The days of making low-risk investments through careful analyzing and interpreting have just begun. In the past, real estate investors relied on spreadsheets to analyze different investment properties and come up with a sustainable business plan to carry it to shore! Here comes the use of an Airbnb investment calculator.
What makes an Airbnb investment calculator?
An Airbnb investment calculator takes all variables into consideration. All the details about your possible investment property are factored in through the AI to give you a stabilized angle on its financial effectivity. Of course, these variables include everything from costs and utilities to expected rental income.
If you’re a real estate investor resorting to an Airbnb investment calculator to ensure your investment is profitable, you can make use of the data provided to make a sophisticated investment decision.
What are the variables that an Airbnb investment calculator takes into consideration?
Whether you’re using an investment calculator for traditional rentals or Airbnb rentals, the Airbnb investment calculator will guide you through several measures to ensure you’re making a low-risk investment. They are listed below:
Expected rental income
Making a substantial return on investment takes the form of rental income when investing in rental properties. Keep in mind that the main goal of buying investment properties is making money in real estate. So, knowing the average rental income that a property yields in the location you’re intending to invest in is a must! An Airbnb investment calculator factors in comparable properties (real estate comps) in the same neighborhood and area to give you the average rental income while factoring in square footage into the equation.
In any case, when using an Airbnb investment calculator, you are getting the average rental income of an investment property before buying it!
Capitalization rate
The capitalization rate is a figure that you will need basic math to calculate. With an Airbnb investment calculator, you can rest and let it do the work for you! It’s one of the many commonly used metrics to measure the profitability of a real estate investment. Therefore, the capitalization rate is a figure that indicates annual income after expenses compared to the initial purchase price of the investment property. It might give you a hint of complication at first, but as for the case of everything, the more you learn about it, the more you will find it relatable.
Of course, expert real estate investors are always looking for the highest possible cap rate when buying an investment property. As a matter of fact, many expert investors won’t consider properties that are lower than 10%.
Wondering how to calculate the cap rate manually? Read this blog post: How to Calculate Cap Rate Most Effectively: A Simple Guide.
Cash on cash return
The cash on cash return is the net operating income of a rental property divided by the amount of cash you initially invest in it. In other words, an Airbnb investment calculator will take into consideration the real estate financing method of your choice to give you an accurate cash on cash return. Most successful real estate investors take on investment properties with the highest possible cash on cash return. It averages around 10% for a successful and fruitful real estate investment.
Property price
An Airbnb investment calculator will give you the median property price in any set area or neighborhood. Of course, the median property price indicates the median value of all the prices of different listed properties in a certain location. It can be calculated monthly, quarterly, or yearly. A property’s price is an essential figure for real estate investors more so than home buyers. This can be attributed to the fact that real estate investors are looking for the lowest price possible when it comes to buying investment properties. On the other hand, homebuyers are looking for their dream home, unconcerned with how the real estate investment market works!
Airbnb occupancy rate
It makes perfect sense that an Airbnb investment property calculator incorporates Airbnb occupancy rates for each location. For Airbnb investors and real estate investors looking to buy vacation home rentals, it’s an indispensable tool to carry in your real estate toolbelt. Of course, if you’re going for an Airbnb rental, you need to know this figure to estimate your rental income. Simply put, it’s an indication of the frequency of booked Airbnb rentals in a certain location.
If you’re already in the Airbnb rental business and looking for ways to increase your Airbnb occupancy rate, read this blog post: Methods to Boost Any Investment Property’s Airbnb Occupancy Rate.
Costs and taxes
When real estate investors buy investment properties, they’re in it for the rental income and the real estate appreciation. An often-forgotten angle to look at that many successful real estate investors implement is reducing the operational costs of the property. In any case with Airbnb rentals, utilities will be delegated to the property owner in addition to the cleaning bills if a property management company is involved. Before buying a property, real estate investors must use the Airbnb investment calculator to ensure they are getting a positive cash flow income property. Moreover, taxes need to be calculated and a monthly payment should be set aside!
Both operational costs and taxes are provided by the Airbnb investment property calculator just to make your life a tad easier!
Care to learn the tax benefits of real estate investing? Read this blog post: The Tax Benefits of Real Estate Investments.
Mashvisor’s Airbnb investment calculator
To help beginner real estate investors get the fullest idea about the use of an Airbnb investment calculator, we’re taking a close look at Mashvisor’s Airbnb investment calculator. In the picture below, you can see the components of an Airbnb investment calculator which you can use virtually without the use of anything other than your laptop and an internet connection.
If you’re looking to find specific properties and have a specific occupancy rate or cash on cash return in mind, it’s not a problem! You can specify your preferences for an investment property and the AI will match you with properties that offer just that!
To make use of the 14-day free trial with Mashvisor’s Airbnb investment calculator and many more tools, click here.
Final thoughts
The use of an Airbnb investment calculator is becoming more and more popular among real estate investors. After all, making real estate investments have proven to be a low-risk investment compared to the stock market. Not to mention that by understanding the components of an Airbnb investment calculator, you are understanding the effect they can have on any real estate property in the US housing market.
If you have any more insights on the use of an Airbnb investment calculator, please share them with us in the comments section.
