Using Our Rental Property Analyzer
Hey investors! This tutorial helps explain all of the benefits and features of our Rental Property Analyzer. There are many tips and tricks in our video above, including finding your perfect offer price to get the cap rate and cash flow you desire. You can also manually enter your desired offer price and see what type of cash flow and expenses you would end up with. It’s important to make sure you have a buffer of positive cash flow from each investment candidate, and this tool will help you do that!
Our Rental Property Analyzer was developed based on our own buy and hold real estate calculator which we used while analyzing our real estate investment properties. We developed this Rental Property Analyzer based on ideas and methods shared in a number of real estate investing books.
Get on out there and look for your next great investment property using our tool! It is also mobile-friendly so you can access it on the go. We recommend going out there and analyzing three properties a day so you can get into the habit. Work your neighborhood and learn about it. It’s free to look and you’ll learn a great deal about your housing market. Do this for a month, and you could have 100 properties checked in your neighborhood!
Once you have found a property you are interested in evaluating, using one of the many real estate listing websites, copy the address of the property you want to evaluate into the top text box. Type your address in (our example is 4411 Walker St NE in Cedar Rapids, IA) and you will then notice that the fields are pre-populated in the Property Information. Isn’t that great?
As you scroll down the page, you’ll notice a “Summary” section. This is the section that shows you the Cash Flow, Cap Rate, and Cash on Cash Return (CCR). The Cash on Cash Return is the rate of return based on your initial investment. This value helps you evaluate the long term performance of your real estate investment. Check our dedicated post here to learn about CCR.
In the Price Information section, you’ll be able to enter the property listing price. This is not used to calculate anything, it is really there as a reference point when you are analyzing your property. The offer price is calculated based on pre-populated information gathered from the “Determine Your Offer Price” section, i.e., your desired cash flow and cap rate. Lastly, the estimated rent can be entered here.
Determining Your Offer Price
As you continue down the page, you’ll see a this section. section called Determine Your Offer Price. You have a choice here. Some investors are focused primarily on cash flow, which is what you are left with after you pay all your expenses. Other investors are interested in the cap rate. The cap rate, or capitalization rate is the estimated rate of return on a real estate investment based on the income the property is expected to earn. Remember where “Offer Price” was showing in the Price Information section? This will update depending upon which offer price radio button you select here: either cash flow or cap rate.
Perhaps You See This Instead?
If you do not have an account with us, you can still use our Rental Property Analyzer, but you will not be able to find your offer price based on desired cash flow. Don’t worry though! It’s free to register and you can do it for FREE. If you already have an account, you can login and see the cash flow information!
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Financing: Financing Cost
We have tried to account for the various ways investors purchase property:
Rehab Financing – Some people have the opportunity to finance their rehab costs. If you are doing that, then enter your rehab financing here.
Financed Closing Costs – Your closing costs may also be covered by your loan. If that was the case, you can enter it here in the Financed Closing Costs area. Note: This is NOT a cash down payment towards your loan. That will be covered in your Out of Pocket expenses, shown on the right side of this Financing section.
Loan Term (Years) – Enter the amount of years you have to repay your mortgage.
Loan Interest Rate – Enter the interest rate offered to you from your bank or hard money lender.
Amount Financed – This is the total that you will need financing before. Remember, this is all based off of your offer price!
Financing: Out of Pocket
Cash Down Payment – This is where you put the % of cash you are going to put down on your mortgage or loan.
Closing Costs – If the seller isn’t covering these for you, you will want to account for these extra costs here. These closing costs include origination fees, points, title fees, inspection fees or any other cash payments required to close your loan.
Additional Expenses – This is a catch-all category to capture Additional Expenses you may experience shortly before or after the purchase. One example would be the funds needed for a home inspection.
Total Rehab Expenses – These are the expenses you estimate that you will incur to alter or improve the property shortly after the purchase.
All Cash Reserves – Cash you want available as a reserve should something occur. It’s recommended to have 6-12 months rent as a buffer to protect against potential vacancies or major repairs. This helps you lower your risk profile.
Expenses: Fixed Monthly Expenses
The Fixed Monthly Expenses section, on the Expenses tab, allows you to enter all of the recurring costs that you will have. These are the expenses that will be accounted for on a monthly basis, such as your mortgage payment, taxes, insurance, property manager, and Homeowners Assocation (HOA). You can also mitigate risk by entering in percentages for vacancy and eviction rate.
Mortgage Payment – In this section, you’ll see your mortgage payment calculated here, based on what you put in the Financing sections.
Annual Taxes – Enter your annual taxes here. These should be checked on your local Assessor Site.
Insurance – This is how much you will pay for your insurance.
Property Management – If you are using a property manager, enter the manager’s fee here. This is a % of gross rent.
Related Post: 10 Questions to Ask Your Property Manager
Vacancy – The default vacancy is set at 5%. Depending on your market, you can raise and lower this depending on your risk adversity. This varies based on management and location, as well as local and global economies.
Eviction – Although you may not have never had an eviction, everyone’s time comes on this. The default is 2% and you can leave this as is, or put a different percentage based on your experience or what you encounter in your neighborhood.
If you must evict, check out Being a Landlord: Pulling the Eviction Trigger
Miscellaneous Expenses – Any additional expenses you pay on a monthly basis.
Homeowner Association (HOA) – If your property belongs to an HOA, this is the monthly fee associated with a membership.
Expenses: Variable Monthly Expenses
In the Variable Monthly Expenses section, you can cover other expenses that may be recurring or vary based on occupancy. For example, fixed monthly expenses usually cannot be changed too much. Variable expenses, on the other hand, could be transferred to the tenant or decreased if you find more affordable suppliers for these services.
Lawn care, snow removal, utilities such as gas, electric, and water, and garbage are typical monthly expenses that can be entered here. We also included fields for Additional Monthly Miscellaneous Expenses and Repair and Maintenance if you would like to plan for these future expenses. We typically budget $50 for repairs and maintenance each month. Sometimes we spend nothing and other months we are above that. If you are purchasing an older home that is a little rougher, you might want to increase your repair and maintenance.
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In this section, you can take a look at the summary of your monthly and yearly expenses to see how tings really look. These expenses are based on the fixed and variable costs you just entered earlier. Your cash flow, which is also shown in the summary section towards the top of the page, will be broken out as monthly and yearly amounts here as well. This cash flow is after you have covered your bases with repairs, vacancy, and evictions.
The beauty of our Rental Property Analyzer is that you can print your results once you are complete. If you go back to the top of the page, you will see a Print icon. From there, you will get a Print dialog that allows you to save the file as a PDF (if you are using Google Chrome) or print to a printer of your choice. You can take these calculations out to your banker and share them with him or her. When you are printing, make sure you have background graphics enabled so you can print the page as it’s designed.
We Value Your Feedback
So that is how it is done! Now go out there and look for your next great investment property. We recommend going out there and analyzing three properties a day so you can get into the habit. Work your neighborhood and learn about it. It’s free to look and you’ll learn a great deal about your housing market. Do this for a month, and you could have 100 properties checked in your neighborhood! Remember, anyone can invest in real estate with the right education.
We built this tool for our users–investors like you. We really value your feedback! We’d love to know how much you enjoyed using this tool and if you found our tutorial and instructions useful. If you have any suggestions, concerns, or feedback, please email us at firstname.lastname@example.org. Thank you and enjoy our Rental Property Analyzer!