A Real Estate Investment Return Calculator for Buying the Most Profitable Properties

Finding a lucrative real estate investment property is almost impossible if you don’t use the right real estate investor return calculator.

Table of Contents

1. What Is a Rental Property Calculator?
2. How Mashvisor’s Real Estate Investment Return Calculator Can Help You
3. Real Estate Investment Return Calculator: The Final Metrics

Many consider investing in real estate a surefire way to build substantial wealth and earn passive income. Owning a rental property, whether a traditional or Airbnb rental, is the perfect way to get started.

However, investors need to be aware that just investing in any property isn’t an assurance that they’ll succeed. First, you need to invest in a profitable property. So, how do you ensure that you invest in a lucrative property?

Finding the best properties for investment is made a lot easier when you use a real estate investor return calculator. I’m pretty sure the majority of you out there hate math – it’s a universal opinion. Unfortunately, real estate investing involves a lot of numbers. 

And even if you do like math, it can sometimes be difficult trying to understand all the logistics involved in buying an investment property. Either way, Mashvisor is here to help you. 

In this article, learn how to use Mashvisor’s real estate investor return calculator to come up with the right estimates and make informed decisions.

What Is a Rental Property Calculator?

To succeed in your real estate investment, you need to ensure you invest in the right housing market, buy a profitable investment property, and also choose the right rental strategy. A rental property calculator helps you achieve all such goals.

Rental property calculator is another term for a real estate investor return calculator. It is a digital online tool that investors and landlords can use to get a better measure of their property’s profitability and performance. In short, a real estate calculator helps you choose an investment property with the highest profit potential. 

The way it works is first, the user inputs basic information about the prospective property and investment criteria (purchase price, financing method, expenses, etc.). Then, the calculator will determine key metrics regarding the expected return on the investment.

Mashvisor’s rental property calculator will help investors calculate the property’s return on investment metrics, such as cash flow, cap rate, and cash on cash return. In addition, it’ll also give you estimates for startup costs, such as closing fees, home repairs, and inspection, as well as recurring costs, such as property taxes, insurance, and maintenance. 

The tool is extremely helpful since it’s important for investors to know how much profit they can expect. On the premise of the above key calculations, real estate investors can get an accurate valuation of the property. It will let them know how profitable it is expected to be and whether or not it’s worth the investment.

Related: Rental Property Calculator: What Is It For?

How Mashvisor’s Real Estate Investor Return Calculator Can Help You

Out of Mashvisor’s many real estate investment tools, our rental property calculator has got to be the go-to tool for any investor. Let’s find out why that is.

But First, What Is Mashvisor?

For starters, Mashvisor is an online real estate platform created with the aim of helping investors make smart investment decisions. It does so by making reliable and accurate real estate analytics and data accessible to ordinary investors. 

Mashvisor pulls its data from various reliable websites, such as the MLS, Realtor.com, and Airbnb. It saves investors a lot of time, and the data is organized in a way that makes it easy to find and presented in a simple format.

In addition to reliable data, Mashvisor also grants investors access to lucrative investment opportunities. The platform provides a variety of tools that will help you analyze both markets and individual properties to choose the most profitable one.

Mashvisor shows property listings in various neighborhoods in your location of choice. Once you’ve found a property that you’re interested in, the predictive analytics shows you whether the property will be more profitable as a traditional rental or short-term rental property.

The ability to compare the metrics from both rental strategies makes Mashvisor stand out from its competitors. Many similar websites dwell only on either traditional or Airbnb rental strategies. Mashvisor, on the other hand, provides data from both rental strategies so you can find an optimal strategy for your financial goals.

Why Go for Mashvisor’s Calculator?

The key factor that makes Mashvisor’s real estate investor return calculator the optimal tool for finding profitable properties is that it uses both traditional and predictive analytics. With the use of past and present data, the tool is able to make accurate and reliable predictions about how things will play out in the housing market.

Our real estate investor return calculator includes three main categories: financing method, expenses, and results. Users can tune the calculator’s results based on how they’re financing an investment property (cash or mortgage). 

You’ll then be given a list of the average expenses in your property’s area. Users can, of course, modify or adjust the predetermined numbers according to property-specific details.

Related: Buying an Investment Property: Cash or Mortgage

3 Important Metrics You Will Find on Mashvisor’s Calculator

The final category is the results. Below, we’ll go more in-depth and explain the relevance of each final calculation later. 

1. Traditional Rental Income and Airbnb Rental Income

One of the most important metrics that investors need to decide whether to invest in a rental property is the rental income. Rental income is the total amount of revenue you collect from your tenants. It can be monthly, especially for traditional rental properties, or nightly for short-term rentals.

Calculating a property’s rental income can be an uphill task because you need to base your calculations on rental comps. Rental comps refer to other similar properties within the same neighborhood as the subject property. They must be as similar to the subject property as possible in terms of square footage, features, and market value.

Mashvisor’s calculator takes this burden off your shoulders. Every property listed on the platform comes with a calculated rental income estimate. If you want to calculate the traditional and Airbnb rental income yourself, Mashvisor provides a list of rental comps.

2. Traditional Cap Rate & Airbnb Cap Rate

The capitalization rate, or cap rate, is a return on investment metric used to compare a property’s profitability based on its value. The cap rate doesn’t account for the financing method used to acquire the property. It assumes the property was fully obtained using cash, making it an excellent metric for comparing it with other listings.

The cap rate formula is as follows:

Cap Rate = (Net Operating Income / Property’s Market Value) * 100

While the formula may make the calculation look easy, the reality is that there are a few other formulas involved to get the net operating income and property’s market value. Investors also need to account for various factors that affect the cap rate, such as location, property type, and rental strategy.

However, Mashvisor provides cap rate estimates for both traditional and Airbnb rental strategies for all listings on the platform.

3. Traditional Cash on Cash Return & Airbnb Cash on Cash Return

Cash on cash return is another vital return on investment metric for investors. It’s quite similar to the cap rate metric. However, cash on cash return accounts for costs associated with financing in the calculations.

Here’s the cash on cash return formula:

Cash on Cash Return = (Annual Cash Flow Before Tax / Total Cash Invested) * 100

Cash on cash return is undeniably a reliable ROI metric. However, it can also be the most difficult one to calculate. You must factor in various financing costs, such as mortgage payments, startup costs, property taxes, buying price, insurance, and many others.

Our investor return calculator gives you accurate estimates of the above costs and then calculates the cash on cash return for you.

The calculator uses real estate comps to get averages for the area you’re investing in. This way, you can also analyze investment properties you already own. Our tool will conduct a real estate market analysis and conclude which is the optimal rental strategy for this specific investment property; this is all, of course, according to the results obtained for each metric under both strategies.

Related: The Airbnb Profitability Calculator: The Best Friend of the Short-Term Rentals Investor

Real Estate Investor Return Calculator: The Final Metrics

The results of Mashvisor’s real estate investor calculator will ultimately lead investors to make the best investment decisions. Here’s a breakdown of each metric and what it means in investment property analysis.

Traditional/Airbnb Rental Income

Rental income is one of the most important factors in finding positive cash flow investments. Our real estate investment return calculator will help you find profitable properties by letting you know how much rental income your investment will make under each strategy.

It is important to know the potential rental income of a property. Why rent out your property long-term (traditionally) if you can generate more rental income with the short-term strategy (Airbnb)? 

Rental income also helps determine the relative cash flow of this property. Our calculator takes into account the monthly expenses, as well as the occupancy rate, to accurately estimate cash flow.

Traditional/Airbnb Cap Rate

As many of you already know, cap rate is short for capitalization rate. With the real estate investor return calculator, the cap rate is a key result because it takes into account the net operating income (NOI) and the property’s current market value. It is a good indicator of how valuable a property is and whether it’s profitable in relation to its value.

Because the amount of rental income differs based on rental strategy, so does the cap rate. A property’s value can differ substantially when looking at its cap rates under each strategy.

Real estate investors also use cap rate to measure the relative riskiness of the investment. A high cap rate means a high-risk investment, whereas a low cap rate means a low-risk investment.

Traditional/Airbnb Cash on Cash Return

Cash on cash return (CoC) is considered one of the most important metrics in real estate investing. What differentiates cash on cash return from cap rate is the method of financing an investment property. Here, the CoC takes into consideration how a mortgage can affect the profitability of an investment by comparing NOI to the amount of cash invested.

In the case of financing the investment with cash, CoC doesn’t differ from the cap rate. However, in the more common case of taking out a mortgage, only the down payment and any cash paid to procure the property are included in the calculation. The remaining money invested in the property from a loan won’t be involved in the calculation of the cash on cash return.

Cash on cash return is a key metric because it gives investors a more realistic measure of the kind of returns to expect. And just like rental income and cap rate, CoC differs for the same investment property based on the rental strategy.

Related: What Is a Good Annual Return on Investment on Rental Property?

A Couple More Things to Know

Real estate investing is an excellent way to build your wealth. However, investing in any property isn’t an assurance that you’ll make profits. You need to invest in the right neighborhood, buy a profitable property and choose the right rental strategy. The best way to do it is by using a real estate investor return calculator,

Mashvisor’s real estate investor return calculator helps you estimate the rental income, cash flow, cap rate, and cash on cash return. It also gives you the estimated expenses, including startup and recurring costs.

In addition to what I mentioned above, Mashvisor’s calculator comes with a few more useful features for real estate investors. Extra features such as property analysis, neighborhood analysis, and many more make it indispensable for thousands of investors across the country.

The best thing about the real estate investor is that it gives you estimates for both traditional and Airbnb rental strategies so that you can choose the best rental strategy for your financial goals.

You can start finding profitable properties with our real estate investor return calculator and many other tools today. 

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