Getting started in real estate investing means that you have to start looking for an investment property that matches your investment preferences, strategy, and desired return on investment. In the age of data and predictive analysis, the investment property calculator is your ultimate assistant when it comes to searching for investment property.
Gone are the days of manually calculating investment performance metrics for thousands of real estate listings found online. No more spreadsheets and complicated investment property analysis- the investment property calculator is here to do everything for you.
Read this blog to learn how you can use the best investment property calculator today to make a real profit.
What is an investment property calculator?
An investment property calculator, also known by its other names, rental property calculator and Airbnb profit calculator, is an online real estate investment tool that uses data analytics of traditional inputs and predictive analysis to look for the best investment properties in a given real estate market. An investment property calculator provides real estate investors with important real estate metrics that are used to evaluate the performance of an investment property.
Related: Airbnb Profit Calculator: The Ultimate Real Estate Investment Tool
Most investment property calculators are easy to use. All you have to do is insert some basic information about the real estate property (purchase price, financing method, cash down payment). Then, the tool simply tells you whether or not to go for this certain investment property or which rental strategy better suits the property. That’s not all. An investment property calculator can also provide you with the expected rental income, expenses, and profits from a certain rental property.
An investment property calculator is a tool for experienced real estate investors and beginners alike. Using one not only saves your time but also eliminates the risk of making wrong decisions due to mistakes in your calculations. With an investment property calculator, worry no more and focus on finding the best income generating properties.
What does an investment property calculator do?
The investment property calculator developed by Mashvisor is a unique real estate investment tool that offers extra features when compared to other rental property calculators. These are the 3 main calculations provided by Mashvisor’s investment property calculator:
1- Cash on cash return
Cash on cash return, or CoC return, is a real estate performance indicator that measures the return on investment based on initial cash invested in the property. To calculate cash on cash return, you simply divide the net operating income (NOI) by the initial cash invested. The process sounds easy, but imagine having to do that for thousands of listings? You get the point.
Since cash on cash return only calculates the return on actual cash invested, the financing method is important. A rental property financed with a mortgage and a 20% down payment will have its CoC return calculated on the down payment only. Our investment property calculator even allows you to add other initial investment costs to the CoC return calculation such as commission fees and closing costs.
Real estate experts recommend investing in rental properties with a CoC return of at least 8%. But does a high cash on cash return always mean a good investment?
Do you have a free Mashvisor account? Use our Property Finder to find investment properties with high CoC return in a matter of minutes!
2- Capitalization rate
Cap rate is considered to be the purest form of return on investment in real estate as it does not take into consideration the financing method. The cap rate is the ratio you get after dividing the annual net operating income of a rental property by its value. This means an investment property bought with cash would have the same CoC return and cap rate.
Knowing the cap rate is essential to compare the rental property’s price with real estate market trends. Different property types in different locations have different cap rates. However, experts in real estate investing suggest that a good cap rate is somewhere between 8% and 12%.
3- Cash flow
Cash flow is a real estate investment indicator that shows how much profit to expect after subtracting all expenses from rental income. Mashvisor’s investment property calculator allows you to factor in all expenses related to the running of a rental property such as maintenance costs, mortgage payments, taxes, and insurance. Since the main goal of investing in real estate is to make money, then positive cash flow is definitely what you should aim for.
Mashvisor’s own investment property calculator: The extra features
1- Neighborhood analysis
A special feature of Mashvisor’s investment property calculator is that it provides investors with real estate data at the neighborhood level. The numbers include the median property price, the average rental income, traditional and Airbnb occupancy rate, cash on cash return and much more. With neighborhood analysis, you can easily carry out a real estate market analysis and compare different neighborhoods to decide which matches your preferences the most.
Related: How to Do Comparative Market Analysis with a Rental Property Calculator
2- Investment property analysis
Similar to neighborhood analysis, the investment property analysis feature gives more insight into the rental property itself and allows you to compare different properties based on the different real estate metrics discussed above.
3- Optimal rental strategy
The rental strategy is an important factor that determines the profitability of an investment property. When it comes to investing in rental properties, there are two main rental strategies one could choose from: traditional long term rentals or Airbnb short term rentals. Using data collected by Mashvisor, our investment property calculator is able to tell you which of the two rental strategies is most profitable for the rental property chosen.
Subscribe to Mashvisor and start looking for rental properties using our investment property calculator. With this tool, you will find the best investment opportunities in any state, city, or neighborhood in the US.
To start your 7-day free trial with Mashvisor and subscribe to our services with a 15% discount after, click here.