Rep. Stewart B. McKinney (R-Conn.) was one of hundreds of real estate investors who plunged into Washington's booming market during the mid-1970s with fond expectations of making a fortune.

During his four terms in office here, he has purchased 19 properties for $612,000 and sold them for $1,737,000. The difference of $1.1 million should have left him with a tidy profit.

Instead, McKinney insists he has lost money, and he says he decided to bow out of the real estate business. With characteristic bluntness, he sums up what he calls his financial "disaster" this way: "One of the reasons I lost money on this thing is because I am in this frigging job . . . Being in Congress costs some money, which is one of the stupid things about the whole damned job."

As the ranking Republican on the House District of Columbia Committee and a member of the House Banking, Finance and Urban Affairs Committee, the 48-year-old congressman steered a politically risky course - against the advice of aides and despite attacks from opponents.

He chanced what might appear conflicts of interest, ran much of the real estate operation out of his congressional office and reported little of it on financial disclosure statements.

McKinney wanted, he said, to make his own money, independent of his wife's wealth. He chose to try in real estate, he said, because it was his "hobby" and his "joy". If he had not worried as much as he said he did about political proprieties, he believes he would probably be as rich today as he had intended.

McKinney set up his operation with the help of $160,000 in personal loans from Riggs National Bank, where he often borrowed at the prime interest rate normally reserved for the bank's most trusted corporate customers. McKinney was so favored, bank officials said, because his wife, Lucie Cunningham McKinney, pledged more than $200,000 worth of securities as collateral.

Most developers, according to industry sources, borrow at about 2 percent above the prime rate. The lower rates have enabled McKinney to save about $10,000 in interest payments - as much as two months late on 90-day lending periods. But Riggs officials said they lost no money due to McKinney's tardiness.

"If you knew me better, you'd know I'm sloppy," McKinney told a reporter, "I don't even know what the amounts of the [loan] notes are. . .

McKinney developed his appetite for Washington real estate toward the end of his first congressional term. In 1972 he bought four new town houses in the 1700 block of Corcoran Street for $210,600 and sold them within two years for $273,000, or $62,400 more than their purchase price.

Eager for a bigger challenge, in 1975 McKinney bought 12 abandoned town houses in the 1400 block of Corcoran Street.

"I have this bug that you can fix up the city and Corcoran Street was the greatest street to do it on," McKinney said. ". . . It was a deserted, debauched, falling apart mess, burned out, the biggest drug-passing street . . . (with) rape, shooting, murder . . . a place where everyone went to do everything they shouldn't do."

It was a time when many other developers were having trouble with financing, particularly in the neighborhoods adjoining 14th Street NW along the 1968 riot corridor.

"From a banking viewpoint, that was a very iffy area," said William J. Trittipoe, a developer who sold McKinney nine of the 12 Corcoran Street houses, Trittipoe said he had purchased them several years before the riots and would have liked to rehabilitate them himself, "but I couldn't get the money."

Without the $160,000 in financing from Riggs, McKinney said, his big Corcoran Street project would not have been possible. "That's the only way I did it.I bought them (the 12 houses) with that money."

So he pressed forward in the spring of 1975 against the advice of his administrative assistant, Joseph McGee. "We had a big fight over it," McGee said, "and he [McKinney] said, 'I did this before I was in Congress and I'm going to do it now. . .'"

McKinney said his potential million-dollar profit was eaten up by restoration expenses, and he was left with losses that he began deducting from his 1977 income taxes.

"It just proves that I was an absolute jerk," McKinney said recently."You can't do it the way I did it."

From the moment he entered the Washington real estate market, McKinney in public disclosure statements revealed little of what he was doing. Between 1973 and 1977, in documents filed with the House Committee on Standards of Official Conduct, McKinney mentioned only four of the 14 houses he sold. The 10 undisclosed sales totaled $708,500.

"Nothing . . . has ever been f--ing concealed," McKinney said. In each case, he said, he was not required to disclose the sale according to his own interpretation of House rules, his accountant's interpretation, or because he lost money on the deal.

"Have you ever read the rules for those [disclosure statements]?" he asked. "It's nothing, it's bull. . . , you don't have to do anything, you can . . . throw them in the safe for all they matter."

Before 1977, House rules required that members report "any capital gain from a single source exceeding $5,000 other than from a sale of a residence occupied by the person reporting [as reportable to the Internal Revenue Service]."

On two undisclosed sales made in 1973, McKinney said, he "absolutely" made profits, about $10,000 on one house and $20,000 on the other. One of them, McKinney said, was his residence 526 Sixth St. SE, but the other sale appears to have been one in which disclosure was required.

Asked why neither of the sales was reported, McKinney said, "I don't know . . . I just let my accountant determine what was suitable. That form was so loose, it was a nothing reporting system."

McKinney reported two of the five sales actually made during 1976 because, he said, he lost money on three of them. But McKinney reported no such losses that year to the Internal Revenue Service. Instead he recorded a $112,179 capital gain from the sale of "five town houses for investment."

A loophole in 1977 House reporting rules allowed McKinney to sell five more houses, without disclosing the sales, for $372,000. The loophole was the result of a requirement that only income for the last quarter of the calendar year be reported. The last of McKinney's five sales that year was recorded on Sept. 30, one day before the reporting period began.

"There are a hell of a lot of congressmen and a hell of a lot of senators who own a hell of a lot more property than I do and make a hell of a lot more money," McKinney said. "I've been so damned open about all this . . ."

As McKinney's real estate business expanded, he acknowledges, records of his transactions, copies of deeds, purchase contracts, closing statements and photographs of the buildings began to accumulate in his congressional office. An architect's rendering of the Corcoran Street project still hangs on his wall. And, during an interview concerning his projects. McKinney reached for supporting files in a cabinet near his desk.

For at least 16 months between May 1975 and August 1976, McKinney's public-salaried office manager, Lynn Lehrman, was in charge of those records before McKinney started paying her an additional $25 a week out of his own pocket, he said, "to haul the files back and forth every night" so she could work on them.

Deeds recorded with the District often carried the notation: "Mail to: Cong. Stewart B. McKinney, attn: Lynn, 106 Cannon House Office Building."

It was not until August 1977 - more than two years after McKinney launched the development along the 1400 block of Corcoran Street - that he hired a private accountant to take over responsbility for his mounting real estate records.

McKinney insists, however, that "there has never been a Corcoran Street business operated out of this damned office, unless you want to consider a telephone call once in a while." Then he said, "It's really been run out of my back pocket, if you really want to know."

One of McKinney's earlier acquisitions in Washington was a ramshackle warehouse at 11. Seventh St. NE, for which he paid $40,000 in 1973. After major remodeling he turned it into his home and sold it last December for $307,500.

With two more lots on Corcoran Street and an alley residence off East Capitol Street, McKinney ended his seven years of acquisitions by buying a $127,000 wood-frame town house at 526 Sixth Street SE, where he now lives.

McKinney said he originally conceived of his various real estate projects as solid investments, not "speculation" at all. "Bull - speculating. I was making some money, I hoped. I could stand to make some money. My wife's got it all."

In the shadow of his wife's inheritance, McKinney said, he was competing for independent means. But as he told it recently, the biggest obstacle to that quest has been the office to which he was elected by the constitutents of his district around Bridgeport, Conn.

A congressman's base salary is $57,500 a year. But with tax, travel, medical and other fringe benefits, the compensation figure increases by as much as a third, according to congressional studies.

As a member of the banking committee, McKinney said he resolved at the outset of his real estate ventures that all of his borrowing would be fully backed by collateral to avoid any appearance of preferential treatment.

But that self-imposed restriction proved his downfall on the big Corcoran Street project, McKinney said. Even with his wife's wealth behind him, he couldn't borrow enough.

"I can't collateralize a million dollars," McKinney said. "Jesus, I mean she [Lucie C. McKinney] may have two million bucks, but as you'll note it's pretty well shtonked on [tied up] now, and she's hopping around Virginia buying brood mares - God knows what's going to happen next."

Since he could not obtain enough cash to restore all 12 houses at once and hold them for the best market prices, McKinney said, "I had to do two at a time and and then sell them . . . and no one [initially] was going to live down there."

Because some of the houses had to be virtually rebuilt the combination of inflation and high restoration costs dealth McKinney a serious financial blow, he said.

Indeed, after he reported a $112,179 capital gain on his 1976 income tax return for the sale of five houses on Corcoran Street, McKinney's 1977 and 1978 returns show losses of $24,557 and $145,037 directly associated with the project.

Even now, McKinney is not exactly certain when or how he will pay off the $130,000 principal remaining on the Riggs loans. In any case, he is not being asked to pay if off. "Why turn down a good loan that is collateralized and earning money?" asks Melvin L. Chrisman, Riggs' senior vice president and cashier.

Over his four terms, McKinney has endeared himself to D.C. officials as a champion of home rule. Usually described as one of the millionaires of the House, McKinney insists that he is not. "My wife is," he said, "probably many times over by the time everybody finishes kicking the bucket."

After two heart attacks and, earlier this year, arterial bypass surgery, McKinney says he is retiring his real estate shingle because "something had to go."

"It's always been my hobby," he said, "I don't play golf, I don't play tennis, I don't ride. I play bridge and build buildings."

McKinney nonetheless looks on his housing projects with pride. "It was a bad investment, but I did over a street and the City of Washington is making a hell of a lot more money off their taxes."

For the future, he said, "I don't know what I'm going to do now . . . Reading books and playing bridge is a pretty boring way to live." CAPTION: Picture 1, Early 1975 view of town houses in 1400 block of Corcoran Street . . . Photo supplied by Rep. Stewart B. McKinney; Picture 2, Rep. Stewart B. McKINNEY . . ."I was an absolute jerk"; Picture 3, . . . and a recent view of same town houses, which were purchased and improved by Rep. Stewart B. McKinney. By Larry Morris - The Washington Post