To avoid losing money in real estate, you need many things. Amongst these things is the property investment calculator. So, stay around to learn how it helps real estate investors make money instead of lose it.
Often we see real estate investors buying an investment property only to end up trying to get rid of it. Why does that happen? Because they lose money due to that property not being profitable. By now, you get it. Making money in real estate means that you need a profitable investment property. So how does a property investment calculator help to find these types of properties?
#1. Best places to invest in real estate
To avoid losing money in real estate, you always want to find the best places to invest in real estate. To do so, you must choose the right real estate market to invest in. Understand that a good market is of great contribution to the profitability of your investment properties. When buying a rental property, you want to make sure that the housing market supports your choice. Same goes for other investment strategies. For example, we don’t think that a commercial investment is a good idea in a residential area.
A property investment calculator can help you choose a great real estate market by showing you the kind of return on investment you can get there. It also helps you to perform real estate market analysis.
#2. Property’s worth
Another way a property investment calculator helps you avoid losing money is by calculating the property’s worth. You want to pay attention to this one!
By analyzing the data you provide, the property investment calculator estimates the price of the property. Of course, this would be based on its location, the area surrounding it, and some other data depending on what it asks from you. By using the calculator to estimate the property’s market value, you avoid paying more money believing that the offered price is the actual market price.
See, many beginner real estate investors fall victim to fraud. If a property is worth $150,000, it makes no sense for you to pay $200,000 for it. That is of course after you take into account that you will be applying for a mortgage and providing a 20% down payment for it. 20% of the $150,000 is $30,000 while it’s $40,000 for the latter sum. Feel the difference? It is a whole $10,000 gap. After all, if you buy a property for more than it’s original value, it decreases your equity instead of increasing it!
#3. Rental income
So, you are buying a rental property and have no idea how much to charge for its rent. No worries. The property investment calculator is here to help. And, yes, you can estimate the rental income with the help of this tool. How is that possible?
First of all, this incredible tool performs what we call the comparative market analysis. Basically what it does is it compares your investment property to other similar investment properties around it. In real estate, we call them real estate comps or rental comps. The subject properties must be as close in description to the property of interest as possible. Some of the criteria are square footage, the number of bedrooms, and the lot size amongst other characteristics. This helps determine how much rental income you can expect to receive from your rental property. After all, you want a competitive price to increase your occupancy rate. Otherwise, you are risking to lose demand on your property.
We also recommend that you check Mashvisor’s rental property calculator. It is the same as the property investment calculator, but it goes better for rental properties in specific.
To learn more about our product, click here.
#4. Property analysis
Here comes one of the most important aspects of the best real estate investments: the investment property analysis. Making money in real estate means that you know ahead of time whether a specific property is worthwhile. To find that out, you calculate what we call the return on investment.
The property investment calculator will calculate the return on investment in two ways:
1) It will calculate the capitalization rate of the property by dividing the annual cash flow by the overall property price.
2) It will calculate the cash on cash return which is the annual cash flow divided by the amount of cash involved in the transaction. This means that you only include the down payment as well as other costs paid in cash.
#5. How long would it take to generate wealth?
See the previous measures we have mentioned? They are indicators of how long it would take you to generate the amount of money you desire. Many real estate investors have a financial goal that represents financial freedom. In most cases, they also have a specified period of time during which they will want to have reached their goal. Using the property investment calculator will assist you with that as well. By helping you avoid losing money in real estate, you will know for sure how long it would take to reach your financial freedom milestone. All in all, making money in real estate is a matter of time, and you would want to know how much money you’ll be able to make in a certain period of time.
Where can you find the best property investment calculator?
Mashvisor, of course! You know that feeling when you have to run so many errands and you wish they were all in the same place so that you won’t have to go back and forth? That is exactly how we would describe Mashvisor: A one-stop shop. Do you want to obtain real estate education? Check out our blog. Wanting to consult with real estate experts? Get in touch with real estate agents through our platform. Most importantly, looking to find the best real estate investment tools? Go ahead and check out our property investment calculator! It is, in fact, that easy and that simple. Everything you need is a click away on Mashvisor.