With a rental property calculator, real estate investment has stepped up to a whole new level. No more long hours wasted on researching investment data. No more spreadsheets and real estate investment tutorials.
Whether you are buying or selling an investment property, the real estate investment calculator is your best friend when it comes to finding the best real estate investments. But is this innovative tool just for beginners or for all real estate investors?
This article answers all questions related to the rental property calculator.
What Is a Rental Property Calculator?
A rental property calculator is also referred to as a real estate investment calculator or investment property calculator. It is an online real estate investment tool that provides real estate investors with essential metrics needed to project the performance of an investment property.
All you need to do is insert the basic information about an investment property, including the price of purchase, financing method, and cash down payment. and there you go, all the performance indicators are at your hand. This is all you need to have the performance indicators at hand.
In general, a rental property calculator tells you whether a rental property is worth investing in. That being said, it is important to point out that not all investment property calculators are the same. When looking for the best rental property calculator, it’s crucial to know the essential features that will help you make an informed investment decision.
A good investment property calculator should also serve as a mortgage calculator for rental property. For instance, if you are planning to purchase a property through a mortgage, the calculator should be able to let you choose your financing options and terms, and input the interest rate. It allows you to view more accurate cash on cash return, and you will also get an overview of your monthly expenses versus your potential rental income. In such a way, you will see if an income property is worth investing in.
Related: 6 Must-Have Real Estate Investment Tools
Why All Investors Need a Rental Property Calculator?
Real estate investors of all levels would benefit from a rental property calculator. Even the most experienced real estate investors use an investment property calculator not only because it saves time, but also makes it easier to compare more than one investment opportunity at the same time.
Before a rental property calculator became available, real estate investors had to spend hours collecting data on the real estate market and investment properties. Working out the numbers and then calculating the different rate of return indicators can be tiresome and this task is certainly not a fun thing to do.
Additionally, it would also be difficult to determine how much you will spend for amortization if you plan to buy the property through a mortgage. But with the availability of a mortgage for rental property calculator, it’s easier for investors to see if the property will generate enough cash flow to pay for the amortization, including all other operating expenses.
Fortunately, the investment property calculator has revolutionized real estate investing by saving effort and time. It makes it possible for investors to value a rental property in just a few minutes. Before, a “how to value rental property calculator” may seem an absurd idea, but now all you have to do is go online and get the information that you need with just a few clicks. More importantly, using a rental property calculator eliminates the risk of making a decision based on the wrong calculation.
Related: Where Can You Find a Rental Property Calculator?
What Are the Key Calculations of an Investment Property Calculator?
Mashvisor’s rental property calculator provides 3 main calculations that every real estate investor needs to make more informed real estate investment decisions.
1. Cash on Cash Return
Cash on cash return is an important real estate investment metric that measures the return on investment (ROI) based on the initial cash invested in the rental property. CoC return is calculated by dividing the net operating income by the initial cash invested. Note that with CoC return, only the cash investment is taken into consideration. So if you purchase the property through a loan, it will not include the loan amount in the computation.
With Mashvisor’s rental property calculator, the computation is automatically done for you based on the estimated value stored in the database. Plus, it also gives the option to add other initial investment costs such as commission fees, repair costs, furniture, and appliance, and closing costs.
How to interpret the results? Real estate experts recommend going for investments with cash on cash return of 8% or higher to assure a profitable investment. However, this value is not set in stone. Depending on the location of the investment property, some investors believe that a cash on cash return of at least 3% to 4% is considered good.
2. Negative/Positive Cash Flow
An important indicator in investment property analysis is the cash flow, which basically tells you how much profit to expect from an investment property. The cash flow of an investment property is the difference between the monthly rental income and the monthly expenses.
Mashvisor’s rental property calculator provides cash flow for a rental property while taking into account various expenses, such as mortgage payments, maintenance costs, insurance, and property tax. It’s important to note that a property’s depreciation can affect cash flow. So if you want to include the property’s depreciation value, using a rental property depreciation calculator is also a good option.
In general, real estate investors should opt for investment properties with a positive cash flow. Nonetheless, if you are truly interested in a property with a negative cash flow, there are ways to turn that property into a positive cash flow investment.
3. Capitalization Rate
The ratio of the net operating income (NOI) over the value of the real estate property is called the capitalization rate or cap rate. Cap rate is considered to be the purest form of return on investment since its calculation is independent of the financing method. It doesn’t matter whether you will purchase the property entirely in cash or through a loan.
A good cap rate is subjective to the property’s type and location. However, experienced real estate investors argue that a good cap rate ranges from 8% to12%, while others are satisfied with a cap rate of at least 3% or 4%.
Related: What’s a Good Cap Rate for Investment Properties?
Mashvisor’s Rental Property Calculator: Not Your Ordinary Calculator
Mashvisor’s rental property calculator is a tool for real estate investors of all levels. Whether you’re a beginner, experienced, or seasoned investor, it is a valuable tool that can help you find a profitable investment property. What differentiates it from other rental property calculators is the special extra services it offers.
With Mashvisor’s calculator, you will get detailed neighborhood analysis and investment property analysis. It also provides a mortgage calculator that allows you to input your preferred financing method.
1. Neighborhood Analysis
The Neighborhood Analysis feature of Mashvisor’s rental property calculator gives a detailed analysis and allows you to compare different neighborhoods at the same time. The data presented include listing property price, rental income for Airbnb vs traditional rentals, and Airbnb occupancy rate. Each category can then be selected, giving each neighborhood a color that refers to a scale meter on the bottom of the screen.
The Neighborhood Analysis feature of Mashvisor’s Rental Property Calculator provides important information such as listing price, rental income for Airbnb vs traditional rentals, and Airbnb occupancy rate.
2. Rental Strategy Analysis
Using creative predictive analysis, Mashvisor’s rental property calculator provides real estate investors with Airbnb vs traditional rental strategies comparisons. Comparing different rental strategies makes it easier for investors to understand why a certain strategy is better for a particular investment property.
3. Mortgage Calculator
The financing section of the rental property calculator allows users to choose a financing method (cash or mortgage) and adjust mortgage-related figures like the down payment, loan amount, and interest rates. You can also choose what type of mortgage you prefer (fixed-rate mortgage, interest-only mortgage, or adjustable-rate mortgage), as well as the term of the loan.
Whether you are a beginner or an experienced real estate investor, using a rental property calculator will help you make more informed investment decisions and forecast your rental property ROI.
Why Use Mashvisor’s Rental Property Calculator
Mashvisor’s rental property calculator is unique in how it uses data gathered from various rental real estate properties from different cities and neighborhoods across the US. The best part is that it does not only give performance indicators based on the figures entered by the user, but it also provides insights based on predictive analysis of accumulated data. Mashvisor also offers a free Airbnb calculator, which estimates the potential Airbnb rental income and occupancy rate of a specific property based on how active Airbnb listings in the area have performed.
In addition, it allows investors to use it as a rental property mortgage calculator, which is best for those who are planning to buy a property through financing. Through this, you will see an overview of your investment payback balance to determine how long it would take for you to earn a return on investment.
Because of its unique features and usability, Mashvisor’s rental property calculator is indeed one of the best available in the market right now.
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