Though real estate professionals don't need a degree in Math, thorough financial analysis knowledge will help them make clever investment decisions. Being 'calculative' during the due diligence stage enables you to avoid costly mistakes.
Fortunately, real estate investors don't need to be a master in math while investing in a property or a real estate syndication. The real estate market has been promising and stable for years. Investors and other professionals need to adopt many calculators to determine the profitability of their proposed real estate investment.
Let's take you through the top 10 well-designed real estate calculators every investor should have.
Why Real Estate Calculator?
Any wise real estate investor looking for profitable deals in the housing market or in the commercial real estate arena needs to think about the expected gains from a rental property or an investment property before making the buying or investing decision.
It is crucial to gauge the gross monthly income and overall capital gain through appreciation while reselling the investment properties after a considerable holding period. A real estate calculator lets investors anticipate financial aspects and helps investors make the most out of their own money.
You may be a real estate syndicator, a realtor, a broker, an agent, or any other real estate professional. Financial calculators will help you determine if you are taking a 'calculated risk' by investing in a particular property or assuring a typical gross income to other investors.
Calculators for Real Estate Investing Calculations
The best real estate calculator would be a must-have tool for real estate investing enthusiasts to save valuable time and get a financial overview with the utmost accuracy. The most sought-after real estate investment calculators free you from laborious physical calculations.
An investment property calculator helps you rethink the facts and figures with a realistic approach. Let's take you through some software or tools that serve as the best calculator to let you assess crucial data points making the most effective use of all the functions.
1. Calculating Capitalization Rate (Cap Rate)
Cap rate is a method to calculate the net present value of a property and estimate the return rate. The capitalization rate is usually calculated in commercial real estate.
Suppose an investment property is sold for $200,000 and generates a Net Operating Income or rental income of $10,000 after property expenses (without considering the financing cost). The cap rate is $10,000/$200,000 - which is 5%.
The Cap Rate Calculator from Omni Calculator makes the process easy for you. Simply enter the values, and you will get the answer within a click.
2. Debt Service Ratio
Debt Service Ratio (DSR) or Debt Service Coverage Ratio (DSCR) is the overall cash flow used for repaying the mortgage loan. This may descend along with the loan term if the lender charges a reducing interest rate.
Please note that
Debt Service = Principal + Interest (the sum of principal and interest payments)
DSR = Net Operating Income / Debt Service
3. Mortgage Payment Calculator
If you opt for a mortgage loan to acquire income properties or opt for a refinance, you may need to calculate the exact amount you will pay back to the lender. Your down payment and the interest rate will be crucial considerations while estimating the mortgage payment.
You can easily calculate the payable amount against your mortgage and get a mortgage repayment summary by using the best real estate calculator for mortgages by Mortgage Calculator.
4. Cash Flow Calculator
You must be expecting a consistent cash return for your cash invested in a rental property.
You may not be the sole owner of the property. You may be investing in it through a real estate syndicate. You would like to analyze the cash flow a property generates.
Rental Software offers a well-designed tool to calculate positive cash flow for landlords (property owners) and a tool for property flippers also. The software solution provides professional-looking financial reports and helps you calculate cash flow and after return value.
How to Calculate Rental Income?
Are you a real estate syndicator and investor? You expect cash flows as consistent rental income from multifamily real estate deals. The overall success of the syndicate relies on the cash flows the rental properties generate over a long time.
Let's go through some calculator options:
5. Rental Investment Calculator
Investors may need to calculate many financial parameters while buying rental properties. If a mortgage loan is involved, you also need to consider the loan amount and other debts. Another significant aspect is how much house rent you can charge per the area demographics. The other factors include property management, upkeep, and upgrading costs.
RentalValuator is a fabulous tool to calculate various values like rental income considering other expenses.
6. Rent to Cost Ratio Calculator
The rent to cost ratio is the percentage of rental income against the capital investment. The cash flows through rents from your tenants, and the property's purchase price are the main elements here.
A general thumb rule here is - that the property should generate over 2% as rent to cost ratio. Then, you can expect positive cash flow out of it.
Rental Property Calculator is the best real estate calculator to obtain this value.
7. Cash On Cash Return Calculator
It is the cash return per year you obtain for the cash you invested. Please note that this figure doesn't consider any appreciation or depreciation of the property- and so it is far different from ROI.
The calculator tool offered by RentDrop is the best to get this value effortlessly.
8. Gross Yield Calculator
Gross yield is the total rental income from rental properties from the property value - excluding property maintenance, taxes, operating expenses, and other property expenses like repayment of a mortgage loan.
The calculator offered by CalculateStuff is the best to get this value.
9. Net Operating Income Calculator
Net operating income calculation helps investors determine the rental property's profitability, excluding financing costs and taxes. This value also enables you to obtain the ROI, Cap Rate, and DSR.
The real estate calculator offered by LandlordGurus helps you calculate NOI by entering the property-specific values in the provided boxes.
10. Calculate Square Footage
The net present value or purchase price of any property depends upon the square footage. The most straightforward formula to calculate the square footage is:
Area = Length X Width.
However, real estate investors must be familiar with the related terms:
- Built-up Area
This is the area encompassed by the outer columns of a building.
- Super Built-Up Area
This also includes the area allotted for parking (in an apartment building) and part of the stairs.
- Carpet Area
Actual working area - within the inner faces of the outer columns.
- Area of the Plot
The total area covered on the land.
We have summarized these real estate calculator tools as an infographic to help you remember them quickly. We hope that the infographic below will improve your calculation skills and help you make wise investment decisions.
The Bottom Line
The article and infographic cover the top 10 real estate calculators every real estate investor should use. We hope that you get significant formulae and the best tools for real estate calculations in one place. Adopt these calculators for due diligence and financial analyses for your real estate investments to stay ahead and take your growth to new levels.