If you are an established real estate investor, then the rental property calculator must be your best friend and business partner. If not, it means you are still in the Stone Age. If, on the other hand, you are aspiring to enter the real estate investing business, the first thing you should get yourself is a rental property calculator, also known as an investment property calculator. But what is this? Well, basically, it is an online real estate investment tool where you input data related to your income property (property price, rent, payment method, one-time costs, recurrent expenses, etc.) and you get as outputs various important numbers related to your return on investment and your profitability as a real estate investor including cash flow, cash on cash return (CoC return), and capitalization rate (cap rate).
Why is the rental property calculator a necessity in real estate investing?
The answer to this question is quite easy and straightforward – because it saves real estate investors lots of time and energy. We do not mean to say that a real estate investor cannot possibly survive and be successful without the use of a rental property calculator. However, his/her life will be unnecessarily complicated, and he/she will chronically run the risk of missing on the best investment property while collecting all required figures and doing all analyses and calculations manually or with spreadsheets. Before you can decide on the best US housing market at the moment and find the best rental property, you need to do a real estate market analysis, conduct an investment property analysis, and get all the real estate comps. Without a rental property calculator, this can take months, and the most profitable income properties will probably be long gone before you arrive at the conclusion that you should have bought exactly them. Alternatively, with the use a rental property calculator, you can finalize all the needed work much faster and get to the right real estate investment decisions on time.
Which is the best rental property calculator in the market?
Mashvisor’s rental property calculator, of course. Next thing you’ll ask is: Why? Well, because it is highly interactive and goes beyond the usual functions of an investment property calculator. It does not simply crunch the number that you input in order to arrive at return on investment estimates that you could have calculated on your own with the use of spreadsheets. In addition, it also factors in predictive and comparative data and algorithms. For example, when you first consider a particular investment property, you might not have a clue what rental income you could expect from this property without spending days on doing diligent research on similar properties in the local market and analyzing tons of data. No worries, Mashvisor’s rental property calculator will actually provide you with a reasonable, reliable projection of the rental income based on the endless data stored in the system. Similarly, the calculator will give a real estate investor estimates of the costs associated with buying, owning, and renting out this particular rental property, which are also frequently unknown beforehand.
How interactive is Mashvisor’s rental property calculator?
To put it simply: VERY. After all, that’s one of the most important features of a rental property calculator. No investor wants a real estate investment tool that will just allow for one option of inputs and outputs. Let’s have a look at some of the most important features of Mashvisor’s investment property calculator:
- Financing: This calculator allows for several different options for financing the purchase of the income property including cash, a 15-year fixed mortgage, and a 30-year fixed mortgage. You can also vary the amount of the down payment though it is usually recommended not to go below a 20% floor for any investment property. Since mortgage payments are the largest recurrent cost in any income property, exploring different financing options will arrive at very different return on investment outcomes. While the cap rate calculates your profitability based on the purchase price of the income property, i.e., it is not affected by the financing manner, the CoC return depends on the cash investment only. So whether you go for cash or mortgage and how big your down payment is will make huge differences when calculating the CoC return.
- Monthly expenses: Mashvisor’s rental property calculator will give you highly reliable estimates of the one-time startup costs (inspections, total repair costs, furniture and appliances, closing costs, and others) as well as the recurring expenses (insurance, utilities, property management, property maintenance, property tax, HOA dues, rental income taxes, and others). However, you still have the option to change all these to whatever other levels you consider appropriate in your particular case. Maybe you want to be extra cautious and go for more inclusive property insurance? Done – just enter your estimates of the annual or monthly cost in the rental property calculator, and all related outputs will be automatically changed.
- Rental strategy: While traditional, long-term rentals might still be the norm in real estate investing, no one can deny the ever increasing role of Airbnb and other short-term rentals in the business. As long as you are not strictly convinced in the rightness of either over the other one, Mashvisor’s rental property calculator will help you greatly in identifying the best rental strategy for your investment property. All measures of the costs, the income, and the return on investment are segregated by traditional and Airbnb. You can easily see whether the cash flow, the cap rate, and the CoC return are more sizable in case of renting out your new rental property traditional or Airbnb, which will eventually determine the optimal strategy for each particular real estate property.
So, YES, the life of a real estate investor is definitely possible without a rental property calculator. However, it will be much more complicated and difficult. Considering the relatively low cost of most investment property calculators, it is simply incomprehensible why anyone would deprive him/herself of the numerous benefits of using one. The speediness and accuracy which a rental property calculator will provide to a real estate investor will eventually make the difference between being a good and a bad investor. So, before you even start thinking about buying another investment property, make sure to get yourself Mashvisor’s rental property calculator.