Investment Property Calculator: Real Estate Investing

This series of articles aims to explain the different aspects of investment analysis in real estate investing, which include investment property analysis,comparative market analysis, and the property valuation methods, while also explaining the different aspects of each and the tools used to conduct investment analysis with ease and at high efficiency.

Investment Property Calculator

In real estate investment analysis, an investment property calculator is a tool used to calculate the different values that are used in property valuation in order to determine the different metrics, such as the cap rate and the cash on cash return, which are used to express the return on investment of an investment property.

We have discussed in other articles the use of the cap rate and the cash on cash return values in a property valuation process when doing  investment analysis. In this article, we will delve into more detail on an investment property calculator, showing examples from Mashvisor’s investment property calculator, and how it can be used to calculate the different values, and what the different aspects of an investment property calculator are that real estate investors have to focus on when doing property valuation.

Related: Investment Analysis Software: Real Estate Investing

Investment Property Calculator: The Major Aspects

There are three major aspects of an investment property calculator that all play a crucial role in getting you an accurate result for the different metrics such as the cap rate and the cash on cash return.

In order to calculate the cap rate and the cash on cash return, as mentioned in more detail in the articles about these metrics, you need accurate values for a number of different aspects, including all the different expenses, both one-time expenses and reoccurring expenses, in addition to accurate financing information for your investment, such as purchasing a property using cash or mortgage, the type of mortgage, and its specifics.

Traditionally, in order to calculate the return on investment using these metrics, a real estate investor would have to conduct research and a study of the market in order to determine the different values for the expenses in the area, and then he/she would have to manually include these expenses into equations that would include the amount of cash invested, the property’s current market value, or any other number of different values that may affect the calculations in order to get an accurate result to base his/her investment decisions on.

An investment property calculator makes this process much easier and faster, and a real estate investor would only need to enter the different values in the dedicated places on the calculator in order to get the results of his/her choice, may it be the cap rate, the cash on cash return, or any other metric that he/she is using for the investment analysis.

So, let’s take a look at Mashvisor’s investment property calculator and the different aspects of it and how they are used in calculating an investment property’s cap rate, cash on cash return, cash flow, and rental income in order to help real estate investors conduct investment analysis and property valuation.

Note: Click Here to Search and Obtain Results with Readily Available Calculated Values!

Investment Property Calculator: The Financing Method

The first aspect of an investment property calculator for calculating the different values is the method used for financing the purchase of an investment property.

Since one of the two main metrics used in property valuation, the cash on cash return, relies heavily in its calculation on the amount of cash used to purchase the property, an investment property calculator would not be able to calculate the cash on cash return if it did not include an aspect for calculating based on the method used for financing the purchase.

Using Mashvisor’s investment property calculator, you are able to choose between cash and mortgage for your financing method.

Investment Property Calculator
Investment Property Calculator: Real Estate Investing

If you choose a mortgage, you are then able to select between a number of different mortgage types and durations, while also setting the amount of money borrowed through a mortgage and the interest rate on that mortgage.

Related: Buying an Investment Property: Cash or Mortgage?

These values will be automatically set based on the area you’re investing in and the type of mortgage that you select.  You are also able to adjust and modify the different values related to the mortgage, like increasing the interest rate, depending on your mortgage and its actual specifications.

Selecting or adjusting the mortgage value will be immediately reflected in the calculation’s results, and the values for the rental income, cash flow, and the cash on cash return will be automatically adjusted to match the mortgage value that you’ve selected.

Note: Click Here to Search and Obtain Results with Readily Available Calculated Values!

Investment Property Calculator: Expenses

The expenses section of an investment property calculator is one of the most important aspects of the tool.

In investment analysis, it is not possible to do property valuation without taking into account the expenses that will apply to your investment, whether they are one-time expenses or reoccurring ones.

Mashvisor’s investment property calculator has the unique feature of providing real estate investors with predetermined expenses based on the area that they’re looking at. These expenses will match the area’s averages for this type of investment property, but they can be modified and adjusted, and new expenses can easily be added if there are any that are unique and apply to your property.

There are two types of expenses that should be taken into consideration when doing investment analysis:

  • One-time expenses
  • Reoccurring expenses
Investment Property Calculator
Investment Property Calculator: Real Estate Investing

One-time expenses include all the expenses that will apply to your investment when you first close the deal, but that won’t apply afterward.

These one-time expenses can include the following:

  • Inspections
  • Total repair costs
  • Furniture and appliances
  • Closing costs

But they can include any number of other expenses that might be specific to your investment property, which can be added as “other” expenses.

In addition to the one-time expenses, there are also other reoccurring expenses that will apply to your investment property. These are expenses that will either apply on a monthly or an annual basis, and they are the most important expenses and will have the most noticeable effect on the rest of your calculations, as these expenses will directly affect your rental income and your cash flow, therefore affecting both the cap rate and the cash on cash return values for your investment property analysis.

The reoccurring expenses may include the following:

  • Insurance
  • Utilities
  • Property management
  • Property maintenance
  • Property taxes
  • HOA fees
  • Rental income taxes

Same as before, you can add any number of other expenses that may apply to your specific investment property as an “other” expense.

With Mashvisor’s investment property calculator, these expenses will all be pre-determined based on the area that you’re looking at, the property type, and the specific property of your choice. But their values can all be altered and modified to suit your individual investment, and any changes you make to these values will automatically adjust the final results of the calculations, such as the rental income, the cap rate, the cash flow, and the cash on cash return, to reflect the new values based on the new expenses added.

Note: Click Here to Search and Obtain Results with Readily Available Calculated Values!

Investment Property Calculator: Results

Naturally, the investment property calculator utilizes these aspects (the financing methods and the expenses) in order to give you accurate results for the rental income, the cash flow, the cap rate, and the cash on cash return.

Investment Property Calculator
Investment Property Calculator: Real Estate Investing

These are the main results that real estate investors aim to obtain through an investment property calculator, as they are the main metrics used in property valuation and for determining the viability of a real estate property as an investment.

The Cap Rate

The cap rate of an investment property relies on the expenses as well as the current market value of the property in its calculations.

This metric is used by real estate investors to determine the value of the investment property based on the amount of rental income that it will generate in relation to its current market value.

The cap rate is unique in that it does not include the method of financing in its calculation, as it will include the current market value of the property regardless of whether you’re financing it through a mortgage or cash.

Learn More: Cap Rate Property Valuation: Real Estate Investing

Cash on Cash Return

The cash on cash return of an investment property relies on the expenses as well as the method of financing in its calculation.

More specifically, the cash on cash return metric is used by real estate investors during property valuation to determine the return on investment that the property will have based on the amount of actual cash invested in it.

So, the cash on cash return will take the method of financing into consideration to include only the amount of down payment made towards the purchase of the investment property, leaving out the amount of money borrowed through a mortgage loan.

Learn More: Cash on Cash Return: Real Estate Investing

Cash Flow and Rental Income

The cash flow and the rental income of an investment property that is meant to be rented out represent the amount of money that you would be making from the property through its rent.

The rental income of the property is the amount of rent that you will be able to ask on the property based on its price and the one-time expenses.

The cash flow represents the actual net income that the property will generate through its rental income, which takes into account all the different expenses, including the reoccurring expenses as well as the occupancy rate of the property.

Learn More: Cash Flow Investment Property: The Key to a Successful Investment

Bottom Line

An investment property calculator is one of the most invaluable tools that are becoming more utilized in real estate investing when doing investment analysis or property valuation.

These tools allow real estate investors to do property valuation at much higher speed, and it saves them a lot of time that they would otherwise spend on obtaining these values and calculating the results manually.

Mashvisor’s investment property calculator is one of the most effective and unique tools in the real estate investing market, and real estate investors can use it to calculate all the different values needed to make the optimal investment decisions and achieve the highest returns on their investment.

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