Have you ever tried to conduct an investment property analysis using the old-fashioned way: a spreadsheet and a pen?
If so, then you probably realize how daunting of a task it can be, and how time-consuming it is. Not only that but if you make a mistake using the traditional method, you might end up wasting days or weeks of research and calculations for nothing.
Alternatively, you can use an investment property calculator in order to achieve more accurate results at a much, much, much higher speed, allowing you to spend more time with your family or working on other projects.
So, what is an investment property calculator, what does it calculate, and what’s the best investment property calculator tool to use out there? Read on to find out.
Investment Property Calculator: What Is It?
An investment property calculator is a tool used by real estate investors to determine the value and efficiency of a real estate investment or an investment property. The main advantage of using an investment property calculator is to save time and effort and to acquire more accurate results.
This is because conducting a real estate market analysis requires plenty of calculations and analytics; and if an investor does not intend to use an investment property calculator, he/she would have to go around and gather data related to the properties in the area and to spend a lot of time and effort doing the calculations and analytics using a spreadsheet manually.
Related: How Can You Use a Rental Property Calculator to Buy the Best Investment Properties?
In order to eliminate that effort, several investment property calculators have been developed all around the web. Gaining access to such calculators provides a huge advantage to real estate investors by saving them time and effort and providing them with more accurate and reliable results, leading to more efficient and easier-to-access investments.
Investment Property Calculator: What Does It Calculate?
So, what does an investment property calculator actually calculate? Depending on whichever platform you’re using, an investment property calculator can provide you with data related to a property’s profitability by calculating a number of different metrics. And although not all calculators are identical, the main metrics that should be included in every investment property calculator include:
- Cash on Cash Return: This value gives the investor information regarding the profitability of an investment based on the amount of cash invested in it. CoC equals the net operating income (NOI) over the total cash investment. This metric is usually used by real estate investors to determine whether an investment property is expected to earn good return on investment or not.
Related: What is a Good Cash on Cash Return?
- Cap Rate: This refers to the ratio of NOI over the property’s asset value. For example, if a property’s value is $100,000, and its NOI is $10,000, its cap rate would be 10%. Usually, and according to most investors, a good cap rate on an investment should be above 8%, otherwise, the investment is considered bad.
- Cash Flow: The main metric to base your investment decision on, an investment property’s cash flow is simply the income that this property will earn minus the expenses associated with it. Cash flow can be either positive (earning money) or negative (losing money), and it can effectively be considered as the pure profit that is to be expected from your investment.
Cash Flow = Monthly Rent – Expenses
Investment Property Calculator: Mashvisor’s Property Calculator
As mentioned before, although there are several platforms that provide an investment property calculator tool, not all of these tools are identical. Some platforms offer investment property calculators that include other features in addition to the main ones mentioned above, giving users a deeper insight into the investment, and allowing them to stand out from other investors by providing them with data that other investment property calculators don’t provide.
The Mashvisor investment property calculator is a unique real estate investing tool which allows users to not only get data related to the cap rate, the cash on cash return, and the cash flow of the investment property but also a number of other features such as:
Neighborhood Analysis
The Mashvisor investment property calculator provides the user with effective property search and heatmap functions. These functions allow real estate investors to determine which areas in a specific state, city, or neighborhood have the best options to invest in. Using the investment property calculator filter allows users to set specific values on their search in order to view all properties that meet their search criteria in an area based on their preferred metric or combination of metrics.
Related: How to Do a Neighborhood Analysis in Real Estate
Additionally, the neighborhood analysis does not only allow the investor to determine the best investment property in an area, but to even determine which areas are better for investing than others based on certain criteria or investment strategies, such as Airbnb or traditional rental properties.
The neighborhood insight option also allows investors to acquire more insight related to the optimal property type, the optimal number of rooms, and the optimal rental strategy in a set area.
The Mashmeter
The Mashmeter is a function of the investment property calculator that is unique to Mashvisor. This function tells an investor whether investing in a certain neighborhood or area is a good investment for or not based on a number of factors that are part of the formula. This value is presented to the user as a percentage score, and it is calculated based on the qualitative and quantitative data collected on the platform.
Optimal Rental Strategy
Another unique feature of the Mashvisor investment property calculator is the optimal rental strategy function, which gives you the optimal rental strategy to use in each area based on historical and analytical data and real estate comps, which then determine whether Airbnb or traditional rental properties are better for the investor in that area.
Investment Property Calculator: Conclusion
While some real estate investors still prefer to use the traditional spreadsheet method to calculate and analyze their investment properties, most investors have become aware that in order to compete in the current real estate market, you need efficiency and speed, which is why most investors are starting to use investment property calculators. And while a wide selection of investment property calculators exist all over the web, using the Mashvisor investment property calculator provides the user with more options and functions that he/she can use to make the optimal real estate investment decisions and go for the best rental strategy.
