Technology has pretty much changed all aspects of life – including real estate investing. The process of buying an investment property and renting it out to make money is still the same. What changed is how real estate investors make their decisions. Typically, investors would rely on spreadsheets to enter the needed data on which they base their decisions. Today, the investment property calculator has taken over to add value to your career as a real estate investor! Keep reading to learn why property investors no longer need to use spreadsheets and why the investment property calculator is here to stay.
Why You Need to Say Goodbye to Spreadsheets
1) Spreadsheets Are Prone to Error
Manually entering data always leaves the door open for error. The smallest change to a formula can cause a major change in the results of dozens of linked spreadsheets. To ensure accuracy, you’d need to audit and review a large amount of data which, not only takes time but is not fool-proof. In real estate investing, time is money and the smallest mistakes can also cost you. Because spreadsheets can’t sync automatically, they are more likely to contain outdated information. This is not something real estate investors want when making decisions.
2) Loss of Historical Data
Successful real estate investors use historical data in order to compare them across different time periods and spot trends. Another disadvantage of spreadsheets is that they are not designed to store historical data. Once they’re updated, historical data is lost! This makes it hard – or nearly impossible – for a real estate investor to notice any trends in the market that could affect his/her investment.
3) Spreadsheets Are Not Efficient
Sure, spreadsheets can calculate financial equations and make projections, however, it’s not easy to program them to do so. Even with the right template, setting up a spreadsheet’s formulas makes beginner real estate investors feel like they need to learn a new language.
Additionally, since spreadsheets don’t automatically update data, investors need to continually look up the data and manually update their spreadsheets. This is obviously not an efficient practice as investors are sometimes repeating data in numerous spreadsheets which leaves them with wasted time and possibly missing data.
4) Spreadsheets Are Difficult to Analyze
This is especially true for beginner real estate investors. What’s even worse is that the volume of the presented data can lead to misinterpretation! You might end up making a poor investment decision based on this misinterpretation.
Introducing the Investment Property Calculator
The investment property calculator is an online real estate investing tool that helps property investors make the best investment decisions in a matter of minutes. How does it work? Simple; a real estate investor would enter the assumed costs associated with a certain investment property (like the purchase price, expected rental income, etc.). The investment property calculator will, in turn, do automatic calculations and provide projections of the expected return on investment and profit for this property. Based on these projections, the real estate investor will then have the necessary data to decide whether or not to buy this investment property.
Data Provided by the Investment Property Calculator
There are many things that an investment property calculator can calculate for you, ranging from basics like the Net Operating Income (NOI) all the way to the final expected return on investment (ROI). A few of the most important calculations are:
Cash Flow
Cash flow is the difference between your monthly rental income and monthly rental expenses. As a real estate investor, you always need to find investment properties that are positive cash flowing as this is an indicator of a healthy and profitable investment property. It means you’re making – rather than losing – money. The investment property calculator shows you the potential rental income of the investment property you’re eyeing before even buying it. Thus, you can rest assured that you don’t end up with negative cash flow.
The Capitalization Rate
Often shortened to “Cap Rate”, this is a metric to estimate the ROI and it equals the NOI over the property’s price. Many real estate experts believe that a good cap rate should be around 10% or more to consider buying a particular investment property. An investment property calculator will give you readily calculated cap rates of different investment properties in your city or neighborhood of choice, allowing you to easily find the one with the best cap rate!
Cash on Cash Return
This is another metric to estimate the ROI. However, it equals the NOI over the total cash investment. Thus, the cash on cash return takes into account whether you paid for the investment property in full cash or with a mortgage. Real estate investors are recommended to go for investment properties with cash on cash returns of at least 8% to assure good profitability which, just like cap rates, you can find using an investment property calculator.
Where Can You Find an Investment Property Calculator?
Right here! At Mashvisor, we aim to add efficiency to the lives of property investors by offering them the best real estate investing tools, one of which is the investment property calculator. With a click of a button, you can have access to this tool at all times to ensure making smart investment decisions! To start out your 14-day free trial with Mashvisor, click here.
Another tool that we provide which works hand-in-hand with the investment property calculator is the Property Finder Tool. If you’re not into comparing and analyzing data, this tool is made just for you. It gives you end results of the best investment properties with the highest expected return on investment in any city/cities of your choice and based on your own set criteria! To learn more about this tool, read this: Turn Your Investment Property Search into 15 Minutes with Mashvisor
Advantages of the Investment Property Calculator?
1) Saves Time and Energy
Because property investors don’t have to manually enter the data, they’ll have much more time and energy to devote to analyzing their data and deciding which investment property is best instead. As a result, they enjoy a much more dynamic experience and can react fast to any important changes in the real estate market.
2) Produces More Accurate Results
An investment property calculator – like Mashvisor’s – performs a real estate market analysis using predictive analytics AND historical data, meaning it is more likely to lead to accurate calculations than spreadsheets. Moreover, the data is constantly updated, leaving no space for error!
3) Tells You More than Numbers
The way in which Mashvisor’s investment property calculator works does not only gives you numbers but also takes into account subjective aspects like your city, neighborhood, and rental strategy. For example, a real estate investor can perform a neighborhood analysis to get results about the best neighborhoods in a certain city and the optimal rental strategy (traditional vs Airbnb) in each neighborhood!
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Final Thoughts
If you’ve read this blog, it means that you’re either already into real estate investing or you’re seriously considering buying your first investment property. Either way, it’s best if you don’t rely on spreadsheets and, instead, switch to an investment property calculator. This tool will add value to your career by assuring that you make the best investment decisions.
Sign up with Mashvisor to get your hands on an investment property calculator now! To learn about your options for signing up for our services, click here.
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