How do you make sure that you always buy profitable investment properties? You use a rental property cash flow calculator. What is this real estate investment tool? Where do you find the best cash flow calculator? Keep reading to figure out the answers to these and many other important questions for real estate investors.
What Is Cash Flow for Rental Properties?
Cash flow is one of the most popular real estate metrics which measures the difference between the monthly rental income which an investment property generates and the cost of buying, owning, managing, and renting it out. Here is how to calculate cash flow:
Cash Flow Formula
Cash Flow = Monthly Rental Income – Monthly Rental Expenses
where the rental expenses include:
- Mortgage payment of principle and interest (if you finance your rental property with a mortgage loan and not all cash)
- Property tax
- Property insurance
- Property management
- HOA dues (for condo investments)
- Rental income tax
- Property maintenance
- Utilities
- Cleaning fees (in case of an Airbnb investment property)
This does look like a lot of real estate data in the eyes of a beginner real estate investor. However, don’t despair. Later in the article we’ll come back to where you can find this and much more property data online.
Meanwhile, maybe you are wondering: “What is a good cash flow for income properties?” After all, some of the most important real estate investing questions involve “What is a good…?” For example, “What is a good cap rate for rental properties?”, “What is a good cash on cash return?”, “What is a good price to rent ratio for real estate investments?”, etc.
The answer is: POSITIVE CASH FLOW. This is the only way to make sure that you are making money from your rental property.
What Is a Cash Flow Calculator?
A cash flow calculator is a variety of the rental property calculator and one of the must-have real estate investment tools. It helps real estate investors calculate cash flow quickly and efficiently and find positive cash flow investment properties.
How does a rental property cash flow calculator replace real estate market analysis?
The cash flow calculator conducts neighborhood analysis in real estate and performs investment property analysis to estimate the costs associated with owning rental property in addition to the rental income to be expected from the property. The calculations take into consideration both the neighborhood factors and the specific property characteristics and traits. The final result is a highly accurate estimate of the cash flow which an income property will generate. Thus, using this tool, real estate investors buying a rental property are guaranteed to make money from real estate right away. There’s no need to wait for appreciation to take place in the long term.
What’s the Best Cash Flow Calculator for 2020?
With the emergence of big data, predictive analytics, machine learning algorithms, and other AI features, real estate investors have to get access to the latest technology to stay competitive in 2020. One of the must-have real estate software tools is the cash flow calculator. And the best one is available at Mashvisor.
What does Mashvisor’s rental property cash flow calculator do for real estate investors?
- Predicts the Monthly Rental Costs
First of all, our real estate cash flow calculator will provide you with estimates of all recurring expenses related to renting out a property, whether as a traditional rental or as an Airbnb property. The cost forecast is very accurate because it is based on data from the real estate market and the neighborhood.
Below you can see how the monthly rental expenses – as well as the one-time startup costs – are presented for this income property in the Farmers Market District neighborhood of the Dallas real estate market.
Mashvisor’s Cap Rate Calculator: Estimating Recurring Monthly Expenses
The mortgage payments are usually the biggest monthly expense for any rental property and affect all other calculations immensely. Our calculator allows investors to choose the mortgage type which they plan to use and recalculates the monthly payment – as well as all other measures – immediately.
The other ongoing expenses are also customizable to fit the investment property analysis to your particular situation. For example, you can adjust the property management costs depending on whether you will hire a professional property manager or do it yourself. You can also specify the size of the utilities bill depending on whether you will include utilities in the rent or not.
- Estimates the Monthly Rental Income
The second component in the cash flow equation is the rental income which an investment property provides. Traditional and Airbnb rental properties bring very different income, and our cash flow calculator accounts for that. With this tool, real estate investors buying rental properties will be able to see the estimated income for both rental strategies.
Once again, if you have any insider information which makes you think that your rental rate might differ from the one prevailing in the local housing market, you can adjust it either up or down.
- Calculates the Cash Flow
The best cash flow calculator naturally has to calculate the cash flow which an income property will generate. An investor has to know what this number is because this is how much money he/she will make from his/her rental business. Most importantly, it has to be positive. Otherwise, you’ll be losing money – rather than making it.
In the image below you can see the estimates for the same Dallas rental property.
Mashvisor’s Cap Rate Calculator: Estimating Cash Flow and Return on Investment
- Computes the Return on Investment
However, that’s not where Mashvisor’s investment property calculator stops. In addition to a cash flow calculator, it’s also being a cap rate calculator, a cash on cash return calculator, and an Airbnb calculator.
Our tool uses all the gathered data and information on hundreds of thousands of homes for sale in the US housing market to calculate what a rate of return investors should expect on each one of them. The computed metrics include traditional and Airbnb cash on cash return, traditional and Airbnb cap rate, and traditional and Airbnb occupancy rate. After all, you will expect this from the best cash flow calculator, right?
Furthermore, showing you the return on investment for both rental strategies, our tool helps you choose the better option for your investment property.
Real estate investing will be all about having the right tools to stay ahead of the competition and find profitable rental properties without wasting time and efforts.
Are you ready to start using the best cash flow calculator today? Sign up for Mashvisor.