A rental property analysis spreadsheet is the easiest way to calculate your revenue or even decide what to invest in. Learn how to make one here.
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Every landlord, no matter how experienced, wants to have a universal tool for rental analysis. It is important to know what you’re signing up for before you make an investment. This is exactly when the rental property analysis spreadsheets come in handy.
Nowadays, there are plenty of opportunities to organize your own spreadsheet for adequate analytics. The latest platforms for planning and organizing are reliable and practical. They may differ in the interface and design so that every user can find the most convenient tool for their business. As a real estate market investor, you should think of starting any of your rental deals by planning everything out.
Even if you always disliked working with lists and tables and consider them a waste of time, a spreadsheet for rental property analysis is a trump card up your sleeve when it comes to finding the most profitable deals. The question is, where to start? First, it’s crucial to look into the core of rental property analysis and understand why it can make a change for investors.
What Is Rental Property Analysis?
Rental property analysis is an inevitable step of every real estate investment. In the process of analysis, you are able to determine crucial aspects of investment properties, such as their capability to be rented out and the possible profit you can get from each deal. Analyzing the current state of events within the real estate market as well as the profitability of your own rental properties is a smart thing to do before diving into a new bargain.
Rental properties are among the most popular real estate properties for investors. Their profitability is on point, while the demand only continues to increase. Becoming an investor can be a hassle, but spreadsheets are designed to simplify your real estate deals. A rental property analysis spreadsheet can save you a lot of time that you would otherwise spend making long and tiring research.
The most common mistake among inexperienced investors is not calculating the crucial aspects of a deal in advance. Before targeting your potential renters, you have to create a wider picture of your own expenses and possible future profit, as well as their ratio. In this case, a rental property analysis spreadsheet becomes your fail-safe.
Learn More: A Step by Step Guide to Rental Property Analysis
Why Use Spreadsheets for Property Analysis?
Whether you already have some experience with rental property analysis or you’re a complete newbie, creating a spreadsheet can become a game-changer for you. It helps you to keep track of all the expenses that may occur, as well as the potential profitability of the rental properties.
To begin with, a spreadsheet is a basic and commonly accepted tool for real estate analysis. It requires minimum effort, but in exchange, it gives a perfect opportunity to track all the changes within the market. It is completely free and available for investors at any point in time. All you need to do is choose either Excel or Google Sheets and begin organizing your data. As a result, you’ll get an easier visualization and reporting of all the important info.
Besides, spreadsheets for rental property analysis allow for various kinds of integrations. For instance, if you’re using Google Sheets for your analytics, you can always import the needed data from different apps. Spreadsheets help you keep everything organized and up-to-date, no matter how rapidly the real estate market can change sometimes.
The best part about using a spreadsheet to monitor your rental investments? It’s completely free. Sure, it may take a bit more work to set up, but in the end, you receive a free solution that can be quickly upscaled if needed.
6 Steps to Set Up a Rental Property Analysis Spreadsheet
With that out of the way, let’s look at how you can create a spreadsheet for analyzing your potential rental property investments.
Create a New Excel or Google Doc Spreadsheet
The first step is creating a new document and naming it. The most accessible and trustworthy options for doing that are Microsoft Excel or Google Sheets. If you have at least minimal experience, working with these platforms won’t be a problem for you.
Both of these platforms are great for property analysis. Even if you need to calculate metrics for multiple properties at once, the formulas will be mostly the same for each one. If you still haven’t made up your mind on what are the most important categories to add, we are going to highlight them for you.
Plan It Out
Given that the main purpose of creating a spreadsheet is to find ways to maximize your profit, you have to include the categories that will demonstrate the ratio between expenses and income. Start with the price of the property, meaning the price at which you’re planning to buy it. You can also add cash investment, which could be the down payment if you’re using financing or the entire amount if you’re fully paying in cash.
If you’re making a list of properties you already own, add the current market value of the property, meaning the price at which you can sell the property based on current market conditions.
That’s when various market analysis tools come in handy. For instance, you may use the deal analyzer, which is a must-have for multifamily rental property deals. Besides, if you are a first-time investor and haven’t made any serious bargains yet, it’ll be wise to consult a real estate investment analysis guide.
With the help of such tools, it becomes easier to determine the exact circumstances of your deal based on the current state of events within the market. After you’ve got a general picture of what to expect, you can start planning out your individual spreadsheet.
Experienced investors consider it crucial to calculate mortgage payments in advance. The mortgage for each property is the next category to include on your list, alongside interest and down payment.
The market is an important indicator when it comes to calculating the costs related to taxes and insurance on each property. Taxes and insurance are an especially tricky category, as they greatly depend on the location of the property you’re planning to rent out. You can avoid a misfire by consulting the tax and insurance information by region in advance.
In some cases, the additional sources of income attached to the property may occur, as well as the related expenses. You may need to add info such as property management or HOA fees to your spreadsheet. When it comes to real estate rental property deals, it is better to foresee any possible sources of profits or expenses that may spring up.
Enter Your Data
Once the document is laid out, start entering the data. In many cases, it’s either impossible or very hard for a person with no coding knowledge to import data. This means this step is going to be primarily manual data entry.
Enter the data you have on the properties and double-check to avoid errors.
With all the basic info included, you may also think about some notable features of a particular property that may highlight the potential for additional future profit. It may be beneficial to add some extra information about the property’s location or mention some facilities that can be of interest to your target tenants.
The next step is to add formulas to calculate some of the metrics used for analysis. If you’re dealing with metrics that concern exact calculations, such as cash flow or cash on cash return, it would be convenient to enter the appropriate formulas into Excel or Google Sheets. Besides, you can also calculate the expected taxes and insurance by filling in percentage calculations.
In some cases, you may as well consider calculating the so-called pro forma in real estate. Pro forma comprises more profound calculations of your future expenses and profit from every deal. It includes such major metrics as gross rental income, vacancy rate, upkeep and repair expenses, management and loan fees, as well as mortgage payments.
If you don’t wish to delve into more extensive calculations yet, you can stick to a classic layout for your rental property analysis spreadsheet. But consider checking all the data before filling it in. It may seem time-consuming, but it’s better to go through your calculations once more to prevent possible future errors.
Consider Importing Data
It would be wise to think about importing some data to your spreadsheet in advance. In many cases, you want live updates in the document, like when you’re trying to estimate what property is the best choice for investment. Updating the document on your own becomes a side-job, so an automated solution is needed.
There is some information like prices and taxes that you can type by hand while doing additional fact-checking. But when it comes to tricky info like Airbnb historical data, importing apps is a must-have.
Evolve Your Spreadsheet
In case you invest in multiple properties at the same time, you can modify and slightly change the purpose of your spreadsheet. For instance, you could store your tenant data and record income and maintenance costs there. Any investment into the real estate market requires responsibility throughout the whole deal. In this case, spreadsheets for rental property analysis can help you throw light on the possible maintenance issues and fix them right away.
This proves the flexibility of the rental income property analysis Excel spreadsheet. You can repurpose your personal list at any time, thus reaching its maximum efficiency. In addition, there are always some extra sources of income that you can think about. While targeting your potential tenants, you may point out some appealing features capable of increasing your future profit.
Metrics You Want to Include
The most basic rental property analysis checklist includes property price, down payment, mortgage payments, maintenance fees, and estimated revenue. However, you can go a bit more advanced and include other metrics that would make it easier to understand whether the property is worth investing in.
There are always some additional categories you may want to include in your spreadsheet. Cash flow is probably the most important milestone of every real estate deal. Basically, it is the difference between the income you get from your bargain and all the necessary expenses. The universal formula to calculate your potential cash flow is:
Cash Flow = Total Rental Income – Total Expenses
It would be a wise choice to calculate your cash flow in advance and include it in your manual spreadsheet. This way, you are able to envision the potential profitability of every rental property and know exactly what your benefits are before making a deal.
Cash on Cash Return
Cash on cash return is a universal metric that determines the exact amount of return you can get from your initial investment weekly or monthly. It depends mostly on your financial method and concentrates only on the sum you’ve invested into your property. Cash on cash return is calculated by the formula:
Cash on Cash Return = (Annual Rental Income – Expenses and Costs) / Total Cash Investment
If you don’t feel like spending time on math, you can always use a real estate investment calculator, a universal tool that automatically calculates your deal’s profit.
Cash on cash return is crucial not only for analyzing the real estate market in general but also for determining the profitability of your individual bargains. As well as cash flow, it points out exactly the benefits you get from renting out each one of your properties. Consider adding this metric to your spreadsheet, as it helps you understand how much money you can make from each deal.
You’ve probably heard about cap rate and how crucial it is for making successful real estate deals. Cap rate, or capitalization rate, is an ultimate tool for comparing different properties within the market. The cap rate is used to calculate the expected rate of return for every investment property. By adding this metric to your spreadsheet you get the opportunity to compare and contrast your properties in order to define the most beneficial one.
Also called a measure of risk, the cap rate helps an investor to decide on whether the property is worth the deal. The cap rate is usually lower in the locations with greater demand for rental properties. In this way, if you’re making a bargain in the hotbed of demand, you may accept a lower cap rate, but ensure the stability of your income. Cap rate is usually determined with the help of the following formula:
Cap Rate = Net Operating Value / Fair Market Value
Gross Rent Multiplier
Another great tool for comparing multiple properties at once is the gross rent multiplier. It is especially convenient for beginners, as it requires minimum data but provides you with accurate calculations of your potential income. In order to calculate the gross rent multiplier, you have to use the formula:
Gross Rent Multiplier = Property Price / Gross Rental Income
The gross rent multiplier is a useful metric for your spreadsheet, as it allows for the fastest calculations of profit. It is much less time-consuming in comparison with other estimating tools.
Learn More: What Is a Good Gross Rent Multiplier?
Gross Rental Yield
Last but not least, gross rental yield stands for the annual income from the property compared to its initial value. In order to calculate it, you have to divide the annual rent by the total cost. Estimating gross rental yield allows you to compare different investment options in terms of their annual profitability.
Adding gross rental yield to your spreadsheet is crucial, particularly when you have to compare multiple properties before renting them out. In this way, you get a perfect opportunity to determine which property is going to be the most profitable for you as an investor.
Alternatives to Rental Property Analysis Spreadsheets
Planning out and making a spreadsheet is proved to be the most reliable way of rental property analysis. However, some investors find them inconvenient, as analyzing all the data requires a lot of time and effort. If you wonder what are the potential alternatives to rental property analysis spreadsheets, there’s good news for you: there are actually plenty of them. But let’s concentrate on the fastest and the most effective one.
Instead of making up your spreadsheet manually, you can use such means of modern technology as an investment property calculator by Mashvisor. It is a reliable and fast automatic generator of all the calculations needed for your rental property. It is a lot less time-consuming than creating and maintaining spreadsheets.
Besides, unlike manual spreadsheets, an investment property calculator provides you with unlimited access from every device and every corner of the world. This feature is particularly convenient if you cooperate with partners while making your deals. An investment property calculator allows for changes in your plans and doing quick additional calculations if necessary.
On top of that, Mashvisor has plenty of other useful tools like the heatmap that allows investors to take a quick look at the neighborhood to figure out what’s the best home to invest in. But that’s not the biggest advantage of using Mashvisor for real estate analysis.
The biggest advantage is that Mashvisor aggregates hundreds of data points across different platforms so you don’t have to. It has data on pricing, estimated cap rates, Airbnb vacancy rates, and more on hundreds of thousands of properties in the US.
Is Rental Property Analysis Spreadsheet Enough?
Some investors still prefer to stick to spreadsheets, seeing them as a more trustworthy and time-checked means of rental property analysis. If you are an experienced investor and want to try a completely new approach, you can always try to use alternatives. And if you are to make your first investment, an online analysis tool will help you save time on analyzing the market and potential properties while helping you learn.
Want to give Mashvisor a go and see how much time you can save on real estate analysis? Click here to get a 7-day free trial.