate investment tools that has become popular among property investors looking to find where to invest in real estate.
What Is Heatmap Analysis?
A heatmap is a visual map of an area showing data based on given criteria with the use of different colors and visual indicators as a representation of different percentages or ranges. Instead of the normal numerical form, a heatmap will display data in a visual form. Heatmaps are convenient since they make it possible for real estate investors to easily explore different real estate metrics in just a few clicks. It is used as a heat filter in the identification of different performances within an area. Heat map analysis is the use of information showed by the heat map for the analysis of different properties, neighborhoods or areas in a city, which is useful in making decisions on property investment.
Heat Map Analysis Metrics
Heatmap analysis usually takes into consideration a number of metrics. Let us look at some of these metrics.
Making money in real estate is not possible if you don’t have a financial plan and regularly monitor your budget. Therefore, it is vital to pay attention to property price when trying to find the best real estate investments. The listing price of potential investment properties is one metric that can be found through heatmap analysis. Real estate investors can compare the listing prices in a given location and use this information to choose the area to invest in, based on their target. This allows any prospective real estate investor to get information about different locations and see how the average listing price in these areas compare. Based on this information, the real estate investor is able to decide on a location to invest in, depending on the listing prices in the area and the investor’s target listing price.
The listing price of real estate is normally the first metric used in real estate market analysis by investors since it is a major factor in determining whether you can afford to invest in a property in that location. Only after having knowledge on the listing prices of the properties will the real estate investor be able to do analysis on other criteria related to the investment property.
Cash on Cash Return
After finding a location with good listing prices, the heatmap can be adjusted to show investment properties on the basis of cash on cash return. Cash on cash return is among the most important factors to consider when doing real estate investment analysis before making an investment decision. It gives an idea of the value of the property based on its return on investment and it is calculated through the division of the net operating income by the investment costs. The prospective property investor is able to know which properties in that real estate market are most profitable and the period of time it will take to begin earning profit from them.
Related: What Is a Good Cash on Cash Return?
Potential Rental Income
Apart from offering information about the cash on cash return and the listing prices of real estate investments, a heatmap analysis enables the investor to find investment property based on potential rental income. The main goal of purchasing rental property is to earn a steady positive monthly cash flow. This metric considers the average prices of rent around the location so that the property investor can know the rental income to expect from the investment property and rental rate that can be set. This heatmap analysis metric is often used in the analysis of rental properties. However, real estate investors can also use it to analyze other investment types so as to add more depth to their analysis.
Airbnb Occupancy Rate
Airbnb occupancy rate is another feature of heatmap analysis that is very beneficial to investors when trying to find the best real estate investments. This metric is mostly used by real estate investors who want to make investments in short-term rental properties in a particular area. Since rental income from Airbnb is usually on a per stay basis and not monthly, there is a direct correlation between the rental income and the occupancy rate. Higher monthly occupancy rate earns more rental income.
Mashvisor’s Heatmap Analysis
Successful real estate investors use heatmap analysis to find investment property by dividing information in accordance with their situation and rental strategy. Whether you are in search of investment property with an affordable listing price, higher rental income, attractive Airbnb occupancy rates, and/or high cash on cash return, Mashvisor’s heatmap will help you achieve your goal.
Mashvisor’s heatmap tool enables real estate investors to pinpoint prime locations for both Airbnb and traditional investment properties in all cities in the country using the above key metrics. It is among the best and most powerful tools in the market that helps real estate investors find the best real estate investments easier and faster. Mashvisor’s tool uses color symbols to help present data that compares many investment properties in an area for each criterion in a manner that can be understood quickly. A green color indicates a high-performance rating, moderate performance is indicated in orange, while a red color shows low-performance rating. The heatmap visualizes the information you want to enable you to make your investment decision quicker and with less effort. It reduces the time that could be used to gather and analyze data using spreadsheets and calculators.
Do you want to get more insight on investing in real estate? Mashvisor’s website provides you with the necessary tools beyond the heatmap analysis and numerous valuable blogs on how to invest in real estate.