Why must real estate investors use a multi family investment calculator? Continue reading to find out!
There are a thousand reasons why you should consider buying a multi family home for investment. Be it easy management, multiple rental income streams, easier application of forced appreciation, and even higher occupancy rate- these are all characteristics that make an investor’s business successful. But to achieve a certain level of success, it is crucial that you start with proper multi family real estate investment analysis. And that’s where the multi family investment calculator comes in.
Before we tell you how this type of real estate investment tool will change your investing experience, let’s talk a little bit about what it is exactly.
What Is a Multi Family Investment Calculator?
The multi family investment calculator is also known as an investment property calculator or a real estate investment calculator. It is a tool specially designed to assist real estate investors with the assessment of multi family rentals. In other words, investors use this tool to examine the real estate market and to conduct multi family real estate investment analysis. The process includes running through all the return on investment metrics as well as key insights on the performance of housing markets. Here’s what Mashvisor’s multi family investment calculator looks like:
Why MUST You Use a Multi Family Investment Calculator?
Just like there is a myriad of reasons for you to get into multi family real estate investing, there are as many reasons why you must use a multi family investment calculator. Here are a few significant reasons:
1. Calculate Cash Flow
The number one reason you are investing in real estate is probably to enjoy positive cash flow. But when you are dealing with a multi-unit property which provides multiple income streams, it is essential that you do the math the right way.
If you don’t know what cash flow is, it is the rental income minus all rental expenses for a certain period of time. But, why is cash flow so important? Simply because that is what you get to keep from the rental income- it’s your profit margin.
Related: Learn How to Calculate Rental Property Cash Flow
But, wait a minute! Why do you need a multi family investment calculator when the cash flow formula is so simple?
As mentioned, multi family homes provide multiple income streams. Moreover, expenses might vary from one unit to the other. Some units might cost you more in expenses while others might cost less. This can make the cash flow calculation all the more complicated.
Besides, you will have to repeat this calculation for every multi family rental you see as a potential investment. By the time you finally find an investment property with positive cash flow, other real estate investors will have probably already jumped on the opportunity. Doing things manually will slow down your investment property search, especially when it comes to multi-unit properties.
Quickly find and analyze a multi family property using a calculator right now.
2. Calculate Cap Rate
The multi family cap rate is one way to analyze the return on investment relative to the property price. So, to calculate the cap rate, you must first compute the net operating income (annual cash flow). Then you divide that figure by the property price.
This will require you to gather a lot of data on the different investment properties you’re considering investing in. But why would you do that manually when you have the multi family investment calculator to do that for you? You can save some time to analyze other multi-unit properties to find the best real estate investment with a high cap rate.
Find Out: What Are the Best Multifamily Markets 2019 with High Cap Rate?
3. Calculate Cash on Cash Return
Cash on cash return is another way to calculate the rate of return. It is very similar to the cap rate; however, instead of dividing the NOI by the property price, you divide it by the amount of money you paid in cash (aka down payment, closing costs, renovation costs, etc.). This measure is significant for a multi family investor as it can help you determine the best method for investment property financing– the one that provides the best ROI for a specific property. Sometimes it is better to finance a property with an all-cash investment, while other times, it is best to turn to external financing options such as a conventional loan. The decision can be made with the help of the multi family investment calculator which will calculate the CoC return most accurately.
4. Find Real Estate Comparables
Real estate comps are one way to finally decide if the multi family house you are analyzing is the best option. You will have to find other multi family homes for sale within the same area which share similar characteristics with the said property. Make sure the numbers make sense in comparison to those properties. If you find that your option is indicating lower ROI figures, that might be a red flag for you. If the numbers turn out to be within the same range, then you are on the safe side. Of course, real estate comps can also help you identify below market value properties and even avoid over-priced properties.
What the multi family investment calculator does is it automatically provides a list of comps for you. So, not only do you not have to spend a lot of time searching for comps, but you can also be confident that you’re looking at the right comps for your investment property.
Related: How to Find Real Estate Comps in 2019: 4 Different Ways
Where Can You Find This Tool?
Regardless of what your investment goals are, Mashvisor can always help you achieve them. Therefore, we recommend that you check out Mashvisor’s multi family investment calculator– a revolutionary tool in the world of real estate business. In addition to the features we mentioned before, our real estate investment tool will assist you in the process of real estate market assessment. Moreover, it helps real estate investors decide on the best rental strategy for their multi family home investment. In fact, our amazing tool has helped so many real estate investors make money in real estate with little effort on their side. Finding multi family homes for sale has never been easier. If you want to learn more about how Mashvisor can help you find profitable investment properties, schedule a demo.