My Hattiesburg

3 Steps in Deciding to Buy or Rent

Step 1: How long do you plan on staying in a particular area?
If you have a job in your home town then you probably would do good by owning your home. However, if you are in town for a limited number of years then you probably shouldn’t buy a home. It is really self explanatory.

Step 2: Your Financial Situation
Several factors come into play here such as your income, credit card debt, current living expenses (car, groceries, medical bills, ect..) and savings. A general rule of thumb is that the monthly cost of maintaining your home (mortgage payment, insurance payment, and tax payment) should not exceed 28% of you gross monthly income. If the maintaining cost exceeds 28% of your monthly income then you would be better off renting until you can get your monthly income up some.

Step 3: Tax Benefits
The federal government allows homeowners certain income tax advantages. Homeowners may deduct from their income some or all of the mortgage interest paid, as well as real estate taxes and certain other expenses that were involved with purchasing the house. Also married taxpayers who file jointly can exclude up to $500,000 from capital gains tax for profits on the sale of a principal residence and taxpayers who file singly are entitled to a $250,000 exclusion. Renting a home does not provide any tax benifits that I am aware of. However, you should always consult a certified tax professional when dealing with such matters.

Factors of the Market

Before someone decides to buy or sale a home it would be advantageous to have knowledge on how the housing market works. In this post I will be discussing the economical characteristics of real estate. So lets begin.

Economical Characteristic #1: Scarcity
We may not often think that land itself is a rare commodity, but only 25% of the earth’s surface is dry land. The supply of land is not limitless; so the amount of land in a certain area is considered to be finite. Generally, the more scarce land is in a region the more valuable it is. So you see how scarcity plays a factor in how people set prices for real estate.

Economical Characteristic #2: Improvements
Improvement in real estate terms is defined as any artificial thing attached to the land. Building improvements on one parcel of land may effect the price of the land around that parcel. For example, building a new shopping center in a area may cause the price of the real estate in that area to go up but on the other hand building a nuclear power plant in the same area may make the price of real estate to decline.

Economical Characteristic #3: Permanence of Investment
The capital and labor used to build an improvement represents some degree of fixed investment. Whether the improvements are building a new structure or adding drainage, electricity, water, and sewer these improvements are considered long term investments and maybe reflected the price of the real estate.

Economical Characteristic #4: Location
You may think of location in terms of only geography. However, the type of location we are interested in is sometimes refered to as Area of Preference. Area of preference refers to the preferences for one area over another. This preference may be based on such factors as history, reputation, convenience, scenic beauty, and simple geography. It is the unique qualities in preference that make some similar properties retain very different prices. Location is the most important of the 4 Economical Characteristics of real estate.

So before you buy or sale a home you may want to analyze the area you live in using these four Economical Characteristics.

Getting Started

In the next couple of days I will be doing a series of posts on buying a house, selling a house, and real estate investment. However, for today I just want to give you a glimpse on how I will be posting. For this upcoming series I will basically act like you know nothing about real estate and give you what I hope is a wealth of knowledge about real estate. The posts that follow this series will be more freely written with topics ranging from home appreciation to Mississippi State Real Estate Tax Law. Hope to see you tomorrow