Question: My husband and I are interested in buying investment properties and fixing them up for resale. What's the best way to find contractors? Is trial-by-fire the only option, or are there classes focused on this kind of project management?

Answer: When it comes to hiring contractors I believe in guilt by association.

You must have some contractors who work on your home and who you trust. For smaller investment properties -- single-family homes or properties with two-to-four units -- such contractors are ideal.

A good approach works like this: Find one very good contractor, just one.

For instance, I have a very good plumber. When I needed some electrical work I asked the plumber who he would use for his home. He, in turn, recommended a very good electrician. And so on.

If you have properties in a variety of geographic areas you want to repeat this process so that you have honest, experienced, licensed and insured professionals always available.

In turn, you want to make a point of being a good consumer. I ask contractors to email bills if I'm not physically at the property -- and I pay as soon as the email is received. The result is that when next I have a requirement for professional services you can bet my needs are handled well and handled promptly.

Paying promptly is very important because often a contractor has costs for parts and people. You have to think about this from the contractor's perspective: It's not fair to have a plumber put in a new water heater and then not immediately pay. In effect, if you don't pay quickly the plumber is acting as your banker and fronting money for you. That's not right and contractors of every kind appreciate when they're promptly paid and respected.

Question: I purchased a home for $60,000. After ten years I bought another property and rented the first home. That original property doubled in value and is now worth $120,000. If I sell it, how can I avoid paying taxes on the gain? There's no mortgage.

Also, my current home has a $72,000 mortgage and is worth $180,000. I understand I can sell it without paying a capital gains tax, but would like to keep it.

During the last ten years, my father gave me his home (for $1) after my mother died. It's on 40 acres and is worth $200,000. It has no mortgage. I cannot afford to keep up all three properties as a single adult. I do not want to sell any of these as I would like to leave them for my children. Can you recommend a way to hold onto all three properties.

Answer: Your desire to hold onto all three properties to benefit your children is commendable. But if it's not affordable, then it's not affordable.

Are your children adults? If yes, would it make any sense for them to chip in each month to help pay off your costs with the understanding that they will inherit the properties?

Can you rent the two properties you do not occupy, not just one?

Alternatively, it might make sense to sell the current residence. If you have lived there for two of the past five years your profit should be tax deductible. Then move into the rental unit for two years. If you want you can then sell that property without paying a capital gains tax. That would leave you with two sales, no capital gains taxes, cash in your pocket and a farm that is owned free and clear of any mortgage debt.

See a tax professional such as a CPA or enrolled agent for specific advice.

Question: I am possibly in the throws of a contract dispute over a land purchase. I'm the buyer.

I found some land and proceeded to make an offer.

I then shopped for a mortgage and determined that based on the down market, ARM's and other conventional land loans were not available or were only being offered at very high interest rates.

Using a standardized form in my community, I negotiated the price with the seller and the terms of the contract (appraisal, survey, and title insurance).

The seller signed the contract and initialed all terms, with one change requesting that the buyer (me) pay for the survey.

I countered the seller by stating I would agree to pay for the survey, but all survey costs would come off the top of the selling price.

The agent for the sellers came back and said no. The agent for the seller asked if I would be willing to split the cost and I agreed. I subsequently initialed the change on the contract the following morning.

Later that morning, my agent came back and said that they would not split the cost of the survey as suggested by the seller's agent and that they wished to terminate the contract and refuse the offer, after I had already signed.

Do I have a contract to buy the property?

Answer: An offer may be withdrawn at any time prior to acceptance. It may be that your agreement to split the cost of the survey was not received until after the sellers terminated the agreement. Thus, to the owners, they withdrew their offer prior to your acceptance. They would feel there was no contract to terminate, merely a counter-offer which they could not accept.

Both parties can debate and dispute who said what to whom and when. Your issue is whether you want to engage an attorney to sort this out. You should at least review what happened with a local real estate lawyer to nail down the specifics -- and to then see if it's feasible or desirable to fight for the property.

Question: I live in a condominium. In the basement of the building is a common storage area with individual storage lockers. The storage lockers are about half the height of a person and make a perfect square.

Currently, I have my bike locked from the outside of the locker to the locker itself. My bike is out of the way, since it's locked from the side, not from the front of the locker.

The property manager wants all bikes removed from the outside of the lockers and is also preventing bikes from being stored on our balconies. If the bikes are not removed, he's threatening to take all bikes without warning.

Can he do this?

Answer: Here's what the manager can do: He can follow the instructions of the condo board. If the board feels he has gone too far it can direct him to stop. Thus your best recourse is to speak with the condo board.

There may well be reasons behind his actions -- blocking fire exits in the basement or somehow violating a local ordinance. If the condo board looks into this matter the manager can explain his thinking. Once everyone understands the issues, there may well be a middle-of-the-road approach to resolve his concerns as well as those of the bike owners.

Question: Can I rent out a house that I just bought, without moving in or living in it for at least six months?

Answer: When you bought the home did you finance the purchase with a mortgage? If yes, how did you answer a question which was raised on your loan application: Do you intend to occupy the property as a prime residence within 30 days of closing?

If you said "yes" lenders will think of you as someone qualified for owner-occupant financing. If you say "no" then lenders will see you as an investor, generally someone who should pay a higher interest rate and satisfy a more-rigorous qualification process.

Now suppose that someone says they will be an owner-occupant but that their real intention is to rent out the house. If the lender finds out it's possible that the loan will be immediately called. It is also possible that the lender will look at the loan application and wonder if it's evidence of fraud.

Thus the answer to your question concerns what you told the lender and whether your use of the property is consistent with your loan application. If your use is not consistent with the application, this may be okay if you have a change of plans which is sudden, unexpected and beyond your control. For instance, a surprise job transfer, an accident, divorce, etc.

To immediately rent the property if you said you will be an owner-occupant will raise instant red flags with the lender. If you have a need to not move in then you also have a need to explain why, if asked.

Question: What's a "money merge account" and do I want one?

Answer: In general terms, a money merge account can be seen as a program to rapidly accelerate mortgage pay-offs. The idea is to place all income into an account, make your mortgage payment, pay your monthly expenses and then take everything left over and apply it to your mortgage balance.

This concept raises several issues:

First, there are lots of "helpers" and "experts" out there who will help you set up and manage such accounts. Of course, such gurus and coaches want a fee for such services which means there are fewer dollars to pay down mortgage balances.

Second, in those cases where accounts are controlled by someone other than you it's your credit that will suffer if payments are not properly made -- or if the money is used improperly or stolen.

Third, if you reduce your account to zero each month you also have zero dollars for emergencies.

Here's an easier idea: If allowed by your lender without penalty, pay something extra with each monthly mortgage payment. You'll pay off your loan much faster and thus reduce the potential interest expense for your loan.

To calculate how much sooner a loan can be repaid, first enter numbers into an online calculator as if the loan has a 30-year term. The re-calculate with a shorter loan term to see how much extra you need per month and how much interest you can save over the life of the loan.

You don't need to give anyone a dime to accelerate your loan pay-off -- and you shouldn't.

Have a real estate question? Send your inquiry to Ask Realty Times. Because of the volume of mail received, Mr. Miller cannot respond to questions individually or privately. Published letters may be edited for space and style. For comments regarding other Realty Times articles, please contact individual authors by pressing here. For past columns, please press Ask Realty Times.

This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.

Published: October 5, 2007

Use of this article without permission is a violation of federal copyright laws.

Have a real estate question for Realty Times? Wondering about buying, selling, financing, refinancing or renting? Here's where you can send your question to Peter G. Miller, OurBroker®, a nationally-known columnist, author and reporter. Peter G. Miller has written six books -- including The Common-Sense Mortgage -- a guide with hundreds of thousands of copies in print. Miller was the original creator and host of America Online's Real Estate Center and joined Realty Times in 1998. Send your questions to . Because of the volume of mail received, individual questions cannot be answered privately and not all questions can be used. Published letters may be edited for space and style and all letters become the property of Realty Times upon receipt.