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Purchase Basics

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Real Estate
Property Choice

The purchase of real estate can be one of the most valuable investments a person can make. Whether its your primary residence or an investment property, there are a few basic principles to follow when choosing a property to purchase. There is more than just price to factor in when purchasing real estate, and looking at property as an investment may help to determine those factors. The following example may be helpful to demonstrate such factors. Two houses are for sale where house A is in an area of growing city that is under development with a sale price of $100,000. House B is in a neighboring city that has grown to capacity with a sale price of $85,000. House A has 2 bedrooms 2 bathrooms and a total property area of 2500 square feet. House B has 3 bedrooms 2 bathrooms but a total property area of 1500 square feet. Even though house B is cheaper and has more rooms, one should look at the underlying value rather than just the price alone. Try to see what others do not see. The fact that house B is an city that has reached capacity and house A is in a developing city will likely lead to the value of house A increasing as the development in the area completes. Even though house B is $15,000 cheaper, there is less square footage total leaving not much area to grow and/or create improvements. However, house A has the extra 1000 square feet to work with leaving room for an addition of another bedroom that will not only create more space, but will increase the value of the home overall. Another thing to factor in is a possible cause for a lower price of house B that is related to a trend of people moving out of the area where house B is located resulting in tougher time selling the property and leading to a lower value and asked for price. Development is generally a good indicator for value to an area, but development does not necessarily mean that a house is particularly a good investment in that area. The trend of people living in the area sometimes is an indicator for property value as well. For example, if house A is in a developing college community, many times there exists a trend of young professionals that have just graduated who inhabit the area which may be an indicator for an increased value to the property that is set to last.

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Property Purchase
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Loan Choice

The basics of purchasing real estate are not limited to choosing the right property. Depending on your goals and future for your acquired property, the mortgage loan program you choose to finance this real estate may be just as important as choosing the property itself. If you are buying the property as your primary residence, choosing a mortgage loan that is affordable each month while maintaining payment on all other monthly expenses should be a goal to keep in mind. Depending on your credit situation and the chosen property, certain interest only mortgage loans can be refinanced in a couple of years to reduce all credit debt into a complete tax deduction. If you are purchasing property for investment purposes, sometimes interest only programs may allow you to spread your funds across multiple property purchases rather that just one real estate investment to earn income from.

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