DEAR BOB: I would like to invest in houses in California's Napa Valley wine country because of the increasing demand and rising market values.

I like the idea of buying houses for small down payments, but what do you think about buying houses far away from my current home? My wife and I have excellent credit and income, but we need to increase our wealth for retirement in about 10 years. Would this be a good place to buy houses for investment?--Doug D.

DEAR DOUG: California's Napa Valley, north of San Francisco near Santa Rosa, is an excellent real estate market. However, since you live far away, I cannot recommend that you buy property there if you do not plan to soon move to the area. Long-distance property management can be a nightmare.

Coincidentally, I have friends who own a "weekend house" in the quaint Napa Valley town of Calistoga. They stay there three or four days a month. Unfortunately, vandals recently broke into their cottage, stole valuables and created a mess. The losses were covered by insurance, but the inconveniences of settling the insurance claim, repairing the damage and replacing the lost items counterbalance the joys of owning a second home.

Instead of buying distant real estate, buy within a 30-minute drive of your house. Specifically, I recommend buying fixer-upper houses. Make "profitable improvements" to raise the market value. You can then hold for long-term investment or sell for quick profits.

DEAR BOB: In my neighborhood, the utility wires are underground. Seven months ago the cable TV company replaced its old cables with new wiring. That's great, but the company wanted to install an above-ground box in the easement area of my property. I said no and they took me to court. Unable to find a lawyer, I didn't show up. They got a court order to install their ugly cable TV box in front of my house. What can I do?--Ted R.

DEAR TED: If the cable box is within the utility-easement area in front of your house, I am not aware of any practical, legal remedy since the appeal time has expired on your default judgment. You can try to reason with the cable TV company, but that is probably a futile effort. Better yet, plant flowers around that ugly cable box.

DEAR BOB: We recently had our vacation property surveyed and, to our surprise, we learned our detached garage encroaches on our neighbor's land by almost two feet. The garage was constructed by a previous owner about 15 years ago, with a building permit. We haven't said anything to the neighbor. Could he force us to move or tear down our garage?--George H.

DEAR GEORGE: If the structure encroachment has existed for 15 years, depending on which state your vacation property is located in, the statute of limitations has probably expired. Encroachment statutes of limitations usually begin running from the date of construction.

I do not advise calling the encroachment to your neighbor's attention. If he has lived with the offending garage all these years, should he bring a lawsuit and get around the statute of limitations, the court probably would order you to pay damages rather than tear down or move the garage.

For encroachment cases in which removing the offending building would be expensive and harm is slight, payment of damages is usually the preferred legal remedy if the statute of limitations has not expired. Consult a local real estate attorney for details.

DEAR BOB: My husband and I recently attended a seminar on investing in tax liens in states that sell them. We were told the yields range from 10 percent to 50 percent, depending on the state and the number of years involved. Do you think buying tax liens on property, in the hope of either getting a high yield or winding up with property ownership, is morally correct?--Gina S.

DEAR GINA: About half the states now sell tax-lien certificates for unpaid property taxes. The local governments benefit by receiving those tax dollars. Banks and individuals buy the tax-lien certificates with the goal of making high yields. Because the property owners didn't pay their taxes, I see nothing immoral about, in effect, lending them the money and then receiving interest on that loan.

However, property owners often don't pay taxes because the property is worthless and can't be sold. Be careful if you buy tax-lien certificates, especially if you're unfamiliar with the property and if it's not close to home. You wouldn't want to wind up owning a toxic-waste dump and being legally obligated to pay for its cleanup.

DEAR BOB: I own a six-unit apartment building, and I live in the "owner's unit," which is about twice the size of the other units. If I sell this building, my profit will be about $170,000. Can I use that new $250,000 home-sale tax exemption to shelter my profit from taxes?--Herbert G.

DEAR HERBERT: Yes, you can use your $250,000 home-sale tax exemption, but it applies only to the profit on the sale of your personal residence unit. It does not apply to the profit on the sale of the five rental units, which could qualify for an IRC 1031 tax-deferred exchange. A tax adviser can explain the details on how to apportion the sales price and your tax breaks.

DEAR BOB: We recently received a letter from a licensed appraiser that offered to reappraise our house for purposes of canceling our private mortgage insurance. The cost is $250. Each month we pay a $68 PMI premium along with our monthly mortgage payments. It would be nice to save this money. Should we hire the appraiser?--Mavis M.

DEAR MAVIS: The appraisal business has slowed recently because of a decline in home-loan refinancing, so appraisers are hungry for business. A few appraisers are creating a new income source from homeowners who can drop PMI premiums if their loan-to-value ratio is less than 80 percent, usually because of market value appreciation.

However, before hiring that appraiser, check with your mortgage lender to make sure that the appraiser is on the lender's list of approved appraisers. Also, inquire if PMI can be dropped on your loan. For example, FHA mortgage lenders almost never cancel the FHA insurance premiums. VA mortgages don't have insurance premiums. And if your mortgage is owned by Fannie Mae or Freddie Mac, the loan servicer (not you) must order the appraisal.

DEAR BOB: I am a government employee assigned to the U.S. Embassy in Ottawa. After arriving in Canada in 1994, my wife and I leased out our U.S. home until this June, when my wife moved back into it. Our accountant advises that after my wife has lived in it for 12 months, we can sell it and claim a $125,000 capital gains exemption for 50 percent of my wife's exemption. I will be transferred back to the United States next summer. If I don't move into our house and am transferred to another foreign location, will the IRS accept my wife's one-year residency if we sell the house?--Benny M.

DEAR BENNY: I'll presume title to the house is in both your names. If your wife is not on the home's title, she can't qualify alone for any home-sale tax exemption. Presuming she holds title, Internal Revenue Code 121 allows partial use of each co-owner's $250,000 principal residence tax exemption if the sale is because of a change in place of employment, health or unforeseen circumstances.

If the house is sold after 12 months of her residency, your accountant appears to be correct. Your wife can qualify for a 50 percent $125,000 capital gain principal residence sale exemption. Of course, if you move into the house and you both own and live in it for at least two years during the five years before sale, then up to $500,000 sale profits will be tax-free.

DEAR BOB: I own a condominium in a 24-unit building with a homeowner's association. The current board of directors has "gone bad" and fails to spend maintenance funds to paint and to keep up the building. When the elevator needed $30,000 of repairs, rather than taking funds out of our reserves, they assessed each condo owner $1,000 and used only $6,000 of repair funds.

Speaking up at the monthly meetings does no good. The directors seem to have made up their minds beforehand. What can we owners do since we like our condos very much? Should we sue?--Elsie C.

DEAR ELSIE: Unless the board of directors is violating a law, such as using condo funds for their personal use, a lawsuit would probably be a waste of time. A better approach would be for you and your like-minded friends to run for election to the board of directors. Throw the rascals out at the ballot box!

DEAR BOB: I own a two-bedroom, two-bath condominium in a beautiful high-rise outside Washington. My monthly mortgage payment is $560 and the monthly condo fee is $344, including utilities. Since I've moved away from the area, should I sell or rent it?--Diane P.

DEAR DIANE: It all depends on the quality of your tenant. If you think you will move back to the Washington area within a few years, keep the condo and put up with the hassles of long-distance property management. Fortunately, renting out a condo long-distance is far easier than renting out a house or apartment building.

Perhaps the condo complex has arrangements for rental management. Your monthly payments sound reasonable. How much rent will the condo earn? If it is substantially above the expenses, your condo could become a great rental investment, but think about how you will handle repairs and problems that arise.

If you doubt you will return to the vicinity, why keep the condo? There may be special reasons, such as rapid market value appreciation, but that depends on your specific situation. Unless there's a strong probability that you'll move back to your condo, the current real estate market makes this an excellent time to sell.

DEAR BOB: About two years ago, I inherited a Massachusetts house from my late aunt. It was rented, so I left the tenants alone as long as they paid my rent on time. At first they were nice, but then the rent checks came later and later. After they got three months behind on rent, I hired a Massachusetts attorney to evict them.

A few weeks ago, the attorney finally got them out. The house is a disaster. The tenants took almost everything, but I found a local handyman, recommended by a relative, who will fix it up for only about $12,000. My problem is that if I sell, I will owe a fortune in profit taxes since my late aunt bought the house in 1938. Should I make a tax-deferred exchange?--Boris W.

DEAR BORIS: Consult a tax adviser. When you inherited that house two years ago, you received a new adjusted cost basis stepped-up to market value on the day your aunt died, or alternative valuation date used by her estate.

To illustrate, suppose she paid $25,000 for the house in 1938, it was worth $300,000 when she died, and today it is worth $325,000. Your basis will be $312,000 ($300,000 date-of-death value plus the $12,000 improvements). Your taxable capital gain will be only $13,000 in this example. Pay the modest tax. Forget about a tax-deferred exchange.

DEAR BOB: I've enjoyed your columns for years, but I was shocked at your recent sexist responses. Recently, you told an ex-husband who wanted to get his ex-wife off the mortgage and whose lender wanted a high fee to do so, "That's her problem, not yours."

I have a similar problem, so I know what that poor woman is going through. My ex-husband and I had a "friendly divorce" about three years ago. To save money, we got a fill-in-the-blanks, do-it-yourself divorce. He got the house and the children most of the time (we have shared custody).

Now I've met a wonderful man and we recently married. We want to buy a house together, but my credit report shows that I owe more than $275,000 on the mortgage on my ex-husband's house, even though he makes the payments and I am not obligated to pay. He refuses to refinance in order to take my name off his mortgage. What can I do?--Maye T.

DEAR MAYE: Since your divorce agreement did not specify that your ex-husband would either refinance the mortgage or pay the lender to remove your name from its legal obligation, that mortgage will continue to show up as an obligation on your credit report.

Many enlightened mortgage lenders will accept your explanation, especially since the mortgage payments are current. Personally, I have a mortgage still in my name on an apartment building I sold "subject to" its old mortgage about five years ago. Thankfully, my excellent buyer makes the payments on time. I had to explain this credit-report circumstance to Norwest Mortgage when I refinanced my home last year, but it didn't stop them from approving my new mortgage. Your home purchase situation with your new husband will probably be similar.

DEAR BOB: I want to buy a particular house in a community restricted to owners 55 and older, but I have a problem. One of the community's rules is that antennas cannot be over 15 feet tall. I am an amateur radio operator, and my antenna must be 25 feet. Am I exempt because of federal or state rulings?--Mr. B.H.

DEAR MR. B.H.: If the subdivision where you want to buy that house has conditions, covenants and restrictions, you agree to abide by them when you buy a house there. With the exception of unenforceable racial rules, I am not aware of any exemptions, such as for tall home radio antennas.

When city ordinances prohibit TV and radio antennas, those laws have generally been held to be unenforceable, but there are a few limited exceptions if safety and health issues are involved. However, I can't find any exceptions to enforcement when a homeowner violates private subdivision rules for antenna height. Consult your attorney before buying that house with its restrictive antenna CC&R.

DEAR BOB: In 1949 my husband and I bought a four-unit apartment building. We lived in one apartment. My husband died in 1988. I sold the building in 1995 for $260,000. When my tax accountant prepared my 1995 tax returns, he told me not to take my one-time "over 55 rule" $125,000 tax exemption. He said that when I die and my children inherit my current house, they can sell it and use this "over 55 rule" $125,000 to their advantage. I am now 77. Was he right? If not, can I do anything about this matter?--Terina M.

DEAR TERINA: You received extremely bad tax advice from your tax adviser. You should have claimed your "over 55 rule" $125,000 principal residence tax exemption for the profit on the sale of your personal residence apartment in that four-unit building. As you probably know, that tax benefit was repealed by the 1997 Tax Act. A new, more generous $250,000 principal residence sale tax exemption, without age limits, now applies.

Since the three-year statute of limitations has expired for your 1995 income tax returns, I am not aware of any way to amend your 1995 tax returns to claim your $125,000 tax exemption on the sale of your personal residence apartment unit.

Readers with questions should write Robert J. Bruss at P.O. Box 280038, San Francisco, Calif. 94128. {copy} 1999, Tribune Media Services Inc.