Real estate investment has been a common money-making method since the Middle Ages, with property ownership seen as a symbol of wealth. Back then, property purchasers didn’t have the internet to rely on to make their investment management easier, but we do now.
Whether you have one investment property or an entire portfolio, here are some of the many online tools that could make your investment activities much more manageable.
Cap Rate Calculator
A cap rate, or capitalization rate, tells investors the rate of return they can expect to generate on their real estate investment property. While you can calculate it manually, there’s an easy online tool into which you can enter your expenses.
It then generates a cap rate by dividing your net operating income by the current property value as a percentage. Investors often use a cap rate calculator to work out their potential returns and as a way to compare similar real estate investments.
Discounted Cash Flow Calculator
Investors use discounted cash flow (DCF) calculators to estimate their investment’s value today based on its future cash flows. If the DCF figure is above the current cost of the investment, it could be a valuable purchasing opportunity.
While using such a calculator is a quick and easy way for investors to make an informed decision, it’s not always accurate. Your future cash flow determines the results, which no one can predict with absolute accuracy.
Weighted Average Cost of Capital Calculator
Analysts and investors use the weighted average cost of capital (WACC) formula to assess their investment returns in a company. Many businesses use borrowed funds to operate, which means the capital cost is crucial for determining companies’ net profitability potential.
A WACC calculator allows you to measure your company’s cost to borrow money, with its formula using debt and equity in the calculation. It multiples your debt’s cost and equity by its weight by market value to provide the total. Many investors use WACC to see if an investment is worth pursuing.
Online Property Finders
While many investors have connections that enable them to learn about properties for sale before they are even listed, it can be worth having online property finders bookmarked in your search engine. These tools allow you to diversify and keep your market knowledge fresh since you can learn about new listings, area demographics, school ratings, weather patterns, property features, and more.
Many different websites offer this information, so keep a few in mind for when you want to refresh your market knowledge.
Net Present Value Rule
Using an online net present value rule tool, you can calculate the current value of your real estate investment’s net future cash flow. Discount your future cash flows by the desired return rate and deduct the value from your capital investment or cash amount. If the net present worth is positive, this means the investment may be worthwhile.
Real estate investors have many different online tools at their disposal to help them make informed property purchasing decisions. Rather than buying on a hunch, put time and thought into calculations to be as sure as possible about your decision. Online tools are making it easier than ever before.