Analysis is a must for real estate investors in search of the best investment property. For the longest time, a real estate market analysis and an investment property analysis were done using spreadsheets. Spreadsheets were time-consuming, prone to error, and not widely applicable. Luckily, the advent of the investment property analysis calculator has eased residential real estate investing and has made spreadsheets obsolete.
An investment property calculator is the best tool for real estate investors when it comes to analysis, as it can perform both a real estate market analysis and an investment property analysis. The focus of this blog, however, will only be on the investment property aspect.
What Is an Investment Property Analysis Calculator?
An investment property analysis calculator is a residential real estate investing tool that helps real estate investors analyze an investment property. The calculator operates based on some inputs from the investor and predictive data obtained by the calculator. More advanced calculators, like Mashvisor’s investment property analysis calculator, allow investors to be interactive with the data in order to find the best investment property in the market.
What’s the Use of an Investment Property Analysis Calculator?
An investment property analysis calculator analyzes rental properties in two main ways. Firstly, it computes the most essential data for the real estate properties in question. Secondly, it then projects the rate of return based on the essential data and more.
Estimating Fundamental Property Data
The most fundamental data in residential real estate investing are rental income and rental expenses.
The importance of rental income for real estate investors is a no-brainer. What is not as simple, however, is projecting estimates of the rental income for properties without an investment property analysis calculator. Without the calculator, an investor would have to perform a manual investment property analysis to come up with real estate comps, which is extremely tiresome. Advanced calculators, like Mashvisor’s, eliminate this problem. These calculators project accurate estimates of the rental income based on rental comps and predictive analytics.
Rental expenses can be an unfortunate part of residential real estate investing if they are above a reasonable level. Controlling the sum of expenses is therefore essential for profitable investment properties. Calculating the sum of expenses of a property can be a daunting task for real estate investors, as there are many expenses to consider. Here are just some examples of rental expenses:
- Mortgage Interest
- HOA Fees
- Utilities and Repairs
- Property Taxes
- Income Taxes
- Closing Costs
As you can see, there are various expenses a real estate investor must be aware of. Remembering and calculating these expenses is difficult for investors but not for calculators. An investment property analysis calculator computes the sum of rental expenses of a property with ease. The calculator also factors in important variables, like financing method, in order to project the most accurate expenses forecast.
Estimating Return on Investment
Rental income and rental expenses allow for further investment property analysis in the form of ROI metrics. The most common and important return on investment data include positive cash flow, cash on cash return, and cap rate.
Cash flow is the most direct form of profitability in real estate investing. Essentially, it is the difference between rental income and rental expenses. If there is more rental income compared to rental expenses, a real estate property is considered to have positive cash flow. Thus, the property earns more than what it costs. The opposite is negative cash flow, which is when rental expenses outweigh rental income. The obvious goal of residential real estate investing is to have positive cash flow. An investment property analysis calculator helps investors achieve this goal by estimating the cash flow of an investment property.
Cash on Cash Return
Cash on cash return is another widely used metric of ROI. It calculates the return on investment based on the NOI and the amount of cash invested into a property. Cash on cash return can be used for properties, whether the financing method is through a mortgage or through cash. Typically, properties financed through a mortgage have higher cash on cash return than properties purchased fully in cash. The investment property calculator projects cash on cash return for rental properties based on rental comps and predictive data. Mashvisor’s calculator estimates the cash on cash return for both traditional and Airbnb investment properties.
Cap rate is like cash on cash return in that it calculates ROI based off the NOI. The difference, however, is that cap rate is used regardless of the financing method of a property, whether it’s cash or a mortgage. Once again, Mashvisor’s investment property analysis calculator computes the projected cap rate for both traditional and Airbnb income properties.
What’s the Use of Mashvisor’s Investment Property Analysis Calculator?
There are many investment property calculators out there, so why should you use Mashvisor’s? The answer is, simply put, that Mashvisor’s calculator presents the most accurate estimations. It also calculates other unique and important data. Here are just a few examples of the unique data.
Best Rental Strategy for Property
Not all properties in a real estate market are the same. Some are better as traditional investments, while others generate more income as Airbnb properties. Mashvisor’s investment property analysis calculator tells real estate investors which strategy is best for their investment properties.
Airbnb Occupancy Rates
Estimated occupancy rates are vital when searching for the best investment property. This is especially true if the property is an Airbnb one. Mashvisor uses data directly from Airbnb to give investors an idea of what their Airbnb occupancies will look like.
The financing method of a real estate investment can either make it or break it. Mashvisor’s calculator helps real estate investors decide which financing method is best for their investment.
Investment Valuation Score
For every investment property, Mashvisor presents a score based on the Mashmeter, which is an evaluation based on qualitative and quantitative data. The score grades the investment as a percentage. The higher it is, the better the investment.
All in all, an investment property calculator is a must for real estate investment analysis. Not only does it give investors important data, but it is also easy to use. To get your analysis for the best investment property, start your trial at Mashvisor and use our investment property analysis calculator today!