It is undeniable how much our lives have advanced along with technology. Nowadays, most of the aspects of our lives involve some sort of technology and that includes the real estate business. From machines involved in property development, all the way to real estate investment software– it has all changed. So why are you still using a real estate investment analysis spreadsheet?
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With the multiple investment properties that investors analyze, purchase, and own, a real estate investment analysis spreadsheet has essentially become useless. The alternative? Real estate technology, of course- specifically the investment property calculator. So, if you are still using a rental property analysis spreadsheet, you might want to reconsider your approach to real estate investing and follow along with us as we explain to you a little about this tool and why it’s better than using spreadsheets.
The Investment Property Calculator
An investment property calculator is a tool which processes data about a specific rental property and performs what we call real estate investment analysis. Here’s what this fantastic tool does that a real estate investment analysis spreadsheet can’t do as efficiently:
1. Calculates Cash on Cash Return
Cash on cash return is a vital component of the investment property analysis. It indicates the rate of return on investment that you will receive for your actual dollar investment. Let’s say you are conducting an investment property search and found one that costs $200,000 in your neighborhood. You will have to make a down payment of at least 20% which is $40,000 and the rest will be covered with a loan. In this case, calculating cash on cash return means that you only take into account the down payment (and any other fees paid from pocket to acquire the investment property like closing costs).
Instead of manually calculating CoC return for a few different investment properties and getting lost in the numbers, the calculator will only ask you to provide a few numbers, and it will give you the first of many ROI metrics on this list.
2. Calculates Cap Rate
Calculating cap rate is another form of return on investment analysis. However, instead of looking at the amount of cash you’ve invested, it considers the whole property price including the mortgage. This metric is important for quickly comparing a bunch of similar investment properties. However, if done manually, it’s not such a quick process. With the real estate investment calculator, you’ll easily and confidently eliminate properties and narrow down your choices.
3. Performs Cash Flow Analysis
When investing in rental properties, you want to make sure you find the most profitable investments. In this case, those are the ones with the potential for not only positive cash flow but high cash flow. When using an investment property calculator, it takes into consideration average rental income and expenses data to calculate the potential cash flow a rental property will provide. Collecting this kind of data for a rental property can be difficult and time-consuming so having a real estate investment tool do it all for you is naturally going to make things easier.
Related: How to Rent Out a House for Positive Cash Flow: 6 Tips
Mashvisor’s Investment Property Calculator
4. Finds Real Estate Comps
While a real estate investment analysis spreadsheet can help you organize real estate comps, it won’t really help you in finding them. Simply put, real estate comps are other rental properties that are similar to the one you intend to purchase. They are located within the vicinity of your chosen property and serve as the baseline for your pricing strategy. Comps or comparables are part of the comparative market analysis which you must conduct for each property you look at to 1) make sure it’s profitable, 2) make sure it is worth the price, and 3) set your pricing strategy accordingly. Having them automatically generated will save a lot of time and ensure that you use the right comps for analysis.
5. Conducts Neighborhood Analysis
Another task a real estate investment analysis spreadsheet cannot do for you is conducting a neighborhood analysis. This type of analysis is vital for every real estate investor out there. Basically, it studies the market in your location of choice, provides real estate trends, evaluates the previously mentioned metrics (cash on cash return, cap rate, and even average Airbnb occupancy rates) in that area based on historical and predictive real estate data. It also helps you determine the optimal rental strategy based on that data and location.
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Why Should You Get Rid of Your Real Estate Investment Analysis Spreadsheet?
You may still be convinced that both tools can perform the same tasks. But, here is why you need to use an investment calculator instead of a real estate investment analysis spreadsheet:
Related: Why an Investment Property Calculator Is Better Than Spreadsheets
The Calculator Is Faster
The investment property calculator has the ability to process more information in less time. Therefore, if you are looking into multiple investment properties at the same time, you might want to use some advanced tools to save you the time and effort.
The Calculator Is Error Free
Unlike the real estate investment analysis spreadsheet, the calculator provided easier detection for errors. Also, it makes the process of correcting the data easier. On the contrary, any error with a spreadsheet means that you have to go all the way back and find the errors first. By the time you find the error, you’ll find out that you might have inserted the rest of the data based on that error. So, you can imagine the frustration in that situation!
You Can Take It Everywhere You Go
Mobility is perhaps the most beneficial feature of the investment property calculator. You can take it everywhere you go as long as you have access to Wi-Fi. Not only that but you can also share the information with other devices and download reports easily to be shared with other investors or your real estate agent.
It Gives You a Lot More Information
The reason a real estate investment analysis spreadsheet is less useful is because it only calculates what you provide for it. With just a few numbers, the investment property calculator will analyze every aspect of the property whether it’s profitability or even location while the spreadsheet will only deal with the investment property analysis.
Ready to stop using that old-fashioned real estate investment analysis spreadsheet? Schedule a demo to learn how Mashvisor can bring you into the 21st century and help you find profitable investment properties.