Investing in real estate is all about finding a deal. After finding a deal and researching the property, most investors quickly move toward a sale or move on. That said, it can be highly time-consuming and take a lot of effort to find and analyze real estate deals. As such, most rental investors use various tools to help streamline the process. Just keep reading if you want to discover 10 free tools that can help analyze real estate deals.
How to Analyze Real Estate Deals
Once you’ve found a decent real estate deal, it’s important to analyze it to determine if it has the potential for steady cash flow. By calculating specific real estate numbers, investors can decide whether or not a deal is worth the investment. Here are some of the steps to determine whether you’re willing to invest.
- Analyze the Investment Location
- Collect Your Data
- Calculate Monthly Cash Flow
- Figure Out Annual ROI
- Compare With Other Rentals
Analyze the Investment Location
Location is everything when it comes to rental properties. After all, location impacts some of the most critical factors, such as property price, rental rates, tenant demographics, property appreciation, etc. As such, the location of your property can ultimately affect how profitable it will be.
If you’re unsure what makes a good location, consider a few key factors. For example, look at the population growth, job opportunities, economic growth, and price-to-rent ratio in that area. Additionally, you can consider the safety and crime rates, school ratings, taxes, and local laws. Once you have this information, you can evaluate the rental potential of your location.
Collect Your Data
Investing in real estate means you’re constantly looking at numbers and data for each property listed for sale. As an investor, you’re typically taking this information and using it to calculate the profitability of each property you’re interested in. However, if your calculations are off or you are missing vital pieces of information, you won’t get accurate estimates of your projected returns.
As such, it’s crucial to collect all the data necessary to run a proper rental property analysis. For instance, you’ll need information and numbers for:
- Taxes
- Property Listing Price
- Insurance
- Interest Rates
- Down Payment
- Mortgage Payment
- Utilities
- HOA Fees
- Vacancies
- Rental Rate
- Repairs or Renovations
- Maintenance
It can take a bit of digging to find all the data for your rental investment analysis, but it’ll be worth it when you have a more accurate estimate of significant expenses.
Calculate Monthly Cash Flow
Once you know the property location and expense data, you can further evaluate the deal by calculating the monthly cash flow. A profitable rental property will generate positive cash flow, which means your income exceeds your expenses. However, it’s important to calculate income and expenses to determine how profitable the property will be.
To calculate rental income, all you have to do is subtract rental costs and expenses from the estimated revenue. But first, we have to figure out an income estimate. One of the best ways to do this is by following the 2% rule, which states the property should rent for 2% of the purchase price. This ensures there’s enough to cover regular monthly expenses and generate cash flow.
Figure Out Annual ROI
When you analyze real estate deals, one of the most important steps is calculating your annual rate of return. There are several ways to estimate your returns, such as the gross rent multiplier (GRM) or net operating income (NOI).
The GRM compares the property’s purchase price to the gross rent the property generates each year. The issue with this calculation is that it doesn’t include expenses. On the other hand, NOI calculates how much money the rental will make after paid expenses.
As you can imagine, finding all these numbers and calculating rental investments can take a lot of time and effort. Luckily, several tools help analyze real estate deals and manage your property once you’ve found a good deal.
Compare With Other Rentals
Finally, one of the final steps that can help you analyze real estate deals is comparing your property with other similar properties. After all, this can help you decide whether or not the property is priced at fair market value. A comparative market analysis looks at the property compared to other properties that have recently sold in a particular location.
To compare your properties most accurately, they should be similar in age, square footage, condition, location, and more. Investors can find real estate comps with the help of real estate agents, online tools, or property management companies in Washington DC.
Top 10 Free Tools to Help Manage and Analyze Real Estate Deals
Finding all the data and information necessary to run a comprehensive real estate analysis can be difficult if you’re doing it manually. But luckily, there are several tools and services available today to help investors analyze real estate deals quickly and efficiently.
Additionally, once you’ve found the right property to add to your rental business, there are several tools to help investors complete the buying, renting, and management process. Here are 10 of the best tools available to real estate investors today.
- DealCheck
- RentZend
- Trulia
- Bankrate
- Rentometer
- BiggerPockets
- Roofstock Cloudhouse
- Mashvisor
- Realtor.com
- Everlance
DealCheck
One of the best and most widely known tools is DealCheck, which allows investors to analyze real estate investment deals from anywhere. Whether you’re using a laptop, cellphone, or tablet, DealCheck can give you all the basic property information you need and recent property sales and rental comps.
You can also create and share property reports using DealCheck, which is excellent for investors who want to share ideas with business partners, lenders, or property managers. Additionally, your data on DealCheck is synced with all your devices so that you can access reports anytime, anywhere.
RentZend
Another helpful data calculator for investors is RentZend, which gives you various property information such as tax records and estimated rental rates. With this tool, investors can easily adjust and evaluate return assumptions to get the most accurate results. Additionally, it allows you to download and print reports to send to partners or other business professionals, making it easy to share ideas and information.
Trulia
Trulia is another great tool investors use to find information on properties anywhere in the US. With Trulia, you can find homes for sale, houses for rent, and extensive neighborhood insights. For instance, you can look at neighborhood photos, resident reviews, and local insights to see which properties are suitable for your rental business.
Additionally, Trulia gives you free mortgage tools to explore and help you with your analysis. For example, they provide you with an affordability calculator, mortgage calculator, refinance calculator, a lender directory, and today’s mortgage rates. With these tools, investors can explore different loan options.
Bankrate
Bankrate is an excellent resource for real estate investors to verify data if you need a quick tool to check mortgage rates and payments. One advantage of this tool is that it’s easy to use. Just input the property price, down payment percentage, and interest rate. Then, you can verify monthly mortgage expenses, which is crucial for your overall investment analysis.
Bankrate offers over 200 financial calculators, including a mortgage calculator, amortization, home affordability, loan calculator, cost-living, credit card payoff, etc. It can help investors compare rates and estimate numbers for big financial decisions, like investing in a rental property.
Rentometer
One of the best tools available for verifying and confirming rental ranges for rental properties is Rentometer. You have to input the property’s address, and Rentometer will give you data on comparable properties in the same location.
Rentometer gives you information such as average rent, median rent, and data on specific percentiles. Additionally, it can give you an idea of where your rental rate lands compared to the neighborhood in which the property is located.
BiggerPockets
BiggerPockets is one of the more comprehensive analysis tools, giving investors several different calculators to help analyze deals. For instance, they divided some of the investment calculators into categories such as rental property, BRRRR, fix and flip, and mortgage payment calculators.
However, it’s important to note that you can only use the calculators on BiggerPockets a limited number of times for free. Unfortunately, you have to sign up for a membership for unlimited use.
Roofstock Cloudhouse
Another tool that’s efficient and simple to use is Roofstock Cloudhouse. This tool gives investors tons of valuable data that can help determine the property’s potential as a rental investment. For instance, you can see when the property was built, the square footage, and the number of bedrooms and bathrooms. Additionally, you can look into neighborhood ratings, location information, and financial estimates, like gross yield, cap rate, and cash flow.
Mashvisor
One of the most widely used tools is Mashvisor, which can help investors decide to purchase or pass on a property. Not only can you narrow down locations and observe rental comps, but you can also break down the property’s return potential.
Additionally, Mashvisor allows investors to see the potential costs and income you’d acquire while owning and managing a particular property. For example, you can calculate the cap rate, cash-on-cash returns, price-to-rent ratio, occupancy rates, and more.
Realtor.com
Another fundamental and free tool that’s helpful for investors is Realtor.com. This tool can help get current rental market information, similar to websites like Zillow or HotPads. You can look for properties to buy, rent, and sell. Furthermore, you can look at properties that have just been sold and compare home values.
Realtor.com also provides mortgage tools like a mortgage calculator, an affordability calculator, a refinance calculator, etc. Additionally, you can compare up-to-date mortgage rates and find one that suits your business needs.
RentCafe
RentCafe provides several resources to help find profitable rentals for investors who want data on home and apartment rentals. Additionally, investors can compare rentals in popular US cities like Philadelphia and Washington DC.
Finally, RentCafe provides residents and property managers resources that make rental processes easier. RentCafe is a great essential tool that can help investors gain increased exposure, gain more leads, and fill vacancies faster.
How Can Professional Property Management Help?
Using free tools to analyze real estate deals can benefit investors, landlords, and property managers. As such, investors must utilize all resources available–including rental property management. Bay Property Management Group is a full-service management team that works to maximize your rental portfolio. We cover several services like tenant screening, rent collection, maintenance, and more. Contact BMG today if you need rental management services in Baltimore, Philadelphia, Northern Virginia, or Washington DC.
