How to Weigh the Rewards of Home Ownership

Posted by Anonymous , 9/4/2007 Tags:WeighRewardsHomeOwnership
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How to Weigh the Rewards of Home Ownership

Introduction

Buying a home is both a business decision and a lifestyle choice. More importantly, it's an investment and you must consider the risks and rewards.

Instructions

Difficulty: Challenging

Steps

1

Step One

Invest with confidence. For the most part, real estate historically has a track record as an excellent investment. A major benefit of home ownership is that property taxes and mortgage interest are deductible at tax time.
2

Step Two

Build equity. As you continue to pay on your mortgage, more of the payment will be applied to the principal balance. Typically, the value of your home appreciates at the same time. This also builds equity.
3

Step Three

Come up with a sizable down payment for your first home. You run the risk of losing that investment if for some reason you are forced to sell the house at a loss.
4

Step Four

Use the equity in your home by refinancing for a larger loan or getting a home equity loan. Check with your accountant for the last word on what is taxed.
5

Step Five

Know that zoning changes can affect your property. A huge rental housing development going up next door could effect your investment value.
6

Step Six

Be aware that economic conditions can change. Major changes in the area may flood the market with too many homes for sale.
7

Step Seven

Hedge against inflation with real estate. Real estate tends to appreciate and often outpaces inflation rates in times of growth.

Tips & Warnings

  • Using equity is one way to avoid the illiquidity of real estate. These funds are not taxable and in many cases are tax deductible.
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