Multi Family Investment Calculator: The Ultimate Tool (2024)

Why must real estate investors use a multi family investment calculator? Continue reading to find out!

There are a thousand reasons why you should consider buying a multi family home for investment. Be it easy management, multiple rental income streams, easier application of forced appreciation, and even higher occupancy rate- these are all characteristics that make an investor’s business successful. But to achieve a certain level of success, it is crucial that you start with proper multi family real estate investment analysis. And that’s where the multi family investment calculator comes in.

Before we tell you how this type of real estate investment tool will change your investing experience, let’s talk a little bit about what it is exactly.

What Is a Multi Family Investment Calculator?

The multi family investment calculator is also known as an investment property calculator or a real estate investment calculator. It is a tool specially designed to assist real estate investors with the assessment of multi family rentals. In other words, investors use this tool to examine the real estate market and to conduct multi family real estate investment analysis. The process includes running through all the return on investment metrics as well as key insights on the performance of housing markets. Here’s what Mashvisor’s multi family investment calculator looks like:

Mashvisor’s Investment Calculator

Why MUST You Use a Multi Family Investment Calculator?

Just like there is a myriad of reasons for you to get into multi family real estate investing, there are as many reasons why you must use a multi family investment calculator. Here are a few significant reasons:

1. Calculate Cash Flow

The number one reason you are investing in real estate is probably to enjoy positive cash flow. But when you are dealing with a multi-unit property which provides multiple income streams, it is essential that you do the math the right way.

If you don’t know what cash flow is, it is the rental income minus all rental expenses for a certain period of time. But, why is cash flow so important? Simply because that is what you get to keep from the rental income- it’s your profit margin.

But, wait a minute! Why do you need a multi family investment calculator when the cash flow formula is so simple?

As mentioned, multi family homes provide multiple income streams. Moreover, expenses might vary from one unit to the other. Some units might cost you more in expenses while others might cost less. This can make the cash flow calculation all the more complicated.

Besides, you will have to repeat this calculation for every multi family rental you see as a potential investment. By the time you finally find an investment property with positive cash flow, other real estate investors will have probably already jumped on the opportunity. Doing things manually will slow down your investment property search, especially when it comes to multi-unit properties.

Quickly find and analyze a multi family property using a calculator right now.

Find a Profitable Multi Family Property

2. Calculate Cap Rate

The multi family cap rate is one way to analyze the return on investment relative to the property price. So, to calculate the cap rate, you must first compute the net operating income (annual cash flow). Then you divide that figure by the property price.

This will require you to gather a lot of data on the different investment properties you’re considering investing in. But why would you do that manually when you have the multi family investment calculator to do that for you? You can save some time to analyze other multi-unit properties to find the best real estate investment with a high cap rate.

Find Out: What Are the Best Multifamily Markets 2019 with High Cap Rate?

3. Calculate Cash on Cash Return

Cash on cash return is another way to calculate the rate of return. It is very similar to the cap rate; however, instead of dividing the NOI by the property price, you divide it by the amount of money you paid in cash (aka down payment, closing costs, renovation costs, etc.). This measure is significant for a multi family investor as it can help you determine the best method for investment property financing– the one that provides the best ROI for a specific property. Sometimes it is better to finance a property with an all-cash investment, while other times, it is best to turn to external financing options such as a conventional loan. The decision can be made with the help of the multi family investment calculator which will calculate the CoC return most accurately.

4. Find Real Estate Comparables

Real estate comps are one way to finally decide if the multi family house you are analyzing is the best option. You will have to find other multi family homes for sale within the same area which share similar characteristics with the said property. Make sure the numbers make sense in comparison to those properties. If you find that your option is indicating lower ROI figures, that might be a red flag for you. If the numbers turn out to be within the same range, then you are on the safe side. Of course, real estate comps can also help you identify below market value properties and even avoid over-priced properties.

What the multi family investment calculator does is it automatically provides a list of comps for you. So, not only do you not have to spend a lot of time searching for comps, but you can also be confident that you’re looking at the right comps for your investment property.

Where Can You Find This Tool?

Regardless of what your investment goals are, Mashvisor can always help you achieve them. Therefore, we recommend that you check out Mashvisor’s multi family investment calculator– a revolutionary tool in the world of real estate business. In addition to the features we mentioned before, our real estate investment tool will assist you in the process of real estate market assessment. Moreover, it helps real estate investors decide on the best rental strategy for their multi family home investment. In fact, our amazing tool has helped so many real estate investors make money in real estate with little effort on their side. Finding multi family homes for sale has never been easier.

If you want tolearn more about how Mashvisor can help you find profitable investment properties, sign upfor a 7-day free trial now, followed by 15% off for life.

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Multi Family Investment Calculator: The Ultimate Tool (2024)

FAQs

What is the 2% rule in real estate? ›

The 2% rule is a rule of thumb that determines how much rental income a property should theoretically be able to generate. Following the 2% rule, an investor can expect to realize a positive cash flow from a rental property if the monthly rent is at least 2% of the purchase price.

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What is a good ROI on rental property? ›

In general, a good ROI on rental properties is between 5-10% which compares to the average investment return from stocks. However, there are plenty of factors that affect ROI. A higher ROI often also comes with higher risks, so it's important to compare the reward with the risks.

Is a 7.5% cap rate good? ›

Generally, a cap rate of 8-10% is considered a good cap rate for a rental property, however, cap rates can vary significantly depending on the market and the type of property. For example, a cap rate of 6-7% may be considered good for a multifamily property in a high-demand market.

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What is the ROI of Airbnb? ›

Investing in Airbnbs can be a great way to expand your income opportunities. Though there is risk involved in Airbnb real estate investments, there are also sizable returns. Many investors see a return of 40% or more, which is far higher than the average percentage yield on a U.S. savings account of just 0.07%.

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What is the 50% rule in real estate? ›

The 50% rule or 50 rule in real estate says that half of the gross income generated by a rental property should be allocated to operating expenses when determining profitability. The rule is designed to help investors avoid the mistake of underestimating expenses and overestimating profits.

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What is the 1 rule in real estate? ›

The 1% rule of real estate investing measures the price of an investment property against the gross income it can generate. For a potential investment to pass the 1% rule, its monthly rent must equal at least 1% of the purchase price.

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How long does it take to make a profit on a rental property? ›

Most of the time, you can get positive cash flow right from day one with your rental. Figuring out your profit for the year is a matter of taking how much rent comes in and subtract how much money goes out for expenses like taxes, insurance, and mortgage payments. What you're left with is your profit for the year.

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What is the 1% and 2% rule in real estate? ›

The 2% rule says an investment property's monthly rent should equal at least 2% of the purchase price. According to the 2% rule, your monthly mortgage payment shouldn't exceed $3,000, and you should charge $3,000 in monthly rent. The 2% rule is more extreme than the 1% rule – basically doubling the monthly rent amount.

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What is the 1% rule and the 2% rule? ›

The 1% rule states that a property's monthly rent must be at least 1% of its purchase price in order for the owner to break even. The 2% rule states that a property's monthly rent needs to be at least 2% of its purchase price in order for the owner to make a sustainable profit.

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Is it the 1% rule or 2% rule? ›

The 2% rule is a variation of the 1% rule, which says that a property's rental income should be at least 1% of its purchase price. If you were applying the 1% rule to the property in the previous example, the rental property would have a better chance of making a good investment.

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Does the 1% rule in real estate still work? ›

The 1% rule is a guideline real estate investors use to choose viable investment options for their portfolios. Although the rule has helped many investors make wise decisions regarding their investment properties, the current real estate market may make following the 1% rule unrealistic.

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