What is a Real Estate Investment Calculator and how does it benefit me as a real estate investor?
In the real estate investing business, those who use today’s advanced technology are the ones to reach success. One of the best tools offered to property investors is the real estate investment calculator. This is an online tool that automatically calculates different metrics to find out the return on investment of a rental property. Thus, this tool gives property investors the ability to decide whether or not buying a property would be a smart investment decision in a matter of minutes.
How does it work? Simply enter the assumed costs associated with an investment property (like the purchase price, expected rental income, the amount of cash invested, etc.). The real estate investment calculator will then do its calculations and quickly provide you with accurate projections of the expected return on investment and profit for this property! These numbers (explained in details below) are necessary data that property investors must know before buying and committing to an investment property.
Related: Buying an Investment Property? Answer THESE Questions First
What Data Do I Get from the Real Estate Investment Calculator?
1) Median Property Prices
The median property price is the midway point of all the houses/units sold at market price over a set period (monthly, yearly, quarterly, etc.). Property investors need to know this because not only can it give them a good idea of the price of rental properties in a certain area, it will also give them a feeling for how this area has been performing over recent months, years or decades! This is definitely an important piece of information needed to make the best investment decision.
2) Average Cash on Cash Return
The first metric that the real estate investment calculator estimates to find the potential return on investment is the cash on cash return. The CoC return equals the net operating income divided by the total cash you invest in a rental property. In other words, this metric takes into account how a real estate investor wants to finance the purchase – all cash vs. with a mortgage. In general, a profitable investment property generates 8% – 12% of cash on cash return.
3) Average Cap Rate
Short for the “Capitalization Rate”, this is another metric to calculate the ROI. However, it equals the net operating income over the property’s price. Real estate experts believe that before buying an investment property, you need to ensure it has a cap rate of about 10% to assure its profitability. With a real estate investment calculator, you can easily find readily calculates projections of both the cap rate and CoC return of multiple rental properties in your city of choice!
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
4) Average Rental Income
Making money in real estate investing is the main goal of property investors. When you own rental properties, your rental income (how much rent you’ll charge your tenants) is basically your main source of income as a real estate investor. Thus, it’s only natural that you should know how much you can expect your rental property to make. The real estate investment calculator will help you with that by showing you the average rental income of rental properties in your area AND the potential rental income of the investment property you’re eyeing before even buying it!
5) Monthly Expenses
Another thing that property investors should know and always keep an eye on is their rental expenses. Why? When calculating the cash flow of an investment property, we take the rental income and subtract the rental expenses. The final number will determine whether your property is generating a positive or a negative cash flow. Obviously, property investors are always looking for positive cash flow properties. Thus, getting this data from the real estate investment calculator will help you make sure you don’t end up with a negative cash flow property!
Related: How to Find Positive Cash Flow Properties in the US Housing Market
6) Airbnb Occupancy Rate
The last piece of data a real estate investor will receive from the real estate investment calculator is important if you’re planning on renting out your investment property for the short-term on Airbnb. The Airbnb occupancy rate is simply how often your listing is booked – which is important for the success of your real estate investing career with short-term rentals. Where can you find a high Airbnb occupancy rate? The real estate investment calculator will give you the answer!
How Does This Data Help Me as a Real Estate Investor?
Find the Best Locations
We all know that the most profitable rental properties are in the best locations. How do property investors find these? By conducting a real estate market analysis. In order to get accurate results from this analysis, you’ll need the data that the real estate investment calculator estimates on the city neighborhood levels. This allows you to analyze and compare different locations and ultimately finds the most profitable one.
Compare Multiple Investment Properties
After identifying the best location where you should buy a rental property, you can’t just go ahead and buy the first or the cheapest one that comes your way! Successful property investors use the data provided by the real estate investment calculator to compare a number of properties in their area or, in other words, perform a comparative market analysis until they find the one.
With Mashvisor’s property finder, this becomes even easier! This real estate investing tool will show you the best of the best properties in your city of choice without the need to perform any analysis. Do you have a free Mashvisor account? Click here to use our Property Finder and find properties in a matter of minutes!
Analyze Your Investment Property
Just like different locations yield different returns on investments, the same goes for investment properties. You can’t assume that just any property will make money and generate profits as a rental. Thus, before buying the property you’re eyeing, you need to analyze how it’ll perform as a rental property. This is where the real estate investment calculator comes most in handy as not only does it give you readily calculated data, it also lets you do your own calculations as well!
Determine the Optimal Rental Strategy
The best thing about the real estate investment calculator is that it provides the above data for the same rental property as a traditional (long-term) or an Airbnb (short-term) rental! This helps property investors in making yet another investment decision which is choosing the optimal rental strategy. So, if you own an investment property but you’re not sure how to rent it out, this real estate investing tool will give you the right answer by showing you the potential return on investment of this property as a traditional and an Airbnb rental.
Related: Real Estate Investing: Traditional vs. Airbnb Investments
Where Can I Find This Real Estate Investment Calculator?
There are many online real estate investing tools available online, but only one can help you in the above-mentioned ways and that is Mashvisor’s real estate investment calculator! All of the above is actually a description of how Mashvisor helps property investors find the best investment properties and meet their goal of making money in real estate. So, what are you waiting for? Sign up or click here to start out your 14-day free trial with Mashvisor and get your hand on this amazing tool!
Do you have questions about Mashvisor? Click here to read our FAQs and learn about our tools.