SUPER CHART SIGNALS HEAD AND SHOULDER HAS FAILED – THANK GOD!

As I promised, I am updating the article I first had published in August 2011 telling you that the weekly Super Chart was showing that there existed a huge, potentially devastating Head and Shoulder Down formation. I have waited patiently for that formation to either begin to fulfill or to fail.
I am most grateful that the formation, a truly very powerful one for this type, has failed. As of the close last Friday (1-20-12) the Super Chart flashed a green BUY signal, eliminating the potential of a market down move that was truly of gigantic proportions.

So, what happened?

Well, if you recall in the article follow-up I posted on 10-3-11, I told you that there had developed beneath the Head and Shoulder formation an up-channel that added a possibly different twist to our original outlook. In that issue I attached the latest chart (9-30-11) so you could see it clearly. I am inserted that old chart here: [Read more...]

What Is A Capitalization Rate?

Often called a ‘cap rate’, it’s a lot less complicated than many are led to believe. Put in the simplest terms, if you buy a real estate investment property for cash, just divide the Net Operating Income (NOI) by the price you paid. The resulting percentage will be your capitalization rate.

NOTE: Don’t confuse cap rate if cash on cash return. That’s another post altogether.

The NOI is what’s left after all vacancies and operating costs. Do NOT count what’s known as ‘capital expenditures’ as operating costs. If you repair something, or spend money maintaining it, it’s an operating expense. If, however, you don’t repair the stove/oven in a unit, you replace it with a new one, that’s a capital expenditure. Capital expenditures are NOT operating expenses, and therefore CANNOT be taken in the year spent against that year’s income. They must be depreciated over time.

Anywho, back to NOI.

Gross Scheduled Income (GSI) — minus Vacancy and ‘credit’ losses — minus all Operating Expenses — = NOI.

If you have loan payments, you want NOI to be more than your annual payments (debt service). NOI minus debt service = Cash Flow (CF).

Soooooo . . . NOI/Price Paid = Capitalization Rate

If NOI is $10, and you paid $110 for the property — $10/$110 = 9.1% Cap Rate.

I’d love to talk with you. Gimme a call at 619 889-7100 if for no other reason than you’re a kind person, and I need a fix. Or, click on the Contact BawldGuy button up top and do your best Mark Twain impression. :) Have a good one.

Real Estate Investment 101 – Do Not Fall In Love With A Market

Since as far back as 2006 or so, people have asked me, sometimes tried to cajole me into advising them or even representing them in the acquisition of investment real estate in Las Vegas. The next time I say yes to one of those requests will be the first. I wish I understood the magnetic pull that market had on so many people. It’s done nothing but lead the nation in foreclosures and lose property value. Besides those two factors, it’s been a highly rewarding market to investors. :)

I’ve literally had clients leave me cuz I wouldn’t help ‘em invest there. Twice I’ve had those same clients come back to me for help. I’m pretty good at what I do, but a magic wand has never been part of my arsenal. They lost everything they bought in Vegas.

Why do I bring this up now? [Read more...]

Weekly Real Estate Investment Mortgage Interest Update

Happy Friday to my investor friends out there,

So far today, all is quiet on the western front.  Not a whole lot of activity going on up at the ‘Wall’.  My guess is there is a lot more talk about the Giants’ chances this Sunday than about stocks and bonds.  Some of you may know that I am a self-proclaimed cheesehead, and last Sunday was not a good day for me and all of Titletown, USA.  But there’s always next year, so on to the important stuff!

Hot off the press, the US Economy is back!   Er, maybe.  Again, the pessimist in me still says time will tell, and I advise you not to get too excited by the news that came out today, and neither will the seasoned investor.  The NAR (National Association of Realtors) proclaimed that December’s pace of existing home sales was up a full 5 percent over the prior month.  Also, the number of Americans applying for first-time unemployment benefits, declined by 50,000 during the week ending January 14th, which is the best performance since around April 2008.  I’m cautiously optimistic about this number, but remember, there are always ‘tainted’ numbers this time of year, due to the seasonal hiring from Thanksgiving through the Christmas holiday.  There’s still some  more numbers to be hashed out, but trust me the proof will be in the pudding at the end of the month when the next round of non-arms hits the tape. [Read more...]

Rules Of Thumb For Real Estate Investors – A Bad Idea

Ask anyone who’s dipped their toes in the real estate investment pool, and they’ll tell ya. There’re are rules of thumb for nearly everything. Many of ‘em are formulas. Can’t pay more than this much, based on that set formula. Even I haven’t seen ‘em all, but I’ll tell you from experience that they all work — ’til they don’t. When they don’t work, it’s usually what Dad used to call ‘an opportunity to learn’. My personal history with rules of thumb is mixed.

Serious people though, simply don’t rely on them for anything that matters more than the quality of their next cuppa coffee. Here’s my favorite example.

Buying income property based on (fill in number here) X gross scheduled rents. [Read more...]