Winston Salem - Basis Points Meaning

 

With the volatility of interest rates, buyers are looking at potential interest rates when they are thinking of purchasing a new home.    When considering when to buy with regard to interest rates, lenders and financial people will use the term basis points to help predict where interest rates may be.  For example, you may be told that if your timeline is 3 months they may advise to consider potential rates using basis points range.  For these planning purposes you need to understand basis points.   Below is a simplified explanation.   

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A basis point (abbreviated as bps and pronounced "bips") is a unit of measurement equal to one-hundredth of a percentage point, or 0.01%. [1]

📊 Understanding the Math

1 basis point = 0.01%
25 basis points = 0.25% (or a quarter of a percent)
50 basis points = 0.50% (or half a percent)
100 basis points = 1.00% (a full percentage point) [1, 2]

💡 Why Lenders and Economists Use Them

Financial experts use basis points to prevent confusion when talking about interest rate changes. [1]

If a loan's interest rate is 4% and it goes up by "1%", people might wonder if the rate is now 5% (an absolute increase of one percentage point) or 4.04% (a relative increase of 1% on top of the original rate). Saying the rate increased by 100 basis points makes it crystal clear that the new rate is exactly 5%. [1]

📌 Practical Example

Imagine you are shopping for a mortgage and the quoted interest rate shifts from 6.00% to 6.25%: [1]

The rate increased by 25 basis points.
On a $300,000, 30-year fixed loan, that tiny quarter-percent bump adds roughly $50 extra to your monthly payment, totaling around $18,000 in extra interest over the life of the loan. [1]

Winston Salem - Investor Intel | Rental Investors

 

Information courtesy of The Close

Rental investors may need to get more comfortable offering tenants a deal. In August, 43.5% of rental listings across the 50 largest metros offered some type of concession, up from 40.4% a year earlier, according to Realtor.com. The competition is particularly intense in markets with lots of available rentals. More than two-thirds of listings offered concessions in Denver, Austin, Las Vegas, Nashville, and San Antonio, with Denver nearing 72%.

For investors, concessions can be less expensive than letting a property sit vacant, but choosing the right incentive matters. Landlords are using waived or reduced fees, upgraded amenities, free rent, and even moving assistance to compete for tenants. Smaller investors may not be able to match an apartment complex offering several months free, so I’d look for incentives that make a listing more attractive without permanently lowering its economics. A one-time rent credit, reduced application fees, or a useful property upgrade could be easier to absorb than cutting the monthly rent for the entire lease. More importantly, investors purchasing rentals in these markets should account for concessions before they buy. If competing properties regularly offer a free month, underwriting a deal at full asking rent may overstate what the property can realistically earn. Investors should research local vacancy rates, competing listings, new apartment supply, and current incentives, then calculate whether the property still works after potential concessions and vacancy. Some protections aren’t worth sacrificing: security deposits remain an important safeguard against damage and nonpayment, and I don't recommend sacrificing them. What investors are prioritizing now:

Competitive concessions: Investors should know what nearby landlords are offering before deciding whether a free month, fee reduction, rent credit, or upgrade will make their property stand out. Effective rent: A $2,000 asking rent with one month free doesn’t produce the same first-year revenue as collecting $2,000 for all 12 months. Investors should underwrite what they’ll actually collect. Cost of vacancy: Sometimes a carefully chosen concession costs less than leaving a property empty while waiting for a tenant willing to pay full price.

Your Move This Week: 🎁 Check competing rental concessions. 🧮 Calculate effective rent. 🔐 Evaluate your landlord protections.