Buying an investment can be exciting and a great way to make money in real estate. However, for your investment to become successful, it’s vital to evaluate the property before purchasing; for this to be possible when you make use of a real estate investment calculator. It will help you make calculations on the property to predict how much profit it’s going to earn. Here are all the calculations it helps you calculate.
What’s a real estate investment calculator?
It’s also known as a real estate return on investment calculator. It’s an online tool that’s designed to assist investors in analyzing potential real estate investments for profitability. The tool offers them all the numbers they need to assess the performance of an investment property.
How to utilize a real estate investment calculator?
It’s very easy to use this tool. All you are required to do is key in some basic information about a particulate b investment property. The information may include the buying price, mode of financing, cash down payment, and other costs. The calculator outputs all the numbers helping you decide whether the investment is worth it.
Essential calculations of a real estate investment calculator.
Before an investor buys a property, they need three real estate metrics to evaluate if a property is a good investment. They include:
It’s the variation between a real estate investment’s monthly rental income and the monthly rental expenses. It’s vital in property evaluation as it tells you how much profit to expect from an investment property. Most investors use a real estate investment calculator in Massachusetts as it calculates cash flow while considering the various rental property expenses such as:
- mortgage payments
- property taxes
- Maintenance cost
Cash on Cash Return
It refers to measuring the ROI based on the initial cash invested. You calculate by dividing your net operating income by the initial cash invested. This calculation mainly aims to know how much you are getting back annually after investing a specific amount of cash down. According to experts, good cash on cash return in real estate is 8% or higher for a profitable investment.
Cap rate or Capitalization rate
It’s the ratio of the net operating income(NOI) to the investment’s current market value. It’s the best way to calculate your ROI as it does not involve the financing method. A cap rate estimates the returns as if the property was paid off in cash.
Before purchasing a property, it’s vital to evaluate the returns. Make use of a real estate investment calculator to understand what to expect.