Question: I own a condo worth $180,000 (mortgage free). Due to my elderly parents health I am considering moving in with them to care for them. (They live in the same complex.) I find myself with two options: sell my condo outright and invest the money in a safe CD or rent the unit. The first plan might bring in $5,500 in interest. Renting would bring in $8,500 after taxes and association fees. Should I consider other factors beside the numerical figures? I also co-own my parents condo with them.

Answer: First, see if it's okay to rent your unit under condo rules. Second, consider that condo units can both generate rent and appreciate -- though neither is guaranteed. Third, you'll be able to easily oversee the property if you rent. That's a huge plus.

Question: I have a friend who is trying to convince me to go in as a partner with him on a rental property (two family house), he said we should buy now because the mortgage rates are so low, this house is in a market which is at its all time high right now.

We are not looking to stay in this investment long term. My opinion is that this would be a bad investment due to the fact that if the property is purchased today for $500,000, then in a couple years the interest rates rise and the property value comes down we would actually have to sell for less then what we paid for the property.

Am I correct in thinking this would be a bad investment?

Answer: You are certainly correct in thinking that higher interest rates dampen real estate demand. As to whether this particular property is or is not a good investment, that requires a look at a variety of factors. For instance: Is the local population increasing? Is new home construction keeping up with demand? Is the local economic base growing? Will the rental produce a positive cashflow? Is the property in the path of future growth? Etc.

Question: With regard to California real estate, the question that I have is as follows: Is it expected that California home prices go down in the near future?

I am looking at homes now, but the prices are outrageously expensive. And my concern is that I wouldn't want to buy something, if the price of the property is likely to drop.

Answer: Nobody knows what will happen to future real estate values. Seers, soothsayers, economic advisers, Wall Street analysts and real estate columnists are all equally unable to divine tomorrow's home prices.

Real estate has two values, it's an investment and it has utility as a residence or rental. As an investment and a rental, it has an element of risk and uncertainty. The marketplace is always unpredictable, the very reason some people buy while others sell.

Question: Exactly how do consumers use housing information on the Internet to drive down commissions? Commissions offered to agents aren't public.

Answer: The impact of the Internet on real estate commissions is not clear.

"Consumers," says The Wall Street Journal, "are bargaining harder with real-estate agents over commissions, which have become much more lucrative for agents as home prices have soared. The average national commission has fallen to about 5.1 percent from 6 percent in the early 1990s, industry publication Real Trends estimated last year." ("Realtors May Revise Internet Policy," May 16, 2005)

However, while there is evidence that brokerage fees have declined in the past decade, the reasons why are uncertain. Is it online competition? Not hardly. Online sites and services are an additional transaction cost because the services of local brokers are still required. As well, consider that vast amounts of online medical and legal information have not reduced fees for doctors and lawyers.

Question: My husband purchased his condo 30 years ago. He is has paid off the loan. My husband and I have been together for 12 years today and have been married for four. We would like to add me on as owner of our condo. We were told that I would need to be added to the deed of trust. I can not vote at our condo meeting until I am an owner. We were told that we needed to consult a realty attorney.

Can I be added to the deed of trust without an attorney?

Answer: Any attorney or legal clinic can quickly and easily add your name to the title. The cost should be minimal and because you want it done right it makes sense to engage a professional. However, not having your name on the title is a substantial risk. There are huge benefits to owning property as a married couple in terms of asset protection, taxes and estates. Please see a lawyer immediately.

Question: I recently placed my townhouse on the market. The buyers have applied for a loan but their broker refuses to give me a copy of the appraisal. As the owner shouldn't I get a copy?

Answer: No. The appraisal was ordered by the lender and paid for by the borrowers. As long as the loan is approved it's none of your business. However, if the appraisal comes in below the sale price and the purchasers ask for a price reduction, you would then be on good grounds to ask for a copy.

Question: I will have lived in my home for 18 months when I sell. I have been given new military orders forcing me to move. Are there any loopholes or clauses that will allow me to not pay capital gains on the home, since I was forced to move for military reasons?

Answer: To fully write-off capital gains profits from the sale of a personal residence you typically need to have lived in the property for two of the past five years. However, under the Military Family Tax Relief Act (PL 108-127), the IRS says that the "law allows persons on qualified extended duty in the U.S. Armed Services or the Foreign Service to suspend this five-year test period for up to 10 years of such duty time. A taxpayer is on qualified extended duty when at a duty station that is at least 50 miles from the residence sold, or when residing under orders in government housing, for more than 90 days or for an indefinite period."

However, your question does not concern maximizing the five-year write-off term, instead it involves a reduction of the two-year minimum. In this case you may be able to rely on two "safe harbor" exceptions.

A safe harbor, according to the IRS, "is a set of certain facts and circumstances that qualifies you to claim a reduced maximum exclusion."

One safe harbor is that you have moved at least 50 miles as a condition of employment.

Another possible safe harbor is the "unforeseen circumstances" test. The IRS explains that "the sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home. You are not considered to have an unforeseen circumstance if you sold your home after August 12, 2004, and the primary reason you sold it was that you preferred to get a different home or your finances improved."

Reducing the two-year minimum requirement will provide a proportionate reduction of your ability to take capital gains. Example: 18 months is 75 percent of two years. If you have a capital gain of $20,000, you will be able to shelter $15,000.

Given that it's in the national interest to encourage military participation, it is difficult to believe that you will not qualify for at least some capital gains protection under safe harbor rules. For details please see a tax professional or a military attorney. As well, be sure to ask if there are other special rules for members of the active military.

Question: I am planning to buy a new construction house in a land which is being divided into 11 lots. The lot I am planning to buy is an irregular one, i.e. it is triangle shaped. What are the disadvantages of irregular lots? Will I have any problems while reselling the house?

Answer: The real concern here is not so much the shape of the lot as the utility of the property. If the property has enough square footage so that you can build a home, have privacy and maintain an appearance and use which are consistent with nearby homes then the shape of the lot should not be an issue.

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Written by Peter G. Miller for REALTY TIMES, July 1, 2005