ROI vs CAP RATE

Many get confused by the terms "Return on Investment" and "Capitalization Rate". Here's the difference:

ROI is your return on investment factoring in your financing. Its your annual cash flow after all expenses divided by your initial investment (out of pocket expense). ROI depicts the true percentage that you will make on your money in the first year. Capitalization rate (cap rate) is your ROI if you paid cash for the property. It doesn’t include financing. It is a better way to compare apples to apples and take financing differences out of the picture. Cap rate is factored by taking your annual Net Operating Income (NOI), which is your gross income minus all expenses except debt service (principal and interest mortgage payment), and dividing that by the purchase price of the house.
Again, Cap Rate is the percentage you would make on your money if you paid cash for the property, and ROI is what your actual percentage is when you factor financing into it.

HOME SALES

I've been away for a while due to some family illness, but I just read this from Money News:

WASHINGTON -- Sales of new U.S. homes rose 16.2 percent in April, the sharpest climb in fourteen years, while prices fell a record 11 percent, according to a government report on Thursday that showed home builders taking extraordinary steps to move houses.
New single-family home sales rose to an annual rate of 981,000 units from a revised rate of 844,000 in March, the Commerce Department said.
Analysts polled by Reuters were expecting April sales to rise to an 860,000 unit pace from a previously reported rate of 858,000 units in March.
In April, the median sales price of a new home fell $28,500 to $229,100 from $257,600 in March.

Buyers are still there! But they know a fair price when they see it. Price the home properly, and somebody will buy it.

CHECK THIS OUT!

How's this for median priced homes?


The 5 most overpriced places in the U.S.
Rank
City
Median home price
Housing price trend*
1
San Diego
$601,800
-4.5%
2
Miami
$371,000
-6.2%
3
Sacramento
$374,800
-4.1%
4
San Francisco
$736,800
2%
5
Washington, D.C.
$431,000
-4.1%

Why would anyone wish to move anywhere except Tyler, Texas, where the median price for a home is $151,000?

CONFUSION

Here's a couple of things to consider:

1) Lots of play in the news re: the slowdown in real estate. But the small print at the bottom of the stories usually says "except for Texas"! So, don't believe everything you read.

2) The confusion exists in most peoples' minds because of the tightened requirements to get a mortgage. When the news reports about the real estate issues, folks get the two mixed up. Real estate hasn't slowed (except in places like California and Florida, where there were big run-ups); the mortgage requirements have been tightened, making it more difficult to secure a loan! Because of the news concentrating on mortgages, which is scary to some, most think it's a real estate problem. It's not. There are fewer buyers out there due to the lack of qualified buyers. There is just as much buying activity out there (especially in Texas) as there ever was..... just fewer buyers who can qualify for the money.

TIPS AND THINGS

I like to post tips for my readers once in a while. I started using hydrogen peroxide routinely some time ago. This appeared in Home Hints E-news recently:

Some Unusual Uses for Peroxide. Many uses for a bottle of 3% hydrogen peroxide (costing less than $1.00 at any drug store) have been suggested on the Internet recently. With prices of most necessities rising, this little brown bottle may be a way to save money in a simple, healthy manner. - Take one capful (the little white cap that comes with the bottle) and hold in your mouth for 10 minutes daily, then spit it out (try it when you bathe). This will help prevent canker sores, and your teeth will be whiter without expensive pastes. Use it instead of mouthwash. (Small print says mouth wash and gargle right on the bottle). - Let your toothbrushes soak in a cup of peroxide to keep them free of germs. - Clean your counters and table tops with peroxide to kill germs and leave a fresh smell. Simply put a little on your dishrag when you wipe, or spray it directly onto the surface. - After rinsing your wooden cutting board, apply peroxide to kill salmonella and other bacteria. - For foot fungus, try spraying a 50/50 mixture of peroxide and water on your feet (especially the toes) every night and let dry. - Soak any infections or cuts in 3% peroxide for five to ten minutes several times a day. - Use a spray bottle filled with a 50/50 mixture of peroxide and water and in your bathroom to disinfect without harming your septic system like bleach or most other disinfectants will. - Try tilting your head back and spraying your 50/50 mixture into your nostrils whenever you have a cold or plugged sinuses. It will bubble and help to kill the bacteria. Hold for a few minutes, then blow your nose. - If you have a nagging toothache and cannot get to a dentist right away, put a capful of 3% peroxide into your mouth and hold it for ten minutes several times a day. The pain should lessen greatly. - If prefer a natural, highlighted look to your hair, spray the 50/50 solution on your wet hair after a shower and comb it through. If your hair is a light brown or dirty blonde, you will achieve more natural highlights, not the peroxide-burnt blonde hair that can come from prepackaged hair dyes. The gradual lightening will not be very noticeable. - Put half a bottle of peroxide in your bath to help treat boils, fungus, or other skin infections. - You can also add a cup of peroxide instead of bleach to a load of whites in your laundry to whiten them. If there is blood on clothing, pour it directly on the soiled spot. Let it sit for a minute, then rub it and rinse with cold water. Repeat if necessary. - Use peroxide to reduce smearing when cleaning mirrors. It works really well.

TRIP

I just returned from ten days out of the country. I would highly recommend a Costa Cruise in the western Mediterranean. The ship was incredible, and the locations visited couldn't have been better. My wife and I don't take the ship's recommended tours; we like to get off by ourselves and get with the people and the culture. Just walking around and shopping in cities like La Valletta, Malta, and Palermo, Sicily is wonderful!