DEAR BOB: Enclosed is a folder about a new land development where I am thinking of buying 10 acres of land. It is 30 miles from an interstate highway, 22 miles from a small town, and has clean air. My cost would only be $53 a month. What do you think of it? Rudy E., Vienna
DEAR RUDY: Not much. Buy recreational land only if you can use it for immediate personal use. Never buy for speculation or for future use as a building site. Too many events can intervene between now and "then." Recreational land is usually profitable only for the developer.
For buyers, the big problem is that the developer usually has a vast inventory of land available for sale. If you can't use your land for personal use, and must resell, a profitable sale is almost impossible, as you'll be competing against the developer's huge inventory and big advertising budget. Don't buy unless you can afford to lose your investment.
DEAR BOB: In 1976, my wife and I took $10,000 of savings and bought a run-down house, which we fixed up. We bought it to live in but a real estate agent dropped by while we were working on it and offered us such a fantastic price that we couldn't refuse to accept. To make a long story short, we followed your ideas, as well as those in Nickerson's and Lowry's books. Today we still live in our bargain-rent Washington apartment where we pay only $325 per month, but we have over $750,000 in equities in various properties. Keep up the good work. Jess R., Washington.
DEAR JESS: Thank you for sharing your success story. I believe that reader comments like yours do more to motivate people to invest in good property than I ever can. When you're ready to retire, you can gradually sell off your properties to provide your retirement security.
To illustrate how important it is to buy good property while you're young, let me tell a personal story. I recently bought a rental home being sold by an elderly man who is now in a rest home. I offered to buy it with $15,000 down and a mortgage for the balance, payable at $831 per month. That house is virtaully the only asset the seller has. Thanks to that house, he will receive the money he needs to live comfortably for the rest of his life. Needless to say, you're in a much better position for your retirement because you own several properties.
DEAR BOB: My wife wants a divorce. We are 63 and 60. Our main asset is our house, which we bought shortly after we got married 18 years ago. We have agreed to sell it and divide the proceeds equally. A friend said we should wait to sell until after the divorce is final so we can each claim that $100,000 "old folks" tax exemption. True or false? Bruno M., Annapolis.
DEAR BRUNO: True. The $100,000 "over 55 rule," home sale tax exemption applies if you've each owned and lived in your principal residence at least three of the five years before sale, have never used the exemption before and are both 55 or older on the sale date.
If you sell while married, only one $100,000 exemption is allowed per married couple. But if you wait to sell until after the divorce, you can each exempt from tax up to $100,000 of your share of the home sale profits. Ask your tax advisor to explain further.
DEAR BOB: I disagree with your statement that a title insurance policy is the best assurance of receiving good title. If a competent attorney examines a title abstract and gives an opinion of clear title, if a loss should occur the attorney is liable for the full loss amount. A title insurance policy pays only up to the original purchase price. Thomas M., Woodbridge.
DEAR THOMAS: While you are quite correct, if I lose my property due to a title defect, I'd rather have a claim against a multi-million-dollar "deep pocket" title insurance company than an attorney who might not even carry errors and omissions insurance. Also, title insurance protects against losses due to causes even the world's greatest title attorney could never discover, such as forged deeds, impersonations, recording errors and fraud.
DEAR BOB: I am thinking of moving my small insurance agency into one room of my home. If I do so, will I be able to depreciate my home? If so, do I depreciate its current market value? Pauline M., Washington.
DEAR PAULINE: The criteria for tax deductions for a home office or shop are (1) the office or shop area must be for "exclusive business use" (no part-time personal use), (2) it must be your principal business location or used to meet clients, and (3) if you are not self-employed, the home office or shop use must be "for the convenience of the employer" (meaning your employer doesn't provide work space, in most cases.)
If you qualify, you can depreciate part of your home's cost basis (not today's higher market value) and deduct part of your home's operating costs too. Ask your tax advisor for full details.
DEAR BOB: We plan to sell our home next month and spend a year or two in Europe.As we have a huge profit, we plan to use that "residence replacement rule" you often write about to defer our tax. Would it be possible for us to sell our home and buy a more expensive one within the 18-month replacement time period and then rent it out? Ira W., Reston.
DEAR IRA: That won't qualify for profit tax deferral as both your old and new home must be your principal residences. However, the law doesn't specify how long you must live in the replacement residence. So you should move into it to qualify for the profit tax deferral before you leave for Europe. Talk it over with your tax advisor.
The new Bruss report, "How to Buy a Home for the Lowest Price and on the Best Terms," is available for 25 cents plus a self-addressed, stamped envelope sent to Robert J. Bruss, P. O. 6710, San Francisco, Calif. 94101.