Entrepreneur Marshall Field once said that “Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.”
While that might be true, it’s also true that not all real estate offers the same potential for real estate investors. Here are some of the best real estate investing tools to use to help analyze and find properties for any real estate investing strategy.
- Roofstock Cloudhouse Rental Calculator helps to analyze and estimate the potential of any single-family home as a rental property, even if the house has never been rented before. Investors receive a forecast of potential return, including cash flow, cap rate, and gross yield.
- Return on Investment (ROI) Calculator helps investors to evaluate the forecasted profitability of different investments.
- IRR Calculator simplifies calculating the internal rate of return (IRR) of a real estate investment online.
Tip: Before you begin researching different real estate markets and rental properties to invest in, it’s important to know what you’re looking for.
Some investors prefer “cash cow” rentals. While they may not appreciate much, the properties are called cash cows for the steady amounts of cash flow they produce each month. Other investors look for a balanced blend of recurring passive income combined with the potential for property appreciation over the long term.
Here are some of the key formulas, concepts, and calculators every real estate investor should understand:
Gross rent multiplier (GRM) compares the property price to the potential gross annual rental income produced. If the property price is $150,000 and the gross annual rental income is $24,000, the GRM is 6.25 ($150,000 property price / $24,000 gross annual rental income).
Effective gross income is the amount of potential rental income after including other income (such as pet fees or roommate rent) and subtracting for a vacancy expense (such as 5% of the gross income received). If the gross annual rental income is $24,000 and the vacancy expense is 5%, the effective gross income is $22,800
Net operating income (NOI) is calculated by subtracting the property operating expenses (excluding any debt service) from the effective gross income. Many investors use the 50% Rule to estimate the operating expenses of a rental property. So, if the effective gross income is $22,800 and the operating expenses are 50%, the NOI is $11,400.
Cap rate compares the NOI to the market value or price of a property and is a formula used to estimate the potential return on an investment. By dividing the NOI of $11,400 by the property price of $150,000 the cap rate is calculated at 7.6%.
Cash flow is the difference between the total cash collected and the total cash spent, including any debt service.
Cash on cash return (also known as cash-on-cash yield) calculates the cash income received from the amount of cash invested in a property. If an investor uses a down payment of $30,000 to buy a rental property and the annual cash received is $4,500 (after paying all operating expenses and debt service), the cash on cash return is 15% ($4,500 cash received / $30,000 cash invested).
Finding a property for sale is one thing, but finding the right property to buy that matches your unique investment strategy is something completely different. Here are some of the websites and resources real estate investors use for property research and buying investment property listed for sale:
CRS Data provides access to public tax records, sale and mortgage histories, comparables, property analysis, and area demographics. Products include Financial Suite and LocalLook tailored for investors.
DealMachine is designed for real estate investors and wholesalers looking for off-market property owned by motivated sellers. Enter the address of any property to receive ownership information, purchase history, and accrued equity
MapLiv is a map-based search interface that provides a quick and easy way to run property comparables for houses for sale and rental property. You can run comps by entering the property address, zip code, or even a nearby landmark if you’re not familiar with the market.
Sites with Properties for Sale
Realtor.com is a free website and has much of the same information found on your local multiple listing service (MLS). However, to access complete listing data and home price trends, many investors work with a licensed real estate agent who has experience working with real estate investors.
Roofstock is an online real estate marketplace where investors can buy and sell single-family homes, small multifamily buildings, shares of a house, or entire portfolios of turnkey rental property with a tenant already in place.
Each listing comes with detailed information such as property photos, detailed financial performance, and neighborhood and school rankings. There are also search tools to help your filter and find investment properties that fit your investment goals.
Zillow has millions of homes listed for sale and rent for both homebuyers and real estate investors. You can research home values and pricing trends for any real estate market in the U.S., and download the most recent research data on current home values and forecasts, rentals, inventory, and much more.
RENTCafé is a tool real estate investors use to find important rental property data such as average asking rents and trends, percentage of renter-occupied households, and the most popular areas for renters.
Rentometer helps rental property owners to run rent comparables to learn if a property’s rent is fair, below, or above the fair market rent in the neighborhood.
Zillow Rent Calculator provides a free Rent Zestimate using millions of data points to help real estate investors understand how to price a rental.
Property Management Tools
Once you invest in a rental property, you’ll need to manage it for maximum profitability. Some investors choose to self-manage, while others hire a preferred property manager. No matter which option you choose, it’s a good idea to understand how professional property management works by reading about these tools:
- Apartments.com provides landlords with a free, all-in-one suite of property management tools including rental listings, tenant screening, rent collection, and more.
- AppFolio offers property management software for a wide range of rental property investments, including single-family rental homes, multifamily buildings, student housing, and commercial property.
- Rentec Direct is specially designed for real estate investors with smaller rental property portfolios. Property management tools include tenant screening and lease signing online, rent collection, maintenance requests, and file storage.
- Stessa helps real estate investors maximize profits through smart money and property management. You can create a free account with Stessa to gain real-time insights designed to maximize revenue based on your unique portfolio and investment strategy.
- TenantCloud focuses on new landlords and budget-conscious property managers by offering features such as rent applications and rent collection, residential lease templates, and seasonal service reminders.
Accounting & Bookkeeping
Tax laws in the U.S. are friendly to real estate investors. But in order to make the most of every tax deduction and benefit you’re entitled to you’ll need to accurately keep track of property income and expenses.
Here are five accounting and bookkeeping tools to help manage your rental property business:
Buildium is best for real estate investors and property managers with large rental property portfolios. Accounting modules include accounts receivable and payable, bank account synching and reconciliation, and Form 1099 e-filing for independent contractors. Pricing begins at $50 per month.
FreshBooks is an all-in-one accounting solution for rental property owners. Features include recurring invoicing for rent payments, automatic late payment reminders to tenants, and auto-billing of rent payments. Pricing begins at $108 per year.
Property Matrix helps investors manage accounting with a full set of online bookkeeping tools. Features include ACH and credit card processing, full-service accounting, and document management. Pricing begins at $400 per month for up to 250 rental units.
QuickBooks isn’t specifically designed for real estate investors, but it is one of the best-known general-purpose software programs used by businesses around the world. Rental property owners can create a profit and loss statement (P&L) to track income and expenses, generate monthly rent invoices to tenants, and sync bank accounts. Pricing begins at $20 per month.
Stessa is a cloud-based rental property financial management system created by and for real estate investors. Simply enter the property address, connect your bank accounts, and monitor property performance in real time from your personal owner dashboard. Features include automated income and expense tracking, secure document storage, the Stessa Tax Center, and mobile apps for iOS and Android. Pricing is free.
We’ve all heard the saying that knowledge is power, especially when it comes to success in real estate investing. Here are some of the resources for learning more about real estate:
- BiggerPockets Real Estate Podcast features off-the-cuff interviews by Brandon Turner and David Greene with real estate investors from all walks of life. Both beginning and experienced real estate investors will find plenty to listen to.
- The Remote Real Estate Investor is a Roofstock produced podcast hosted by Michael Albaum, Tom Schneider, and Emil Shour. Listen in to learn how remote real estate investors analyze deals and grow a rental property portfolio in some of the best rental property markets in the U.S.
- Joe Fairless is host of the Best Real Estate Investing Advice Ever Show, the world’s longest running daily real estate podcast. Learn everything you can from Fairless, who controls over $900 million worth of real estate.
- Real Estate News for Investors is hosted by Kathy Fettke, the CEO and Co-Founder of Real Wealth Network. Learn about hot topics such as the best areas for single-family and multifamily rentals, market trends, and investing in real estate with a self-directed IRA.
- Rental Rookie is hosted by former 8th-grade teacher turned real estate investor Emily Du Plessis. Newbie investors tune in to learn how to get started in rental property investing and begin living life on your own terms.
- Roofstock Academy is a training program built to help you build income through real estate investing without making costly mistakes. The Roofstock Academy is a hands-on, actionable program created by investors who have purchased thousands of properties. It’s perfect for an investor ready to take their business to the next level, whether you’re going from 0 to 1 or 10 to 100 rental properties.