My Friends at Firestone

I know. This is supposed to be a real estate blog about homes in Hattiesburg and throughout the ‘Burg, and it is! However, my 2009 Infiniti gets a lot of wear and tear trans-versing the often “not in such great shape” highways and byways of Lamar and Forrest Counties. So, I’m giving a “shout out” to Murray and Ryan, and the rest of the crew at MY Firestone store.  Located on Mayfair south of 98 and just behind the McDonalds, these highly skilled automobile technicians are  reputable, courteous and kind. Most of us are insecure when it comes to having our vehicles serviced. Frankly, no one wants to be taken advantage of. These guys and gals are trustworthy! You can depend on them to say what they’ll do, and do what they say; honestly!

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An Alternative to Paying Tax Today


A 1031 exchange is a fairly common transaction in real estate parlance. Quite simply, it is a way for people to delay (indefinitely) the payment of all or part of capital gains taxes to Uncle. It works for raw land equally well as it does for residential property. Interestingly enough, it wasn’t until 2007 that the State of MS conformed with the IRS code and the other states in America regarding 1031 exchanges. Mississippi lags behind the rest of the country in many areas, unfortunately.

The benefit of a 1031 exchange is that it allows the investor to defer the tax due from the sale into the replacement property. This allows more money to be reinvested. In the example shown, the investor has 27% more to invest now by deferring the tax into the future.

The property to be exchanged must be like-kind which means real estate for real estate. Rental property can be exchanged for other rental or investment property. Personal-use properties like a first or second home are not eligible for exchanges.

There are some critical dates that restrict the validity of the exchange. The investor in a rental home in Hattiesburg must identify the replacement property within 45 days of the sale of the relinquished property. The replacement property must be closed within 180 days of the sale of the relinquished property.

  • The replacement property must be equal to or greater in value, equity and debt than the one being relinquished.
  • All net proceeds must be used in acquiring the replacement property.

There are specific rules involved in constructing a valid tax-deferred exchange. There are three professionals that should be involved: a tax advisor, a real estate professional and a qualified intermediary who will assist in the acquisition and transfer of both the relinquished property and the replacement property. Important! Be sure to review IRS Publication 544.

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Credit Card Debt

Credit card debt in America is back to levels prior to the recession. The average credit card APR is just under 16% according to Weekly Credit Card Report. Homeowners have an advantage over renters when it comes to getting their arms around debt issues.

Basic money management suggests that higher rate debt be replaced with lower rate debt. Credit cards, personal cars, boats, motor vehicles and other personal property, typically have interest rates higher than that of real estate loans.

In case you thought your credit card debt was forgiven when you die in Mississippi, it’s not. Your estate still owes it.

Though residents of Southern states carry less credit-card debt, they rank high in accounts that are 30 days past due. The national average is 1.47% of the population.

Mississippi leads the nation with 2.35%, followed by Louisiana and Arkansas.

At the low end are Hawaii (1.12%) and Alaska (1.17%). That despite Hawaii and Alaska being among the most expensive places to live.

Borrowing against a person’s home usually provides the lowest rate of financing. Refinancing a home mortgage to take cash out to retire personal debt is one option. Another would be to secure a home equity or HELOC, home equity line of credit.

An alternative advantage of borrowing against one’s home in Hattiesburg is that the interest may be tax deductible unlike the interest on most personal debt. Qualified mortgage interest includes acquisition debt which can only be used to buy, build or improve a principal residence and up to $100,000 of home equity debt which can be used for any purpose.

Managing money is a critical life skill that people need to master. While the goal may be to become debt-free, paying the least amount of interest possible can be a good first step. Owning a home provides an asset that allows for options not available to tenants. Seek professional advice to determine your best course of action.

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Rental Homes in Hattiesburg are IDEAL

Rental homes in Hattiesburg are the IDEAL investment because they offer a higher rate of return than other investments without the volatility of the stock market. With certificates of deposit and bonds at less than 2%, people need an alternative investment that they understand and with a reasonable amount of control.

In this case, IDEAL is an acronym identifying the advantages of rental properties.

  • Income from the monthly rent contributes to paying the expenses and a return on the investment.
  • Depreciation is a non-cash deduction that shelters income for some investors.
  • Equity buildup occurs with amortized mortgages because each payment is composed of interest owed and principal reduction to retire the loan by the end of the term.
  • Appreciation is achieved as the value of the property goes up.
  • Leverage can increase the return on investment by using borrowed funds to control a larger asset.

These individual benefits working together make rental real estate a good investment for today’s economy. Increased rents, high rental demand, good values and low, non-owner occupied mortgage rates contribute to positive cash flows and very favorable rates of return.

In case you landed on this blog post in the process of looking for a home to rent, here is a link to the All Star Team Home Page where we have our most recent rental properties listed.


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Save the Cost of Mortgage Insurance on a Home in Hattiesburg

During the banking crisis in the Great Recession, certain types of mortgages were unavailable that are once again being offered. Fortunately, the 80-10-10 mortgage is one of those making a reappearance and it can save borrowers a considerable amount of money.

The objective of an 80-10-10 mortgage is to avoid the expense of mortgage insurance for buyers wanting a 90% loan. A buyer can obtain an 80% first mortgage and a 10% second mortgage with a 10% down payment and not be required to have private mortgage insurance.

For example, a buyer could put $30,000 down on a home in Hattiesburg priced at $300,000 and get an 80% first mortgage without mortgage insurance. The borrower could get a second mortgage, either through the same lender or a third party.

In the example, the 80-10-10 would save a buyer $193.71 per month which can be a considerable amount of money over a ten-year period. The interest rate on the second loan will be higher than the first because there is more risk.

Helping buyers make better choices is a valuable service real estate professionals can provide. Having the right tools and information can make the decisions easier to understand. Using an 80-10-10 calculator, you can see what the savings might be for your situation.

The best information regarding your mortgage comes from a knowledgeable and competent lender. I only work with the best lenders in Hattiesburg and will gladly refer you to someone who “fits’ your personality and needs. Call me and lets discuss who the right fit for you might be!

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