Real estate investing terminology is a must-know for successful real estate investors. Knowing the meanings of the terms will definitely help investors with their real estate investments. When it comes to real estate investing terms that benefit investors the most, the conversation always starts with the topic of this blog: the investment property calculator.
Investment Property Calculator – What It Is
An investment property calculator, also known as a rental property calculator, is a tool real estate investors use to calculate vital data pertaining to investment properties. Some forms of data are inserted in by an investor, and the calculator calculates the desired information. Typically, the main function of a rental property calculator is to compute metrics of return on investment. More advanced calculators, as we will cover later on, provide additional information about real estate investments.
Investment Property Calculator – What It Calculates
At its core, a rental property calculator focuses on five pieces of data.
-
Rental Income
Rental income is one of the most basic, yet most significant, real estate investing terminology and real estate investing data. This fundamental value is essentially the main form of profit for investment properties. It is used to determine all types of return on investment. The first and foremost function of an investment property calculator is to give an estimate of the rental income of a property. Smart calculators, like Mashvisor’s rental property calculator, do this with the aid of rental comps and predictive data. In that way, the most accurate rental income figures of a property are computed.
-
Rental Expenses
Rental income makes money for real estate investors. Expenses do the opposite. There are many necessary expenses to consider for real estate investments. It can be tiring and potentially erroneous for an investor to manually sum them all up. Instead, a rental property calculated is used. The calculator lists and sums up the expenses of a property, with minimal input from the investor.
-
Cash Flow
Cash flow is one of the most important metrics of return on investment. In its most basic form, it is taken as the difference between rental income and rental expenses. As a percentage, as calculated by investment property calculators, cash flow is compared to the total price of a property.
-
Cap Rate
Sometimes, a rental property calculator is called a cap rate calculator because it can calculate cap rate. Cap rate is calculated as the net operating income of a property divided by the property price. Cap rate is a vital metric in real estate investing for performance and comparison. The cap rate calculator, or investment property calculator, calculates this number for any given property.
-
Cash on Cash Return
Another return on investment metric that can also be used for property comparison is cash on cash return. Cash on cash return is different from cap rate in a number of ways, the most significant being that it considers the total cash invested in investment properties rather than the property price. As a result, properties financed through a mortgage tend to have higher cash on cash return than properties purchased with cash. Whatever the case, a cash on cash return calculator will compute this metric in no time.
Related: Understanding Cap Rate vs. Cash on Cash Return
Investment Property Calculator vs. Spreadsheets
Why bother with an investment property calculator? Is there any alternative to it? Yes, but not a good one. The archaic alternative to a rental property calculator is spreadsheets. Spreadsheets are so outdated that reverting from calculators to them is like reverting from cars to carriages.
Related: Why an Investment Property Calculator is Better Than Spreadsheets
Investment property calculators are excellent for real estate market analysis and investment property analysis because they are accurate, fast, and easy to use. Basically, calculators are everything spreadsheets are not. Spreadsheets depend primarily on investor input, unlike calculators. This makes spreadsheets very prone to errors. The real estate investing calculations are manual too, which further magnifies errors. Rental property calculators, on the other hand, reduce errors and magnify accuracy.
Investment property calculators are time-savers. Spreadsheets are the complete opposite, as manual investment property analysis for each property is required. This is never an issue with investment property calculators. Mashvisor’s investment property calculator, for example, performs investment property analysis and real estate market analysis in a matter of minutes.
Mashvisor’s Investment Property Calculator – The Only Investing Tool You Need
There are many investment property calculators out there. Which one should real estate investors choose? The more basic calculators provide the five forms of data mentioned earlier. Typically, more analysis would still be required. This isn’t the case, though, if you use Mashvisor’s investment property calculator. Mashvisor’s investment property calculator is so accurate and insightful that you will not need any other real estate investing tool.
Related: How to Use Mashvisor’s Rental Property Calculator
-
Neighborhood Analysis
Mashvisor’s analysis begins with real estate market analysis, also known as a neighborhood analysis. Areas are color-coded based on how well they perform according to certain forms of data. Mashvisor allows the real estate investors themselves to choose the criteria they would like to base their search on. These criteria include rental income, Airbnb occupancy rates, cash on cash return, cap rate, and median property prices. Mashvisor also tells investors the optimal rental strategy, optimal number of rooms, optimal property type, and a grade of the property’s investment capability from our Mashmeter.
-
Investment Property Analysis
Once investors have settled for an area, they have to narrow down properties. Investment properties can be searched for depending on property type, projected rental income, projected cap rate and cash on cash return, property type, and more. The selected property can be analyzed through investment property analysis. Everything from its return on investment and rental expenses to its number of bedrooms and bathrooms and optimal rental strategy will be displayed. Real estate investors can then use the interactive investment property calculator to see how the returns would differ based on their own inputs.
For more on real estate investing terminology and the rental property calculator, start your trial with Mashvisor!
