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Ask the expert: What is a cap rate?

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You might have heard the term “cap rate” among those who invest or aspire to invest in real estate. Short for “capitalization rate,” the concept is key if you’re going to pursue a career in rentals and/or commercial properties.

The cap rate is a method for estimating the potential return on a property and assumes it’s paid for with cash. The formula includes dividing the Net Operating Income (NOI) by purchase price, or value; NOI is the gross income minus expenses except for debt service.

Example: A property costs $100,000 and generates $10,000 in income. NOI/Value means 10k/100k = 10% cap rate.

Debt service isn’t included because cap rate makes all things equal. The investor who will finance a property knows that it starts at a 10 percent cap rate and then does additional figuring to arrive at his or her actual return on investment (ROI).

So what’s a good cap rate? That’s up to you. Similar to comps in single-family properties, it’s important to know the typical cap rate in your area. So a “10 cap” might be the norm where you’re from, while a “7 cap” is acceptable elsewhere. And every investor has their individual threshold as well.

It gets more complex, naturally. Investors also need to consider things like depreciation and capital expenses, and evaluate whether the NOI is accurate. There are also other ways to calculate your return. But for a quick analysis and a way to help determine optimal purchase price, cap rate is the way to go.

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Warren County Real Estate Market Report – August 2019

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Huge shift in NEW PENDING sales in 2019. Could it be low interest rates?

Watch this video for a quick summary of Warren County real estate for August 2019 and a brief visual update of the new splash pad construction across from Fantasyland Playground. Video footage will show the progress including some additional work on the creek around the small overpass bridge near Bing Crosby Stadium. The work appears to be helping to protect the creek from future flooding and has already helped the flow of water in this area.

In general summary:

  1. New Listings are down for the first time in months. -5.66%
  2. New Pendings are the most remarkable change this month. 62.50% Because this change is so drastic, it has caused me to dig a little deeper. After reaching out to a few other business professionals including Michelle Napier (CBM Mortgage) and Jennifer Compton (Blue Ink Original Title and Settlement), we think the low interest rates that are available to purchasers right now must be playing a role in the sales jump. Jennifer commented, “The low interest rates have had us extremely busy the past few weeks closing refi’s.” She continued, “I bet these low rates are playing a big part in the percentage change in pending sales.”
  3. 3. Average Days on Market 73.

*If you would like a copy of this report emailed to you, please send request to jenaveryrealtor@gmail.com

Resource: 2019 Market Stats by ShowingTime
MRIS: Statistics calculated September 2019

Jennifer Avery, REALTOR®
“Your Happy Home Expert!”
BPOR, SRS, CNE, E-Pro Certified | Licensed in VA
jenaveryrealtor@gmail.com | 540-683-0790
CRUM REALTY, INC | 318 S Loudoun St, Winchester VA 22601 | 540-662-0400

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NextHome Realty Select announces Curtis Siever as a NextHome Certified Instructor

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Every year, NextHome hosts a Franchise Owner Summit that brings together franchise owners and brokers from across the country with corporate and industry leaders. The event provides attendees with a first glance at new technology and products, allows them to network with other NextHome members, and to share strategies on elevating their business.

NextHome rolled out a brand new program at last week’s Franchise Owner Summit in Denver. Brokers and owners had the opportunity to register and complete our inaugural Train the Trainer course, a NextHome accreditation program.

Completing the course, in addition to meeting other prerequisites, has resulted in 35 franchise owners becoming NextHome Certified Instructors. Their office locations across the country are now National Association of REALTORS® approved sites where our NextHomies can teach the NAR Accredited Buyers Representative (ABR) course.

Given that over 50 percent of all agents inquire about the ABR designation, this is a game-changing opportunity for the first class of NextHome Certified Instructors to host trainings in their office locations and connect with local real estate professionals.

NextHome Realty Select would like to recognize Broker/Owner Curtis Siever, who completed the Train the Trainer course in Denver and is now ready to spread his knowledge with agents in his sphere.

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5 questions to ask when choosing a neighborhood

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Before you start shopping for a new home, it’s a good idea to consider what neighborhood you want to live in. Here are five questions to ask yourself when considering location.

1. Are the schools good? If you have young kids, this is a top priority. Do some digging online and consider visiting the more promising schools in person.

2. Is it safe? Ensure that the neighborhood doesn’t have issues with crime. You can often find information about crime rates on the web. Another option is to make inquiries with the local police department.

3. Where can I go by foot? Consider what shops, services or amenities are within walking distance. This includes grocery stores, cafes, restaurants, daycares, clinics, parks and gyms.

4. What will commuting be like? Take into account how close the neighborhood is to your workplace and your children’s school. If you intend to take public transportation, see how accessible and convenient it is.

5. Do I like the atmosphere? To better understand the overall vibe of the neighborhood, the best thing to do is scope it out in person. Walk the streets, chat with the locals and visit the area’s shops and restaurants.

In addition to asking yourself these five questions, it’s worth discovering what trends are emerging with respect to home values in the neighborhood. This will indicate whether buying in the area will prove a good investment if you choose to sell the property down the road.

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Warren County Market Report – July 2019

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Welcome back to school, Warren County!

Watch this video for a quick summary of Warren County real estate for July 2019. Charts demonstrate the changes in the market, so be sure to click play!

In general summary:

  1. New Listings are up 15%.  This is a significant increase over last year.  Good news is that we are selling what we list and hopefully will continue to do so.  Closed Sales are up 9%.
  2. Average Median Sold $241,000.
  3. Average Days on Market 76.

*If you would like a copy of this report emailed to you, please send request to jenaveryrealtor@gmail.com.

Resource: 2019 Market Stats by ShowingTime
MRIS: Statistics calculated July 2019

Jennifer Avery, Realtor
“Your Happy Home Expert”

BPOR, SRS, CNE, E-Pro Certified | Licensed in VA
jenaveryrealtor@gmail.com | 540-683-0790
CRUM REALTY, INC | 318 S Loudoun St., Winchester, VA 22601 | 540-662-0400

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Fixed versus variable rate mortgages: what you need to know

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Fixed or variable rate? It’s a question every homebuyer is faced with when obtaining a mortgage. If you’re unsure about which option is best for you, this primer should help.

What are fixed and variable rate mortgages?
Fixed rate mortgages are straightforward and involve paying the same monetary installments and interest rate for the duration of your term.

Variable rate mortgages, on the other hand, are a little more complicated. They’re tied to your bank’s prime rate, which may change over time.

Your bank’s prime rate is based on the target federal funds rate or the rate banks charge each other when they lend funds overnight. A quoted prime rate is typically the average of the prime rates charged by the major banks.

The target federal funds rate can increase or decrease several times per year. For example, in 2018, this rate changed four times. It rose by 0.25 percent each time, climbing from 1.25 percent in March to 2.50 percent in December.

Should you choose a fixed or variable rate mortgage?
Variable rate mortgages typically have a lower interest rate than fixed rate mortgages and historically, they’ve saved people money. However, fixed rate mortgages have the benefit of offering certainty and predictability. They make budgeting easier and take away any trepidation around potential interest rate hikes.

To better determine which mortgage type will cost you the least, see what leading economists are forecasting for the target federal funds rate. Just keep in mind that no one can reliably predict future fluctuations.

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Right of first refusal: what it is and why it’s useful

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A right of first refusal (ROFR) in a real estate contract is a clause that gives an individual first dibs on buying a particular property. If someone other than the specified individual makes an offer, they’re notified by the seller and given the opportunity to match the bid.

Who can arrange an ROFR?
An ROFR clause can be arranged between a tenant and a landlord, between family members or between neighbors. An ROFR can also be offered to a tenant via a homeowners’ association or condo board.

Advantages for tenants
This type of agreement can benefit all parties involved. If, for instance, a tenant is interested in eventually buying the home they’re renting, an ROFR clause gives them the assurance that so long as they have the funds, they’ll be first in line.

Advantages for landlords
On the landlord’s end, he or she maintains the right to sell to the highest bidder and always has at least one interested buyer. As an added bonus, it’s likely to be someone who can purchase the place with little hassle.

If you sign a right of first refusal agreement, make sure that the specifics suit you. Look at details such as the deadline to match an offer and the expiry date of the clause. Additionally, it’s a good idea to consult with a lawyer before entering into any legal agreement.

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Upcoming Events

Sep
16
Mon
7:00 pm Faith and Science Presentations ... @ Warren County Community Center
Faith and Science Presentations ... @ Warren County Community Center
Sep 16 @ 7:00 pm – 9:00 pm
Faith and Science Presentations at Community Center @ Warren County Community Center
The first of a 5-part series of video presentations and discussion concerning faith and science will begin Monday, September 16th, 7:00 PM at the Warren County Community Center, 538 Villa Ave. (off W. 6th St.),[...]
Sep
17
Tue
9:00 am First Baptist Church Golf Tourna... @ Shenandoah Valley Golf Club
First Baptist Church Golf Tourna... @ Shenandoah Valley Golf Club
Sep 17 @ 9:00 am – 12:00 pm
First Baptist Church Golf Tournament @ Shenandoah Valley Golf Club
Tuesday, September 17th 9:00 a.m. registration 10:00 a.m. shotgun start
1:30 pm Watercolor Landscapes @ Art in the Valley
Watercolor Landscapes @ Art in the Valley
Sep 17 @ 1:30 pm – 4:30 pm
Watercolor Landscapes @ Art in the Valley
This four week course with instructor Elena Maza will focus on learning basic skills to create watercolor landscape paintings: basic composition and use of color and value to create a sense of depth and distance.[...]
Sep
18
Wed
10:30 am Children’s Art Class “Back to Sc... @ Art in the Valley
Children’s Art Class “Back to Sc... @ Art in the Valley
Sep 18 @ 10:30 am – 12:00 pm
Children's Art Class "Back to School" Session @ Art in the Valley
We are offering classes for children ages 7-12 who would enjoy expressing themselves through art. The students will expand their creative side with drawing, painting and constructing, using various mediums such as acrylic, pastels, watercolor[...]
1:30 pm Botanical Drawing @ Art in the Valley
Botanical Drawing @ Art in the Valley
Sep 18 @ 1:30 pm – 4:30 pm
Botanical Drawing @ Art in the Valley
Learn and practice the art of botanical drawing in pencil with local artist and instructor Elena Maza. This four session course will focus on learning basic drawing skills as applied to botanicals: basic line drawings[...]
Sep
19
Thu
12:30 pm Watercolor Painting Essentials @ Art in the Valley
Watercolor Painting Essentials @ Art in the Valley
Sep 19 @ 12:30 pm – 3:00 pm
Watercolor Painting Essentials @ Art in the Valley
This class will teach you the necessities to create your own watercolor paintings. Setup of materials and proper studio techniques will be shown. Indispensable ideas about drawing and color mixing as well as paint application[...]
4:00 pm Sketching with Pencils @ Art in the Valley
Sketching with Pencils @ Art in the Valley
Sep 19 @ 4:00 pm – 6:30 pm
Sketching with Pencils @ Art in the Valley
Pencil sketching is a great way to capture a visual record of your experiences and ideas. This class will give students a strong foundation for making pencil images for a journal or sketchbook. Principles for[...]
5:30 pm WomanGathering @ Middle of Main
WomanGathering @ Middle of Main
Sep 19 @ 5:30 pm – 7:00 pm
WomanGathering @ Middle of Main
Guest Speaker: Debbie Copeland, Author FB LIVE @ 6 PM with hostess Eka Kapiotis and videographer Jen Avery THIS IS A FREE EVENT – Please join us and other women looking to be inspired! WomanGatherings[...]
Sep
20
Fri
9:00 am Annual FRUMC Book Sale @ Front Royal United Methodist Church
Annual FRUMC Book Sale @ Front Royal United Methodist Church
Sep 20 @ 9:00 am – 4:00 pm
Annual FRUMC Book Sale @ Front Royal United Methodist Church
At the Front Royal United Methodist Church in the Fellowship Hall. Sept 20, 9am – 4pm Sept 21, 9am – 1pm Books for everyone available: religion, biographies, history, fiction, food, and children’s books. All proceeds[...]
10:00 am The Fundamentals of Oil Painting @ Art in the Valley
The Fundamentals of Oil Painting @ Art in the Valley
Sep 20 @ 10:00 am – 12:30 pm
The Fundamentals of Oil Painting @ Art in the Valley
This class will focus on proven approaches for successful oil paintings. Subject matter will be the student’s choice. No previous painting experience with oils necessary. The class will introduce students to fundamental concepts of color[...]