Getting your feet wet in real estate investing can be tricky if a real estate investor is not properly guided. But what if we told you that all an aspiring investor needs is one tool that will ensure this much-needed guidance? This tool most certainly exists, and it’s called the rental property calculator.
What’s a Rental Property Calculator?
A rental property calculator, also known as an investment property calculator, is the ultimate tool investors use for real estate investing. It performs many functions, like comparing potential rental properties, analyzing the local housing market, and determining profitability. The investment property calculator presents data to a real estate investor based on different factors, like the investor’s own inputs and, if the calculator is a smart one, like Mashvisor’s, predictive data.
Why Do You Need a Rental Property Calculator?
So, why should an investment property calculator be the first thing investors need in real estate investing? Well, let’s compare the rental property calculator with its alternative, spreadsheets.
Spreadsheets are used to perform much of the same functions as an investment property calculator. The difference is that one requires burdensome, manual analysis, while the other can be conducted at the click of a mouse. You’ve guessed it, an investment property calculator takes a lot less time to analyze rental properties.
Not only does a rental property calculator give real estate investors a faster real estate market analysis and investment property analysis, it conducts a much more accurate analysis, too. Spreadsheet calculations are done by hand. This can magnify errors, which take a lot of time to resolve. Investment property calculators do the exact opposite; they reduce any potential errors.
Overall, an investment property calculator is far superior to its archaic alternative of spreadsheets. Rental property calculators make real estate investing easier, faster, and more accurate. Specifically, an investment property calculator makes the two main goals of analysis, finding rental properties and determining their investment capabilities, much easier. This is why a real estate investor needs a rental property calculator.
How Does a Rental Property Calculator Help Real Estate Investors Find Properties?
Smart investment property calculators, like Mashvisor’s, search for investment properties through a real estate market analysis.
A real estate market analysis begins by searching for a real estate market. An investment property calculator allows real estate investors to choose to invest in their local housing market or in out-of-state real estate markets. A real estate investor can choose to search for markets based on his/her preferred criteria. For instance, Mashvisor’s rental property calculator utilizes a heatmap, which can search for markets based on different data, like rental income, cash on cash return, cap rate, Airbnb rental strategy, etc.
How Does a Rental Property Calculator Determine Investment Capability?
Once real estate investors have found rental properties they are pleased with, it’s time to analyze them further. In other words, an investment property analysis is in order. At its core, an investment property analysis does two things: it calculates rental income and rental expenses, and it calculates return on investment.
Calculates Rental Income and Rental Expenses
Rental income is the bread and butter of an investment property’s profitability. It’s no surprise, then, that real estate investors spend much of their search for properties with high rental income, among other things. Investment property calculators locate areas and rental properties with high rental income using top-notch predictive analytics.
Rental expenses are just as important as rental income when looking for rental properties. Computing rental expenses is not easily done by hand, however. There are simply too many expenses to factor in. The most common rental expenses shared by all investment properties, however, are mortgage payments, property insurance, utilities, management fees, and association fees. The rental property calculator calculates all these expenses and much more in a matter of minutes. Some expenses are required to be manually inserted by the real estate investor, while most are calculated by the calculator.
Calculates Return on Investment
Rental income and rental expenses are the precursors to all forms of return on investment. Return on investment is vital to understand an investment property performance. There are three main types of return on investments that rental property calculators compute: cash flow, cash on cash return, and cap rate.
Cash flow is the difference between the rental income of an investment property and its rental expenses. Rental properties that make more rental income than expenses have positive cash flow. Investment properties that have the opposite are said to have negative cash flow. Positive cash flow is the ultimate goal of any rental property, since it signifies making more money than spending. A rental property calculator is used to calculate the positive cash flow of existing investment properties and project the positive cash flow of potential rental properties.
Cap rate is a form of ROI that considers a property’s cash flow relative to its purchase price. Cash on cash return is a similar metric of ROI. The difference, however, is that it considers the financing method of the investment property in question. If the property is purchased through a mortgage, the total cash invested is in place of the purchase price.
Why You Need Mashvisor’s Rental Property Calculator
There are a lot of investment property calculators available, so why should you use Mashvisor’s? Simply put, because it’s the best one out there!
Mashvisor’s rental property calculator isn’t your run-of-the-mill calculator when it comes to real estate market analysis and investment property analysis. For starters, its data is backed by the most accurate predictive analytics available. Its heatmap allows a real estate investor to search for any potential investment property based on desired metrics. The calculator also informs investors of the best type of property in a certain area.
Investment property analysis has been revolutionized by Mashvisor’s rental property calculator. The calculator tells real estate investors which rental strategy to follow for the most success (traditional rentals vs. Airbnb rentals). Another vital metric from Mashvisor’s calculator is the Mashmeter. The Mashmeter rates the overall investment opportunity of rental properties, with tons of factors taken into consideration.