DEAR BOB: I own a vacant lot on which I planned to build a home. But after I checked construction costs, I found that it was beyond my budget. A local real estate broker suggested that I trade my lot as a down payment on apartments or other property. He said I can do so without paying any tax on my modest profit. If this is true, how do I go about it? Harold W., Alexandria.

DEAR HAROLD: Yes, it's true you can make a tax-deferred trade of one investment property for a larger property. It's called a "like kind," tax-deferred exchange -- even if you trade your lots for apartments, stores, offices, a shopping center, or anything else except your personal residence. Most experienced realty brokers can handle such a trade for you, but you may wish to consult your tax advistor about any tax questions.

DEAR BOB: What do you think of motel investments? A friend made a small fortune investing in motels after the Korean War. We have about $75,000 in retirement savings that we are thinking of investing in a motel. Would this be a good investment today? Mark M., Arlington.

DEAR MARK: Investing in a business-oriented real estate property can lead to a full-time job managing that property. It's true that some motels have been very profitable investments in recent years, due to high buyer demand. But if you talk with motel owner-managers, I think you will soon find that owning a motel means you've bought yourself a 24-hour job.

DEAR BOB: Our hot water heater exploded and it cost over $300 to replace it. Can we deduct this on our income tax returns? Guillermo B., Bethesda.

DEAR GUILLERMO: Possibly. To qualify as a casualty loss tax deduction, the loss must be "sudden, unexpected and uninsured."

It would appear that your water heater explosion meets these criteria. However, the first $100 of each personal casualty loss is not deductible, so $200 would be your deduction. Your tax advisor has details.

DEAR BOB: A friend says to save receipts for home repairs and remodeling for some tax benefit at the time of sale. Please explain. C.L., Wheaton.

DEAR C.L.: Home repair and decorating costs are normally of no tax consequence, as they are personal living expenses. Capital improvement costs, of course, are additions to your home's cost basis. But when repairs and fix-up costs are incurred within 90 days before home sale and paid for within 30 days after the closing, they are subtracted from the gross sales price if you buy a replacement house.

DEAR BOB: It seems that every week you write about a different tax break for home sellers. Please list all the ways to avoid having to pay profit tax when we sell our home. Sidney S., Wheaton.

DEAR SIDNEY: The major tax avoidance rules for home sellers are (1) residence replacement rule (profit tax deferral), (2) new "over 55 rule" $100,000 profit tax exemption, and (3) installment sales (profit tax deferral into future years). Your tax advisor can explain the qualifications for each tax break.

DEAR BOB: I misplaced your suggestion of books for novice realty investors to read. Please repeat those titles. Paul R., Washington.

DEAR PAUL: The classic book on real estate investing is William Nickerson's "How I Turned $1,000 into $3,000,000 in Real Estate in My Spare Time." A more recent book is Albert Lowry's "How You Can Become Financially Independent by Investing in Real Estate." Both are published by Simon and Schuster and are available at larger libraries and bookstores.

DEAR BOB: The original version of the $100,000 home sale profit tax exemption for sellers over 55 also applied to handicapped persons. Is this provision in the final bill which became tax law? Herbert B., Bethesda.

DEAR HERBERT: No. The Senate-House Conference Committee didn't extend the $100,000 profit tax exemption to handicapped home sellers.

DEAR BOB: With two friends, I want to buy a rental house. We will soon complete medical training as surgeons. What are the possibilities of borrowing all the money on a long term real estate loan? Mark S., Alexandria.

DEAR MARK: Borrowing on a 25-to 30-year mortgage is easy. But you can generally borrow only up to 75 or 80 percent of the purchase price. Lenders usually want at least a 10 to 15 percent cash down payment from the borrower; the seller might carry a second mortgage to fill any finance gap.

Borrowing the down payment can be risky. Don't do it for your first realty investment. Later on, 100 percent financing becomes easier when you fully understand "creative finance" methods.