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Question: I have been renting in a major metro area. Last year I decided to research buying a home. I was utterly shocked at the cost of housing. For example, a drafty 5-room starter home built in 1920, in need of work, located well outside of the city, goes for a quarter million. The house that I grew up in is worth well over 300k (my parents paid 39k for it in 1977) and anything close to the city (within an hour) -- forget it.

I am at a loss as to what I should do. Should I buy now and assume that the market will continue to appreciate at an alarming rate, or should I wait and see if there will be a correction in pricing?

Answer: When looking at real estate appreciation it helps to have context. For instance, when your parents bought in 1977 what was the average wage? Was it higher or lower than today? What was the price of a car?

Part of the price increase you are seeing results from inflation -- dollars that buy less over time so it takes more and more dollars to buy a similar item. But, as well, some of the real estate housing increase in many communities exceeds the rate of inflation. In this case, owners are seeing an increase in buying power and real wealth.

No one knows what will happen to real estate prices in the future. But look at your community. Is the population growing? The workforce increasing? Is there a lot of close-in land to develop?

Question: How does a recent college grad get financing to purchase a home or townhouse. I have great credit, make $53K a year but live in a high-cost metro area.

I'm going to have to pay more than $350,000 for a house that I like. Everyone has been telling me there is no way for me to get approved for a loan until I have at least $40,000 in savings. I have no money saved up right now, but plan to have almost $10,000 saved up in a year. I would like to get a three- or four-bedroom and rent the other rooms to college friends. Can I open my own company and get the loan as an investment?

Answer: Without a down payment you would need to finance $350,000 -- at 6 percent over 30 years that would be $2,098.43 a month for principal and interest. Then you would also have costs for taxes, insurance, repairs, utilities, etc.

If you had roommates the cost would quickly become more affordable.

Here are some steps you can take:

  • Sit down with lenders to see what financing is available to you -- there are loan programs which permit income from borders to count for qualification purposes.
  • Consider a less-expensive property that you can fix-up over time.
  • Buy a duplex or triplex property -- live in one unit and rent the rest.
  • Speak with a tax professional to see how a home purchase would change your personal finances. Rent from others is income, but you will have write-offs for mortgage interest, property taxes, depreciation, etc. You are likely to have far-smaller tax bills than you now face.

Question: We bought our home 29 years ago. It has an annual ground rent of $180. Our home will be paid in full in 11 months and we will most likely be relocating in about another 3-4 years. Should we purchase the ground ($3,000)?

Answer: You are paying for the improvements on a property owned by someone else. How long can the ground rent continue? Can the rental rate be changed or is it $180 a month perpetually?

The purchase price is equal to 17 monthly payments. After 17 months your living costs will effectively decline by $180.

Please have a local attorney or legal clinic immediately review your paperwork -- if you are renting ground and the lease term ends it could be that the property and all improvements will automatically revert back to the landowner, just as with an apartment rental. To protect your investment in the house you may have no reasonable choice other than to buy the property.

Question: My sister and I inherited a cabin in Canada. One of us wants to sell (me) and the other doesn't -- but she doesn't have the money or credit to buy me out. What steps do I take to force a sale?

Answer: You need to see this matter as both a real estate issue and a family concern. Whether you sell or not, your sister is your sister and will be for a very long time. If you force her to sell then future family events may be, er, awkward. There may also be other issues in years to come where your sister's cooperation would be valued.

You first need to see how title to the property is held -- this is a job for a Canadian attorney. In the U.S., a suit for "partition" to force a sale might then be suggested.

Question: I recently was discharged in a Chapter 7 bankruptcy, sold my home and now want to rent an apartment. I have been turned down five times. Each time I sat down with the leasing agent or owner and explained in detail my situation.

Here are the things I bring to the forefront when meeting with a prospective landlord: 1. Better risk than most as I have no debt -- can't file BK for at least 6 years. 2. Have never been evicted. 3. Great job for the last 4 years clearly indicating I make more than enough to cover the rent. 4. Clean, quiet, honest and respectful. 5. Willing to pay 3 months advance rent in addition to the traditional deposit. What can I do to get a rental?

Answer: Most probably landlords are troubled by that word recently. It's good that you have a job -- but you had the job and still entered into a bankruptcy. It's good that you can't go bankrupt for several years -- but that does not mean the rent will be paid. A three-month deposit is a huge plus -- but in some jurisdictions landlords may be prohibited from collecting more than a month or two.

Why did you go bankrupt? Landlords will tend to be more understanding if the BK was for reasons beyond your control -- say huge hospital bills. But if the reason was poor spending habits or big charge-card debt, then the picture is different.

Landlords generally want a year or two of good credit after a bankruptcy. The best approach may be to sub-let space and build up your credit status over time. Perhaps look for a "granny flat" in a private home -- effectively a separate apartment.

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