Betting on real estate flips is not a good retirement plan

Reader cannot bank on recent skyrocketing housing values to continue

Q: I am thinking of retirement. If my primary residence nears the $500,000 in tax-free capital gains for a married couple, should we consider moving?

If we had a new primary residence and also bought a small home with thoughts of retiring in the latter in about 10 years, the first would qualify for another $500,000 tax break, but what would the second home implications be?

In other words, I think it makes sense to buy two new ones, and have the equity go up for both, then sell the first and retire in the second, or maybe sell it.

I am hoping to use the profit to retire early. I hope this is clear. Sometimes I confuse myself. -- J.A., via e-mail

A: I don't know where you're writing from, but it certainly isn't my hometown.

Nobody in my neighborhood expects to make that kind of money selling a residence.

My guess is that you've been spoiled by skyrocketing prices in your area, wherever it is.

Remember -- as they must say in mutual fund ads -- past performance is no guarantee of future results. Speculating in real estate is not for amateurs.

Every bubble will burst, or at least ooze out slowly, sooner or later. That's already happened in many parts of the country.

You can't plan on funding your retirement by making half a million dollars on every home you sell.

But yes, you could use the tax exclusion on a whole string of houses, after you'd owned and occupied each of them for at least two years as your primary residence.

You wouldn't have to stop at three, if that kind of project appealed to you. You could go on doing it for the rest of your life. The catch is that there are many places and many times when one couldn't count on enough profit to make the plan work.

Impressed reader requests

columnist's John Hancock

Q: My family enjoys your frank and interesting real estate articles. We were wondering if we could obtain your autograph or a note about your most interesting questions. Thank you in advance for your reply. -- W.D.

A: That's a first. I've never been asked for an autograph before -- well, maybe at book signings.

As it happens, my new book is built around some of the most amusing questions this column has received over the years.

Perhaps the reader has to be in the real estate business to realize how funny they are, so the publisher asked me to slant the book toward real estate agents.

I'll try you on a couple of typical letters -- see what you make of them:

"Please send all information on Fanny Mae. Also, if she has written any books."

"We hear it's a good idea to pay extra on our mortgage. Do we send the extra money on principal, interest or escrow?"

"Can you give us advice about how to sell our home without using an agent? I think you call it being a FSOB."

If these strike you as funny, the book, "I've Heard it All," is available postage-paid for $20 directly from me, at 240 Hemingway Drive, Rochester N.Y. 14620. And I'll be happy to sign it.

Signing new deed

can add co-owner

Q: My name only is on the deed to my house. My sister and I are living together. I want to put her name on the deed, also. How do I do that? What papers do we need to get and have notarized? -- C.S.

A: To make your sister co-owner, sign a new deed transferring title to the two of you. A lawyer can take care of this simple matter, and see that the new deed is entered in the public records.

The way your names are listed on the deed will make a difference when one of you dies.

Would you want complete ownership to go automatically to the survivor, or would you each want the right to leave your share to someone else, perhaps your children?

Discuss with the lawyer just what you want, and have the deed drawn up accordingly.

TIC's may not

be best option

Q: I'm a 63-year-old woman and own four houses and an apartment building. I would like to get out of the burden of ownership/management.

Are TIC's the way to go? I've heard gas and oil 1031 exchange is also good.

If you were in my position, what would you do? -- S. C.

A: You don't sound like the right candidate for the complications of a tenants-in-common organization or a tax-deferred exchange.

Today's capital gain rates are pretty low, and if I were you I'd sell outright, pay the taxes and keep it simple.

Edith Lank will personally respond to any questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.