When analyzing real estate investments, investors typically rely on a rental property Excel spreadsheet to identify a great investment opportunity.
Table of Contents
- Why Invest in Rental Property?
- What Is a Rental Property Excel Spreadsheet?
- What If I Don’t Want to Use an Excel Spreadsheet?
- Final Thoughts
A rental property Excel spreadsheet is a tool that is often used to analyze several real estate properties and compare them based on numerous types of data.
Regardless of the rental strategy that you want to use, investing in real estate is all about making the right decisions based on data and research. So, if you’re looking to make a successful real estate investment, you will need to know all about rental property spreadsheets and how to use them.
Why Invest in Rental Property?
While there are many investment strategies to choose from in real estate, rental properties are perhaps the most popular type of real estate investment. It is mainly because owning a profitable rental property is like receiving passive income, which provides security and financial stability.
But more importantly, a smart investment in a well-managed rental property allows you to finance the property with a mortgage while the rental income covers the mortgage payments. When all the finances are handled carefully and thoughtfully, the rental income that the property will generate should be enough to cover its mortgage payments for years to come.
After a while, you will end up with a property that you fully own and that is generating far more income than it’s costing you – and that is when you know you’ve made a successful investment.
But how do you know when you’ve found a good rental property to invest in?
Let’s find out.
It’s All About the Rental Income
In relation to finding an excellent investment property, it’s all about the rental income that it can generate. However, simply finding the property with the highest rental income isn’t a good indicator to use. It is because the rental income that the property generates needs to be measured against that property’s price, size, and type.
Additionally, the rental income of properties can vary greatly across different markets. For that reason, you need a better way of measuring the value of a property based on its rental income.
This is where metrics such as the cap rate or the cash on cash return become very relevant.
Rental Property Return on Investment
The two most commonly used metrics for measuring a rental property’s return on investment are the capitalization rate and the cash on cash return.
The two metrics give you very similar information about the projected value of rental property investment. The difference, however, depends on how you want to measure it and the type of financing you want to use.
The cap rate metric is used to calculate the rate of return that an investment property will generate from its rental income compared to that property’s market value. In other words, it is used to see how long it would take for the rental property to generate enough rental income to cover its price.
The formula for calculating the cap rate is as follows:
Cap Rate = (Net Operating Income / Property’s Price) x 100
Related: Where to Find Cap Rate Data for Residential Real Estate
The cash on cash return, on the other hand, is used to measure the rate of return based on the amount of cash you’re investing in the property. So, instead of using the property’s value, you will only use the amount of down payment and closing costs that you will need to pay in cash while you finance the rest of the purchase with a mortgage.
Similarly, the formula is as follows:
Cash on Cash Return = (Net Operating Income / Cash Invested) x 100
Both of the above metrics are very important for comparing rental properties and determining their investment value. Consequently, they are crucial when it comes to creating a rental property Excel spreadsheet or a rent ledger template.
What Is a Rental Property Excel Spreadsheet?
Now that we’ve covered the appeal of investing in rental properties and why it’s crucial to make decisions based on thorough analysis and comparison, let’s talk about the Excel spreadsheet for rental property.
A rental property Excel spreadsheet is a tool that lets you compare a large number of rental properties in a market to determine the ones with the best value. It is done by categorizing properties based on different types of data, using the Excel spreadsheet for rental property management, and sorting properties based on their return on investment.
The types of data that you want to include in an Excel rental property spreadsheet template depend on your particular case and investment strategy.
So, how exactly do you use an Excel spreadsheet for rental property?
How to Use a Rental Property Spreadsheet
The first step to using a rental property Excel spreadsheet is gathering the data you will use in your spreadsheet template. Generally, the information you need can include anything related to the property and your investment. It may include:
- Original purchase price of the property: The price at which you bought the property, regardless of how that value has changed over time
- Current market value of the property: The price at which you can sell the property based on current market conditions
- Mortgage: Includes mortgage payments, interest, and down payment
- Taxes and insurance: All costs related to taxes and insurance for each property depending on its market
- Income and expenses: Any additional sources of income attached to the property and expenses that may incur, such as property management and HOA fees
- Other crucial info: May include anything notable about the property or the market that may indicate future growth or present potential for additional future profit.
- Current occupancy status: Whether the property is leased or owner-occupied, and its lease agreement details if they’re available.
- Tenants’ information: If the property is currently occupied by tenants, the info can help you get in touch with your potential future tenants.
By gathering all the above info and including it in your Excel spreadsheet for rental property management, you can then compare all the different properties based on whatever metric you choose. The information about your future investment property can tell you a lot about its potential as a rental income generator. However, you need to combine it with some math to come up with fail-proof conclusions.
Related: Why Real Estate Investors Need a Mortgage Calculator
Example of a Rental Property Excel Spreadsheet
As I mentioned above, the type of info that you include in your Excel rental property spreadsheet template depends on what you want to get from it. I also talked about the most important metrics to use when comparing rental properties to determine their potential return on investment.
Now, I’m going to give you an example of a rental property Excel spreadsheet that involves the use of the cap rate and the cash on cash return metrics. Keep in mind that the example I’m about to give does not include all the details that an investor would normally use in their rent ledger template.
But for the sake of simplicity, I will only talk about the fields needed to include the cap rate and CoC metrics.
Example No. 1 – Cap Rate
To analyze rental properties and compare them based on their cap rate, I will first need to create an Excel sheet and populate it with all the info that I need to get the value of NOI.
The net operating income of each property is one of the two main values needed to calculate its cap rate, as explained previously. It means that I need to know the following for each property that I’m comparing:
- Its potential rental income and any other sources of passive income that are attached to the property (i.e., rental parking).
- All costs and expenses related to buying and owning the property.
After including the said values in the columns of your free spreadsheet, you can create add all recurring expenses and subtract them from your monthly income to get your NOI.
Next, you will want to create a new spreadsheet including the same properties where you can calculate their cap rate. Since you already have the NOI and the property price for each item on the list, you can use the cap rate formula from above to populate this field.
Example No. 2 – Cash on Cash Return
Calculating the cash on cash return is slightly more complicated as you will need to include the mortgage in your spreadsheet. Generally, however, it follows the same logic.
This time, you will be including the mortgage payments and interest rate when calculating your NOI, and you will only be including the down payment and closing costs instead of the property’s price.
The complication may come if you’re comparing properties in different markets, as you might need to calculate different types of mortgages at different interest rates, depending on the market.
Other Types of Rental Property Spreadsheets
When searching online, you will come across several types of rental property spreadsheets. Some of them might seem too convoluted with information, which might get overwhelming for any beginner investor. Others might be too limited or might not focus on the type of data that you’re looking for.
While it is easy to find a rental property Excel spreadsheet free online, most investors would recommend creating your own. However, you might be able to find different types of free spreadsheet templates and use several of them, each for different use.
A spreadsheet template for Excel property management, for example, is an excellent tool when managing rental properties that you own. However, when it comes to using a rental property Excel spreadsheet specifically for finding a great investment property to purchase, it’s not easy to find a rental ledger template that suits your particular case.
What If I Don’t Want to Use an Excel Spreadsheet?
Throughout history, rental property spreadsheets were the main tool used to compare and analyze rental properties. But what if you don’t want to use one and go through all of the hassles?
Luckily, nowadays, it’s easier to find tools that compensate for a spreadsheet than it is to find a good rental property Excel spreadsheet template. Today, you can find tools that will gather data, run the analytics, and give you the same type of output that a traditional spreadsheet would.
Depending on your use, such tools can tell you what a property’s return on investment will look like over the next ten years with a single click of a button. It’s easy to assume that most investors nowadays would prefer this option over using traditional Excel spreadsheets.
And if this is something that you’re interested in, then you’re lucky because we have just the tool for you.
Mashvisor’s Real Estate Platform
Mashvisor is a real estate investment platform designed to help rental property investors overcome the hassle of using spreadsheets. By utilizing a sophisticated AI that gathers data from trusted sources such as the MLS and Airbnb, Mashvisor’s platform can:
- Help investors find lucrative rental properties based on their projected returns
- Provide the tools and data necessary for analyzing the current and future value of each property
- Compare different rental strategies (traditional vs Airbnb rentals)
- Analyze entire markets for their average performance
- Calculate your rental income, cap rate, cash on cash return, mortgage payments, and more
Any type of data that would typically require you to use a spreadsheet to calculate and analyze, Mashvisor can do it in the blink of an eye.
Instead of gathering data on hundreds of properties and manually entering that data into your spreadsheet templates, you can jump straight to the conclusions that will help you make smart investment decisions.
Related: How to Do an MLS Listings Search: A Real Estate Investor’s Guide
Rental Property Analytics
Mashvisor’s rental property analytics include each property’s rental income and all of its related costs and expenses based on current market data.
When visiting any property’s page on the platform, you will find an investment property calculator that functions similar to a rental property Excel spreadsheet. The calculator will include fields for all of the costs and expenses, as well as the rental income of the property, its cash on cash return, and cap rate.
Costs and expenses are pre-filled based on the market’s averages, and they include:
- Rental property taxes
- HOA fees
- Property management
- Renovation costs
- Cleaning fees
- Utilities (water and electricity)
- Property maintenance
You can change the values as you see fit, and you can add additional values to both the recurring expenses, as well as the one-time closing fees related to the property. Additionally, the tool also comes with a mortgage calculator.
The mortgage calculator includes different types of mortgages, and you can change the interest rate, duration, and down payment based on your particular case. Making changes or adding input to the expenses or mortgage calculator will immediately be reflected in the rest of the calculations, such as the cap rate and cash on cash return.
Finding a Rental Property Using Mashvisor
Finally, when it comes to finding rental properties, Mashvisor does it best. Instead of relying on a rental property Excel spreadsheet to find the perfect property to invest in, you can use the platform to find one in minutes.
By utilizing all of the data mentioned above, Mashvisor’s investment property search tool allows you to set your search parameters to match the exact characteristics of your dream investment property. Simply enter the US market that you want to invest in using the map search tool, and use the filters to narrow down your search based on:
- The property’s price
- Type of property (single-family, multifamily, condo/co-op, townhouse)
- Age of the property
- Number of bedrooms/bathrooms
- Projected cap rate
- Projected cash on cash return
- Rental strategy (short-term or long-term rental)
The map will show you all rental properties listed for sale that match your search criteria.
But that’s not all!
The tool will show you what each property’s stats are in terms of rental income, cap rate, and cash on cash return, and it will tell you whether the property is performing above or below the market’s averages.
Additionally, you will see a list of all the properties, which you can sort based on your metric of choice.
Using a rental property Excel spreadsheet is the traditional way of finding and analyzing several rental properties to identify the best one for investing.
It is no surprise that the tool’s always been incredibly crucial for real estate investors who aspire to be successful. However, using a spreadsheet to compare properties manually can be a major hassle that turns many people away from investing in real estate.
In today’s modern world, it is now easy to find free rental property spreadsheet template Excel and other tools that make up for using a spreadsheet template altogether.
Mashvisor is perhaps the best solution for the problem of using spreadsheets, as the platform provides you with all the important information that you need to make a lucrative and informed investment decision.
Make sure to subscribe to Mashvisor and gain access to all of our tools and features that will help you gain an edge in today’s hyper-competitive real estate market.
To start using our real estate investment tools today, click here to sign up for a 7-day free trial, followed by 15% off for life on your Mashvisor subscription.