Ever wonder why some real estate investors become millionaires while others fail? The secret may be the investment property calculator!
Many aspiring property investors enter the world of real estate investing with enthusiasm to start making money and building wealth. Unfortunately, most of them face failure not long after they buy an investment property. What gives? There are many reasons behind this. However, the main reason is the ever-changing nature of the real estate market.
The real estate investing business is constantly changing and is not the same as it was years ago. What might have been a good location or a good investment strategy might now be a bad one. In addition, thanks to today’s advanced technologies, now property investors have access to a number of real estate investing tools to help them make successful investment decisions. One of those tools is the investment property calculator.
In this article, we break down what the investment property calculator is. We discuss its uses and why every aspiring real estate investor needs one to join the class of successful property investors. So, without further ado, let’s jump right in!
What Is an Investment Property Calculator?
An investment property calculator is a real estate investing tool that successful property investors use to do calculations and get projections for an investment property to determine its rate of return on investment. Thus, using this online tool, property investors input some basic information about an income property (such as the purchase price, the financing method, the cash investment, etc.) and the investment property calculator will then provide them with all the crucial numbers needed to decide whether or not to buy this income property.
If you’re wondering where you can find this amazing real estate investing tool, then you’ve come to the right place! Mashvisor offers property investors with a versatile investment property calculator that uses traditional and predictive analytics as well as comparative and historical data. As a result, Mashvisor’s investment property calculator provides property investors with the most accurate results within minutes. This adds a lot of convenience to the life of a real estate investor.
To get immediate access to the best investment property calculator there is, sign up for Mashvisor now!
What Does the Investment Property Calculator Compute?
As mentioned, property investors use this tool to get projections and calculations related to the rental property and return on investment. But what are these exactly? Mashvisor’s investment property calculator computes the following metrics:
The cap rate is the return on investment a real estate investor receives when calculating the net operating income (NOI) and dividing it over the income property’s value. For example, if NOI of an income property is $10,000, and its value is $100,000, its cap rate is 10%. Property investors are advised to invest in an income property with a cap rate of 10% or more. Mashvisor’s investment property calculator not only allows property investors to calculate the cap rate but also provides readily calculated cap rate ratios of thousands of investment properties across the U.S real estate market. This helps a real estate investor easily determine which income property yields a better return on investment.
Cash on Cash Return
The cash on cash return is simply the NOI over the total cash investment. Calculating cash on cash return allows property investors to see the expected return on investment they’d make if they pay for buying the rental property all in cash vs. with a mortgage. In the real estate investing business, investment properties with a cash on cash return of at least 8% are good investments. Similar to the cap rate, Mashvisor’s investment property calculator also provides a real estate investor with the cash on cash returns of investment properties. It further allows them to modify their costs to get the most accurate results.
The cash flow is the difference between monthly rental income and monthly expenses of an income property (both of which the investment property calculator estimates as well!). It comes in the form of monthly rent collected from tenants and it could be positive or negative. Obviously, as a real estate investor, you always want to invest in positive cash flow investment properties! Negative cash flow means the expenses exceed the profits, which results in losing money from your rental property. Mashvisor’s investment property calculator provides property investors with cash flow details after all the numbers have been added and calculated.
Why Every Real Estate Investor Needs an Investment Property Calculator
Successful property investors use this real estate investing tool to make smart investment decisions more efficiently. A real estate investor can use the investment property calculator to:
Analyze Investment Properties
Analyzing an income property is an important step before making the purchase. A real estate investor must ensure that his/her investment will bring the return he/she is aiming for. Thus, an important factor for a successful real estate investing career is buying the right rental property. Once again, the investment property calculator estimates the cap rate, cash on cash return, cash flow, as well as other important projections that determine the profitability of investment properties (such as rental income, occupancy rate, and expenses). Mashvisor’s investment property calculator allows you to analyze different investment properties in the same area to find the best one with the highest profitability.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Determine the Optimal Rental Strategy
Another factor for successful real estate investing is determining the optimal rental strategy. As a real estate investor, you can rent out your rental property as a long-term traditional rental or a short-term Airbnb rental. This decision is based on many factors and it’ll affect the profitability of an income property. Which is why you must be very careful when making this investment decision. Fortunately, the investment property calculator can help you out!
All data provided by Mashvisor’s investment property calculator is disaggregated into two categories: traditional and Airbnb data. Therefore, property investors can calculate the expected return on investment of a rental property if it was rented out as a traditional or an Airbnb rental and, based on the results, determine which rental strategy is optimal and most profitable.
To Sum Up
The secret to successful real estate investing lays in making smart investment decisions. So, whether you’re a beginner real estate investor looking to buy your first investment property, or an experienced real estate investor searching for your next rental property, be smart and make use of Mashvisor’s investment property calculator! This real estate investing tool will guarantee that you make the best investment decisions and find profitable investment properties in any state, city, and neighborhood in the US housing market.
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.