Q: I purchased a two-flat dwelling five months ago. It has been unoccupied for two years. The roof's in terrible shape and in both apartments, there's a lot of work to be done. I'm having trouble finding a good home improvement company. Could you suggest how I might do this?
A: Contact your local Board of Realtors, Chamber of Commerce and Better Business Bureau. Tell them your needs, desires and problems. One or more of these agencies will be able to give you the names of two or three reputable home improvement companies. Contact them and ask for names and addresses of customers and ask these customers if the work was satisfactory and reasonably priced.
You may be able to get names and addressed of other former customers of these companies who were not as satisfied with their work. Then ask the companies to bid on your job. On the basis of the bid and your investigation of the companies, select the one to do the work.
Q: We have a choice of (1) borrowing $80,000 at 10-7/8 percent and putting $30,000 down on a $110,000 house in Rockville, or (2) borrowing $60,000 at 10-7/8 percent and putting $50,000 down, which we could do comfortably from our savings. My wife and I both ork and we contribute equally to a combined annual income of $45,000. We keep almost all of our savings in a money market fund that yeilds around 10 percent interest. Should we put more down and reduce our mortgage loan amount?
A: As long as you can continue to get a return of 10 percent or more on your invested money, you're likely to be better off to pay $30,000 down on your home purchase. In your income tax bracket, your after-tax mortgage interest rate is significantly less than 10-7/8 percent. For a more detailed analysis, you'll either have to consult a tax adviser of get the tax tables and other necessary information and do your own computations.
Q: My friends and coworkers and I are intrigued by the federal "lottery" auctions of gas and oil-right leases on property in Wyoming and New Mexico. It's said to be a better risk than state lotteries. The cost is $20 per drawing. The company handling the transaction charges a $10 entry fee and a $10 service fee. We'd be very interested in your views of this lottery system.
A: This is a system under the direction and supervision of the office of the assistant secretary for land and water resources, Department of Interior. tThat office doesn't consider it a lottery, since there's no "prize" given, and no "consideration" received by the government. The $10 entry fee is to help defray administrative costs.
That office calls it a "simultaneous drawing system." It works this way: The government posts for a period of, say five days, available government-owned land for leasing. All who file during the five days are considered to have filed simultaneously (and non-competitively). A drawing is held on the third Monday of each month. That person or those persons whose names are selected are the ones who receive the lease or leases. Exploration must begin within 10 years for the lease to remain effective.
The advertisement notice you saw was probably prepared by a company (or individual) who acts as a filing agent on your behalf. The $10 service fee (its amount and name may vary) goes to the company individual.
The office of the assistant secretary for land and water resources tells me there's a potential for abuse in this system. As a result, plans are being laid to make regulatory changes and to ask Congress for statutory changes in the system.
Some persons whose names are drawn and who are awarded the leases are able to sell them to oil companies at anywhere from a small profit to quite a handsome profit. The amount of profit depends on the likelihood of getting a producing well on the leased land.
Q: My wife is 51 years old and I am 62. If we sell our house, how would the tax bite affect us? Is there a tax law that allows up to $50,000 gain on the first sale of a house to be forgiven?
A: No. But there is a provision in the Internal Revenue Code that allows you to exclude $100,000 of gain on the sale of your "principal residence" if (1) you or your wife are age 55 or older before the date of the sale. (2) you owned and used the house you're selling as your "principal residence" for a period of three years (continuous or interrupted) within the five-year period ending on the date of sale, and (3) neither you nor your wife has previously elected to exclude gain on the sale or exchange of a residence after July 26, 1978. You may want to see your tax adviser to get help on the details