Related: 6 Must-Have Real Estate Investment Tools
What Is a Heatmap?
A heatmap is a tool that presents data in a visual form, rather than a numerical form. A heatmap analysis often uses colors, especially red and green, to display data. As it pertains to real estate investing, a heatmap tool shows real estate investors data that can help them in choosing the best real estate market to invest in- one where buying an investment property will bring the highest returns.
Where to Find a Heatmap Tool
A heatmap analysis is a necessary tool for finding income properties, so it is of the utmost importance for a real estate investor to have access to one. Luckily for you, the reader, the search does not have to go too far. Why is this the case? Because you can use Mashvisor’s heatmap analysis! Mashvisor’s heatmap tool is among the many must-have real estate investment tools we provide. To learn more about Mashvisor’s product, click here.
How to Use Mashvisor’s Heatmap Analysis for Finding Income Properties
Mashvisor’s heatmap analysis finds rental properties by focusing on the location and certain filters based on the investment properties found there.
Location
As it pertains to location, the heatmap analysis requires that the user chooses a city to invest in first. Once a city is selected, every neighborhood in the city with available investment properties for sale is displayed. Each neighborhood can be selected to reveal a brief neighborhood analysis, projecting the median property price, cash on cash return for both Airbnb and traditional rentals, cap rate for Airbnb and traditional rentals, and a Mashmeter score, which is a percentage grade based on the overall investment capability of the selected neighborhood.
The heatmap analysis can then be utilized with the neighborhood analysis. The real estate investor can view the location according to specific parameters on a red to green color scale, signifying lowest to highest per parameter. The parameters include property price, Airbnb cash on cash return, traditional cash on cash return, Airbnb rental income, traditional rental income, and Airbnb occupancy rate. The heatmap allows an investor to identify the best neighborhood within a city depending on the desired parameter.
Related: Location, Location, Location: What Makes for the Best Location in Real Estate?
Heatmap Filters
As mentioned, the heatmap analysis focuses on finding income properties based on certain filters. Let’s take a closer look at each of these rental property characteristics:
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Listing Price
Property price is the characteristic investors first notice when finding income properties. The property’s price is related to important forms of profit data, such as rental income, return on investment, appreciation, and property valuation.
The heatmap analysis displays neighborhoods based on the prices of the investment properties in that location. The more affordable neighborhoods are in red while the more expensive neighborhoods are displayed in green. You can use the heatmap analysis to find properties within your set budget. This allows you to find affordable investment properties to your liking.
Overall, property price is an important metric that is useful in determining the best places within a location and estimating the future profitability of a rental property.
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Rental Income
The bread-and-butter for rental property profitability is the property’s rental income. You can’t even begin to calculate or estimate the return on investment without looking at rental income data! It is no surprise, then, that all real estate investors prioritize finding income properties with potentially high rental income.
Fortunately, the heatmap analysis points real estate investors in the direction of neighborhoods that have properties with expected high rental income. The analysis presents the median Airbnb rental income and the median traditional rental income of the neighborhood. This allows investors to choose the best neighborhood that will give them the amount of rental income they need to profit.
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Return on Investment
While rental income is vital for making money in real estate, rental property profitability can only truly be understood in terms of return on investment. ROI exists in two main forms: cash on cash return and cap rate.
Cash on cash return measures the annual pre-tax cash flow of a property to the total amount of cash invested. Cap rate, on the other hand, is a ratio of the property’s net operating income to its fair market value. While each ROI metric is calculated and used differently, they are both crucial pieces of data to consider when finding income properties.
Luckily for the user, Mashvisor’s heatmap analysis and real estate market analysis compute and estimate the cash on cash return and cap rate for both types of rental properties – Airbnb rentals and traditional rentals – in any area. Just select the cash on cash return filter and check out the data for each neighborhood to choose the most profitable one.
Related: Cap Rate vs. Cash on Cash Return
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Airbnb Occupancy Rate
The final parameter we will discuss is Airbnb occupancy rate. Occupancy rate is a measure of how often Airbnb rentals will be occupied by tenants. The higher it is, the more tenants will visit the property (or the longer tenants will stay), and the more profitable the property becomes. To help you understand the potential Airbnb occupancy rate of a property, Mashvisor’s heatmap analysis presents investors with occupancy rate data directly from Airbnb.
With the Airbnb occupancy rate filter, you can find neighborhoods that have a high enough rate to ensure you make money with your short term rental property.
Finding income properties is no longer a chore, all thanks to the heatmap analysis tool. The heatmap analysis allows real estate investors to break down the best places to invest in real estate and to further search for investment properties. Using parameters such as property price, traditional and Airbnb rental income, traditional and Airbnb cash on cash return, and Airbnb occupancy rate, real estate investors can fully understand what’s in store for them before they buy an investment property.
To get your hands on such revolutionary technology to start finding income properties all over the US, click here to start your 14-day free trial with Mashvisor!