If you are thinking about buying a rental property, it’s important to get an idea of the rental income you can expect to receive each month before you decide to purchase it.This is basically how much you will charge for rent. With this data, you’ll be able to calculate the potential cash flow and return on investment. This is the only way to determine how profitable a rental property for sale is.
While there are different approaches to determine how much to charge for rent, one of the most reliable methods is to use an investment property calculator. In this article, we are going to focus on Mashvisor’s rent calculator and why every real estate investor needs it.
How Is a Rent Estimate Determined?
The amount you’ll be able to charge for an income property depends on a number of factors such as its location, the property type, rent control laws, the supply and demand in the area, and its condition and features. Therefore, working out how much to charge your tenants is not an easy task, especially if you are a beginner or if you are buying an out-of-state rental property and don’t understand the market.
If you want to find a reasonable rent estimate, the most practical way is to conduct a detailed rental market analysis. This involves looking at what other similar rental properties in the area (rental comps) are charging for rent. This is what will give you are fair market rent that is competitive enough to attract potential tenants and at the same time maximize rental income.
If the rent is too high, you will repel good tenants and have a high vacancy rate. On the other hand, if the rent is too low, you will leave money on the table. Rental comps help you find a sweet pricing spot for your rental property.
Why Do You Need a Rent Calculator?
A rent calculator is an online tool that uses rental data to determine the rent you can expect from an investment property. Basically, it eliminates the need to search for rental comps using the traditional way. You can imagine how many days or weeks it would take you to drive around the neighborhood asking property managers, landlords, or Airbnb hosts what they charge for rent. Not to mention that some of them might not be willing to give you this information. Therefore, using our rental calculator can save a lot of your time and effort. All the leg work has essentially been done for you already.
Mashvisor’s rent calculator can give you an accurate rent estimate so that you know how much rental income you can expect from the property you are considering buying. It does this by using big data and the power of AI. The rental data on Mashvisor’s database is from a number of reliable real estate data sources such as the MLS, Airbnb, and Zillow.
It’s true that there are several other rental websites in the market that offer fairly accurate rent estimates. So, why don’t you just check for the Zillow rent estimate, for example? It’s because Mashvisor’s rent calculator offers investors more real estae data and insights than just a rental estimate. Basically, it provides you with a full investment property analysis that many calculators in the market don’t.
Here are some of the key rental data that you can access through Mashvisor’s rental property calculator:
1. Gross Monthly Income
Mashvisor’s rental income calculator provides you accurate rental income estimates for any rental property listed on the platform or any off market property whose address you enter. The estimates provided are for both Airbnb rental income and traditional rental income. With this monthly income calculator (which also works as an Airbnb calculator), you don’t have to worry about how to calculate monthly income as the income data is readily calculated for you.
2. One-Time Startup Costs
Our rental calculator projects one-time startup costs to help you be prepared before the actual purchase. These costs include:
- Total repair costs
- Furniture and appliances
- Closing costs
3. Monthly Rental Expenses
Estimating monthly expenses is important as they will eat into your potential monthly profits. Our monthly expense calculator provides the following estimates:
- Property management
- HOA dues
- Rental income taxes
- Property tax
- Property management
4. Cash Flow
When evaluating an investment property for sale, you need to make sure that the rent you charge covers all the recurring rental expenses and monthly mortgage repayments. You should only invest in rental properties that generate positive cash flow. As a real estate cash flow calculator, Mashvisor allows you to access cash flow estimates in a matter of minutes.
5. Cap Rate
The main reason to estimate rental income is to calculate the potential return on investment. One key return on investment metric used to analyze real estate deals is cap rate. Cap rate measures the net operating income of an investment property relative to its market value.
To calculate cap rate, the first step is to know the annual gross income. With our rent calculator, you don’t need a separate annual income calculator. As a cap rate calculator, it automatically computes the expected cap rate.
6. Cash on Cash Return
Cash on cash return is another important return on investment metric, particularly when you are financing your rental property investment with a loan. It measures the annual pre-tax cash flow relative to the total amount of cash invested. Our rent calculator is also a cash on cash return calculator.
7. Real Estate Comps
One common question that real estate investors ask themselves before buying rental property is, “How much should I spend on a house?” Of course, you don’t want to pay more than the actual value of the property. To avoid this, you need to run a comparative market analysis. This involves looking at what other similar properties in the area have sold for recently. Mashvisor’s rent calculator makes this analysis easier for investors by providing real estate comps for each property you analyze.
8. Rental Comps
As a savvy real estate investor, you might not want to take the numbers provided to you by a rental property calculator for granted and still do some of your own research. The way to do that is to look at comparable traditional or Airbnb rental properties in the area where you are considering buying property and seeing how much they charge for rent. Mashvisor’s real estate calculator helps you in this regard as well by providing you with both traditional and Airbnb rental comps for each property listed on the real estate software.
The Bottom Line
When it comes to buying a rental property, there is more to focus on than just the rent estimates. Therefore, when you are shopping around for a rent calculator, you want to find one that can offer a comprehensive investment property analysis. You can get this from Mashvisor’s rent calculator.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.